GAS SALES CONTRACT
between
COASTAL GAS MARKETING COMPANY
as Seller
and
AMERICAN CRYSTAL SUGAR COMPANY
as Buyer
CGM Contract No. __________________
INDEX
ARTICLE PAGE
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CAPACITY AND REGULATORY AUTHORIZATIONS . . . . . . . . . . . . . . . . . . . 5
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
QUANTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
QUALITY AND DELIVERY PRESSURE . . . . . . . . . . . . . . . . . . . . . . . 13
TRANSPORTATION AND DELIVERY POINTS . . . . . . . . . . . . . . . . . . . . . 14
MEASUREMENT AND TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
CREDIT WORTHINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
BILLING AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
POSSESSION AND CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 25
FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
TRANSFER AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 27
VIKING CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ASSIGNMENT OF TCPL CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . 29
ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
LIMITATION ON CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBIT "A"
EXHIBIT "B"
EXHIBIT "C"
EXHIBIT "D"
EXHIBIT "E"
GAS SALES CONTRACT
THIS AGREEMENT, made and entered into as of the 20th day of March, 1996, by
and between COASTAL GAS MARKETING COMPANY, a Delaware corporation (hereinafter
referred to as "Seller") and AMERICAN CRYSTAL SUGAR COMPANY, a Minnesota
agricultural cooperative (hereinafter referred to as "Buyer");
WITNESSETH:
WHEREAS, Buyer desires to obtain a supply of natural gas;
WHEREAS, Seller desires to sell natural gas to Buyer, and Buyer desires to
purchase natural gas from Seller, under the terms and conditions hereinafter set
forth; and
WHEREAS Seller is in the process of acquiring expansion transportation
service for the transportation of natural gas on TransCanada PipeLines Limited's
(TCPL) pipeline system from Empress, Alberta to Emerson, Manitoba; and
WHEREAS Buyer is in the process of acquiring expansion transportation
service on the pipeline system of Viking Gas Transmission Company's ("Viking")
system, from Emerson, Manitoba to various points off the Viking's system;
WHEREAS, Buyer and Seller intend to utilize such transportation capacity to
facilitate the delivery of gas to Buyer under this Agreement;
NOW THEREFORE, in consideration of the mutual covenants hereof, the parties
agree as follows:
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ARTICLE 1.
DEFINITIONS
1.1. The term "British thermal unit" or "Btu" shall mean the amount of
heat required to raise the temperature of one pound of water one (1 DEG.) degree
Fahrenheit at sixty (60 DEG.) degrees Fahrenheit. Btu shall be measured on a
dry basis at 14.73 psia.
1.2. The term "Buyer's Facilities" shall mean the seven pulp dryers
currently operating at Buyer's plants, as such plants are listed on Exhibit
"A".
1.3. The term "Daily Contract Quantity" shall, for each day of each
month, mean the daily quantity of gas to be nominated, delivered and taken under
this Agreement, as such daily quantity is determined pursuant to Article 4
below.
1.4. The term "day" shall mean a period of twenty-four (24)
consecutive hours period commencing at twelve o'clock (12:00) noon, Central
Standard Time (CST), without regard to Daylight Savings Time.
1.5. The term "Delivery Point(s)" shall mean the interconnection(s)
between Viking and/or any local distribution company receiving gas from Viking
for delivery to Buyer's Facilities.
1.6. The term "Federal Energy Regulatory Commission" or "FERC" shall
mean and include the Federal Energy Regulatory Commission and any other
existing, new or succeeding governmental authority or agency which may now or
hereafter have jurisdiction over the sale and/or transportation of gas
hereunder.
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1.7. The term "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and noncombustible gases, in a gaseous state, consisting
essentially of methane.
1.8. The term "Incremental Gas" shall have the meaning specified in
Section 4.1.2.
1.9. The term "Index Price" shall mean the price per MMBtu (dry) of
gas quoted under the heading "Index" for Northern Natural Gas Company, "Ventura,
Iowa",
*CONFIDENTIAL TREATMENT REQUESTED*
1.10. The term "Maximum Daily Quantity" shall mean the maximum daily
quantity of gas that Buyer may purchase and, if requested by Buyer, that Seller
shall sell and deliver hereunder and shall equal ten thousand nine hundred and
twenty (10,920) MMBtu plus Shrinkage Gas. The parties recognize that the
Maximum Daily Quantity cannot exceed the volume of the TCPL Capacity.
1.11. The term "MMBtu" shall mean one million (1,000,000) British
thermal units.
1.12. The term "month" shall mean a period beginning at noon CST on the
first day of a calendar month and ending at noon CST on the first day of the
next succeeding calendar month.
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1.13. The term "Monthly Contract Quantity" shall, for each month, mean
a quantity of gas equal to the sum of the Daily Contract Quantity in effect for
each day of the month in question, and shall not be less than the Monthly
Minimum Quantity.
1.14. The term " Monthly Minimum Quantity" shall be determined as
provided in Section 4.1.1.
1.15. The term "psia" shall mean pounds per square inch absolute.
1.16. The term "Seller's Transporter" shall mean any and all
pipeline(s) utilized by Seller to transport and deliver gas to Buyer under
this Agreement.
1.17. The term "Shrinkage Gas" shall mean the quantity of gas retained
by Viking for fuel and gas lost and unaccounted for associated with the
transportation of gas delivered hereunder at the Delivery Points, such quantity
to be determined as set forth from time to time in Viking's tariff(s) on file
with the FERC. In no event shall the quantity of Shrinkage Gas to be provided
hereunder exceed two hundred eighteen (218) MMBtu.
1.18. "TCPL Capacity" means the long term firm transportation service
associated with TCPL's 1997/98 facilities application, between TCPL and Seller,
and which provides for the transportation of 312.4 10(3) m(3) /d (10,920 MMBtu
per day plus Shrinkage Gas) of Gas on the natural gas pipeline transportation
facilities of TCPL from Empress, Alberta to Emerson, Manitoba.
4
1.19. The term "Viking" shall mean Viking Gas Transmission Company
("Viking").
1.20. The term "Viking Capacity" shall mean the firm expansion capacity
for which Buyer has applied on Viking's system from Emerson, Manitoba to the
interconnection of Viking and any local distribution company providing
deliveries to Buyer's Facilities, commencing November 1, 1996.
ARTICLE 2.
CAPACITY AND REGULATORY AUTHORIZATIONS
2.1. Buyer has applied to obtain the necessary firm expansion capacity
on Viking's system defined as the Viking Capacity, as of November 1, 1996. If
the Viking Capacity is not available beginning on November 1, 1996, Seller's
obligations to sell gas and Buyer's obligation to buy gas hereunder shall be
postponed until the date on which the Viking Capacity is available; provided
however, if the Viking Capacity is not available by April 1, 1997, or it
becomes apparent that Buyer cannot obtain the Viking Capacity by April 1, 1997,
the parties shall negotiate in good faith to agree to alternate terms for the
purchase and sale of gas. If the parties are unable to agree, or if Buyer's
utilization of coal is preferable in its sole opinion, then this Agreement shall
terminate. In the event of such termination, neither party shall have any
liability or obligation to the other party as a result of this Agreement.
2.2. Seller has applied to obtain the necessary firm expansion
capacity on TCPL's system defined as TCPL Capacity, as of November 1, 1997. The
TCPL Capacity is expected to be awarded by TCPL on/or before August 1, 1996.
If Seller
5
has not been awarded the TCPL Capacity by August 1, 1996, then the parties
shall negotiate in good faith to agree to alternate terms for the purchase and
sale of gas after October 31, 1997. If the parties are unable to agree, then
either party may notify the other of the termination of this Agreement effective
November 1, 1997. Seller will nevertheless deliver the gas at the contract
price through October 31, 1997.
2.3. It is recognized that certain regulatory authorizations shall be
required to permit the export and import of gas supplies to be utilized to
fulfill Seller's obligations to deliver gas under this Agreement. Seller shall
use commercially reasonable efforts to obtain and maintain such authorizations,
and Buyer shall cooperate with Seller in connection with obtaining such
authorizations. The cost of obtaining and maintaining such authorizations shall
be paid by Seller. If, despite such efforts of Seller, such authorizations as
are necessary to permit the export/import of gas to be delivered under this
Agreement, are not obtained, Seller may terminate this Agreement by giving
ninety (90) days prior written notice to the Buyer.
ARTICLE 3.
TERM
3.1. This Agreement shall be effective as of the date first
hereinabove written, with delivery and purchase obligations beginning November
1, 1996, and, subject to Section 3.2, shall remain in effect for a primary term
extending through October 31, 2007 and from year to year thereafter, unless
terminated by either party upon expiration of the primary term or any subsequent
one (1) year period upon the earlier of (i) one hundred and twenty (120) days
written notice given prior to expiration of the primary term or prior to the
expiration of any one year period
6
occurring thereafter, or (ii) the notice period for application of firm
transportation, renewal or the termination under Seller's Transporter's or
Viking's tariff(s).
3.2. At any time after January 1, 2000, either party may request that
the parties negotiate in good faith to mutually agree upon amendments to this
Agreement. If the parties are unable as a result of those negotiations to
mutually agree upon appropriate amendments prior to July 1, 2000, then either
party may terminate this Agreement effective as of October 31, 2001, by giving
the other party written notice of termination on or before August 1, 2001.
ARTICLE 4.
QUANTITY
4.1. Subject to the other provisions hereof, beginning on November 1,
1996, Buyer agrees to nominate and purchase from Seller hereunder and Seller
agrees to deliver to Buyer all gas required by Buyer for Buyer's Facilities plus
Shrinkage Gas, provided that Seller shall not be obligated to deliver a daily
quantity of gas in excess of the Maximum Daily Quantity. If Buyer desires to
purchase gas for use at Buyer's Facilities from Seller prior to November 1,
1996, such purchases shall be considered to be Incremental Gas, as provided in
Section 4.1.2.
4.1.1. Buyer shall nominate and take from Seller a monthly quantity
which is at least equal to the Monthly Minimum Quantity.
*CONFIDENTIAL TREATMENT REQUESTED*
7
*CONFIDENTIAL TREATMENT REQUESTED*
4.1.2. From time to time hereunder, Buyer may elect to buy, and Seller
may elect to sell, quantities of gas in excess of the Maximum Daily Quantity,
which shall be referred to as Incremental Gas. In such event, Seller shall use
best efforts to make Incremental Gas available for sale to Buyer. Buyer's and
Seller's agreement with respect to such Incremental Gas shall be confirmed by
use of an Exhibit "C".
4.1.3. On or before three (3) business days prior to the day of each
month that transportation nominations are due on Seller's Transporter and Viking
(whichever day is the earliest) for the next month of delivery ("Delivery
Month"), Buyer shall notify Seller of the Daily Contract Quantity for the next
Delivery Month and of the daily quantity of gas to be delivered for each of
Buyer's Facilities. The Daily Contract Quantity, however, shall not be more
than the Maximum Daily Quantity, and the Monthly Contract Quantity shall not be
less than the Monthly Minimum Quantity. If Buyer fails to notify Seller of the
Daily Contract Quantity by the time set forth in the first sentence of this
Section 4.1.3 for the Delivery Month in question, the Daily
8
Contract Quantity for such Delivery Month shall be a daily quantity equal to the
Daily Contract Quantity in effect on the last day of the month preceding the
Delivery Month in question.
4.1.4. Except with respect to quantities for which Buyer and Seller have
established a price pursuant to Section 8.3, during a month, Buyer, by notice to
Seller, may reduce its nomination of the Daily Contract Quantity, so long as
such reduction does not result in the purchase for that month of a quantity of
gas less than the Monthly Minimum Quantity. Any such requested reduction in the
Daily Contract Quantity shall take effect as of the earlier of (i) two (2)
business days after Seller's receipt of Buyer's notice of a reduction of the
Daily Contract Quantity or (ii) when the reduction is made effective by Viking
(it being understood, however, that the time periods specified in this sentence
are not intended to limit the parties' obligations in Article 6 regarding
nominations and imbalances). Any Alternate Quantities as defined in Section
8.3.3 shall not be subject to reduction in nomination.
4.1.5. If, within any one month, Buyer desires to increase the Daily
Contract Quantity being delivered (such increased Daily Contract Quantity not to
exceed the Maximum Daily Quantity), the increase in the Daily Contract Quantity
shall take effect as of the earlier of (i) two business days after Seller's
receipt of Buyer's notice of an increase or (ii) when the change is made
effective by Viking (it being understood, however, that the time periods
specified in this sentence are not intended to limit the parties' obligations in
Article 6 regarding nominations and imbalances).
4.2. If, for any month, Seller fails to deliver the Monthly Contract
Quantity (which is a quantity equal to the sum of the Daily Contract Quantity in
effect for each
9
day of such month) and such failure is not otherwise excused by any provision of
this Agreement, by operation of law or Buyer's failure to meet its obligations
hereunder, Seller shall pay Buyer the Net Replacement Cost, as defined below,
incurred by Buyer during the month of non-delivery to purchase a quantity of gas
and/or alternate fuel, up to but not in excess of the difference between the
Monthly Contract Quantity and the quantity actually delivered during the month
in question; such gas and/or alternate fuel acquired by Buyer shall be referred
to as Replacement Fuel. Deliveries within Viking's operational tolerances set
forth in the applicable FERC approved tariff and firm rate schedule shall meet
Seller's obligation to deliver gas to Buyer. "Net Replacement Cost" shall mean
the quantity of Replacement Fuel purchased by Buyer during the month of non-
delivery times the positive, incremental difference between (i) the total
delivered cost (on a per MMBtu basis), reasonably incurred by Buyer to acquire
such Replacement Fuel and (ii) the total delivered cost (on a per MMBtu basis)
of such gas that would have been incurred by Buyer had such quantity been
delivered by Seller at the Delivery Points hereunder. Within thirty (30) days
after the actual quantities delivered hereunder during the month in question are
confirmed by Viking, Buyer shall render to Seller a statement detailing the
difference between the Monthly Contract Quantity and the quantity delivered, the
quantity of Replacement Fuel, the costs and description of costs incurred by
Buyer for such Replacement Fuel and Buyer's Net Replacement Cost. Within thirty
(30) days of receipt of such statement, Seller shall reimburse Buyer for Buyer's
Net Replacement Cost for the month in question, Buyer agrees to acquire
Replacement Fuel at the lowest reasonable price available to Buyer. Seller's
payment to Buyer for Buyer's Net Replacement Cost incurred in obtaining
10
Replacement Fuel pursuant to this paragraph shall constitute Buyer's sole and
exclusive remedy for Seller's failure to deliver the Monthly Contract Quantity
pursuant to this Agreement for the month in question and Seller shall not, under
any circumstances whatsoever, be liable to Buyer for any other costs, charges,
expenses, losses or damages (except as set forth in Section 6.3 below) of any
nature or kind whatsoever, whether direct or indirect, foreseeable or not
foreseeable, consequential or incidental and arising from or in any way
attributable to or suffered as the result of Seller's failure to deliver gas to
Buyer pursuant to the terms of this Agreement during the month in question;
except that, if Seller's failure to deliver the Monthly Contract Quantity is as
the result of gross negligence or willful misconduct on Seller's part, then
Buyer's remedies shall not be so limited.
4.3. Except with respect to Alternate Quantities as defined in Section
8.3.3, if for any month, Buyer fails to nominate and take the Monthly Contract
Quantity and such failure is not otherwise excused by any provision of this
Agreement, by operation of law or Seller's failure to meets its obligations
hereunder, Buyer shall pay Seller an amount calculated as
*CONFIDENTIAL TREATMENT REQUESTED*
11
*CONFIDENTIAL TREATMENT REQUESTED*
4.3.1. If, for any month, Buyer fails to take the Alternate
Quantities as defined in Section 8.3.3 for such month, and during such month,
Seller sells all or a portion of the difference between such Alternate
Quantities and the quantity taken by Buyer to another purchaser at a price
less than the Alternate Price payable hereunder for the month in question,
Buyer shall compensate Seller for the difference between the Alternate Price
per MMBtu hereunder during the month in question and the price per MMBtu paid
to Seller by such other purchaser ("Seller's Incremental Costs"). Within
thirty (30) days after the actual quantities delivered are confirmed by
Viking, Seller shall render to Buyer a statement of Seller's Incremental
Costs detailing the difference between Alternate Quantities of Gas for such
month and the quantity of gas not taken by Buyer in such month, the quantity
of gas not taken by Buyer that was sold to another purchaser and the price
Seller received from such other purchaser for such gas. Buyer shall
reimburse Seller for Incremental Costs within thirty (30) days of Buyer's
receipt of Seller's invoice for Seller's Incremental Costs. Seller will use
commercially reasonable efforts to sell any Alternate Quantities
12
not taken by Buyer at the best prices reasonably available from markets which
Seller is not contractually obligated to serve.
4.3.2. Buyer's payments to Seller pursuant to this Section
4.3 and 4.3.1. shall constitute Seller's sole and exclusive remedy for
Buyer's failure to purchase the Monthly Contract Quantity pursuant to this
Agreement for the month in question, and Buyer shall not, under any
circumstances whatsoever, be liable to Seller for any other costs, charges,
expenses, losses or damages (except as set forth in Section 6.3 below) of any
nature or kind whatsoever, whether direct or indirect, foreseeable or not
foreseeable, consequential or incidental and arising from or in any way
attributable to or suffered as the result of Buyer's failure to purchase gas
from Seller pursuant to the terms of this Article 4 during the month in
question. Nothing contained in this Section 4.3.2. shall affect Buyer's
obligations under the other Articles of this Agreement.
ARTICLE 5.
QUALITY AND DELIVERY PRESSURE
5.1. All gas delivered under the terms of this Agreement shall at all
times conform to the quality specifications of Viking at the Delivery Points, as
such specifications are contained in Viking's FERC tariff in effect from time to
time.
5.2. Seller shall deliver the gas at a pressure sufficient to allow
the gas delivered hereunder to be delivered to Buyer's Facilities at the
Delivery Points; provided that Seller shall not be obligated to compress gas or
cause same to be done, in order to deliver gas to Buyer hereunder. In the event
that compression is required to effectuate delivery of gas hereunder and Seller
does not compress, or cause same to be done, Seller shall not be obligated to
deliver, and Buyer shall not be obligated to
13
take, gas hereunder during the period that compression is required to effectuate
delivery hereunder and neither party shall be liable to the other for the
failure to deliver or take such gas.
ARTICLE 6.
TRANSPORTATION AND DELIVERY POINTS
6.1. All gas delivered hereunder shall be delivered to Buyer at the
Delivery Points. Title to all gas sold hereunder shall pass from Seller to
Buyer at the Delivery Points.
6.2. If Seller's Transporter or Viking curtails or interrupts the
transportation of gas to be delivered hereunder, the Daily Contract Quantity
shall be reduced by the daily quantity of gas so curtailed or interrupted. If
the Daily Contract Quantity is reduced because of such interruption or
curtailment, Seller shall notify Buyer of such decrease. Seller shall use best
efforts to acquire and deliver gas to replace the reduced Daily Contract
Quantity. Such replacement gas shall be considered Incremental Gas, and shall
be priced in accordance with Section 8.2.2 and confirmed by use of an Exhibit
"C".
6.3. The parties agree to fully cooperate to eliminate imbalances
between nominations and deliveries on Seller's Transporter and Viking. Seller
further agrees to coordinate with any local distribution companies delivering
gas to Buyer's Facilities to eliminate imbalances. If any scheduling or
imbalance penalties or charges (including, but not limited to, cash-outs) are
imposed upon either party hereto by Viking or Seller's Transporter in accordance
with the provisions of its applicable transportation tariff(s), as a result of a
party's failure to deliver or take the Daily Contract Quantity, then the failing
party shall reimburse the other party the dollar
14
amount of such penalties or charges within thirty (30) days following receipt of
an invoice therefor. Seller will be responsible for any such penalties or
charges resulting from its failure to provide timely information to local
distribution companies or transporters, as long as Buyer provided such
information to Seller on a timely basis.
6.4. Seller shall provide to local distribution companies delivering
gas to Buyer's Facilities Buyer's nominations of the quantity of gas to be
purchased from Seller under this Agreement and transported by the local
distribution companies to each of Buyer's Facilities, subject to the following
terms and conditions:
6.4.1. Buyer agrees to notify Seller of its daily nomination
of the quantity of gas to be purchased hereunder and transported by local
distribution companies to each of Buyer's Facilities during the next Delivery
Month. Buyer shall furnish such notice to Seller no later than the time that
Buyer furnishes its notice of the Daily Contract Quantity under Section 4.1.3
above. Buyer's notice shall include any and all information necessary for
Seller to furnish such nomination to local distribution companies. Seller
agrees to nominate the quantity of gas that Buyer requests be transported, as
provided herein, to local distribution companies and to receive from local
distribution companies confirmation of such nominations (if and to the extent
that local distribution companies agree to confirm such nominations to
Seller) on Buyer's behalf.
6.4.2. If, during a month, Buyer requests a change in the
quantity to be purchased under this Agreement during that month, Buyer shall
also furnish Seller with any and all information necessary for Seller to
furnish such change in nomination to local distribution companies. Seller
agrees to provide local distribution companies
15
notice of such change in the nominated quantity as soon as practicable, but not
later than one (1) business day after the date such request for change is
received by Seller from Buyer.
6.4.3. Seller agrees to develop forms that could be used by
Buyer to provide to Seller the information necessary for Seller to furnish
the nominations contemplated in this Section 6.4 to local distribution
companies.
6.4.4. Buyer agrees to provide a letter to local
distribution companies (or other evidence satisfactory to local distribution
companies) advising local distribution companies that Seller is authorized to
make the nominations contemplated in this Section 6.4 .
6.4.5. In conjunction with the services set forth above in
this Section 6.4 , Seller shall also monitor the gas flow from the Delivery
Points to Buyer's Facilities. Seller will communicate with Buyer's
telemetering equipment (if available to Seller) or with Buyer's designated
representatives if telemetering equipment is not available to Seller.
ARTICLE 7.
MEASUREMENTS AND TESTS
7.1. The measurement and testing of the gas sold hereunder shall be in
accordance with Viking's FERC transportation tariff(s) in effect from time to
time and applicable to gas delivered at the Delivery Points.
16
ARTICLE 8.
PRICE
8.1. Buyer shall pay to Seller each month the sum of the following:
Commodity Charge and/or Alternate Commodity Charge (as applicable) plus
Incremental Gas Charge (if any) plus Additional Charges, minus Additional
Credits.
8.2. The Commodity Charge is calculated as the Index Price
*CONFIDENTIAL TREATMENT REQUESTED*
8.2.1. If at any time during the term of this Agreement,
"INSIDE FERC'S GAS MARKET REPORT", or the Index Price set forth therein, is
no longer published, Buyer and Seller shall, within (30) days of notification
of the cessation of publication, mutually agree to a substitute publication.
Such publication shall include a comparable natural gas market index tied to
a location comparable to Ventura in that it (i) is delivered to Northern
Natural Gas Company's market area and (ii) serves as a commonly accepted
point for purposes of trading natural gas physical and financial futures
transactions, to serve as the Index Price. Alternatively, the parties may
mutually agree to another acceptable pricing mechanism. The substitute
selected shall be retroactive to the time "INSIDE FERC'S GAS MARKET REPORT"
or the Index Price was no longer published.
8.2.2. The Incremental Gas Charge shall be calculated as the
mutually agreed to price for Incremental Gas, *CONFIDENTIAL TREATMENT REQUESTED*
If the Incremental Gas is being purchased and sold as
the result of a curtailment of transportation as provided in Section 6.2 , or
prior to November 1, 1996 as provided in Section 4.1 , the price to be paid for
Incremental
17
Gas shall equal the actual cost incurred by Seller to acquire and deliver such
gas, including without limitation all commodity costs for the gas, as well as
all costs associated with the transportation of such gas to the Delivery
Point(s).
8.3. The Alternate Commodity Charge shall be calculated as the
Alternate Price (as defined herein) *CONFIDENTIAL TREATMENT REQUESTED* In
lieu of paying the applicable Commodity Charge hereunder, at Buyer's request at
any time after the TCPL Capacity and the Viking Capacity have been awarded to
Seller and Buyer, respectively, subject to Section 9.1, Seller shall use
commercially reasonable efforts to establish an alternate price (such Pricing
being the "Alternate Price") or establish an alternate commodity charge pricing
mechanism
*CONFIDENTIAL TREATMENT REQUESTED*
Such Alternate Price or mechanism may include without limitation prices derived
from future prices published on the New York Mercantile Exchange ("NYMEX").
The Parties shall execute a confirmation in the form of Exhibit "D" to confirm
such Alternate Price. Examples of alternate pricing mechanisms may include but
are not limited to fixed prices, cross commodity swaps, fixed basis and fixed
prices tied to an escalator. Any such Alternate Price will include any of
Seller's costs associated with the transaction.
8.3.1. Buyer may request, by telephone between the hours of
8:05 a.m. and 2:00 p.m. local Houston time on any day that natural gas
futures contracts are traded on the NYMEX, that Seller quote an Alternate
Price for a specified quantity of gas to be delivered at the Delivery
Point(s) during a specified month. Buyer's request for an Alternate Price
may include a request for Alternate Price(s) for more than one month and for
varying quantities for each month.
18
8.3.2. At the time of, or as soon as possible after Buyer's
telephone request, Seller shall quote Buyer an Alternate Price based on the
per MMBtu NYMEX or other futures traded price and the basis differential used
to adjust the NYMEX or other futures traded price to the quoted price
applicable to the Delivery Point(s) (such quoted price hereinafter referred
as "Quoted Price"). Upon such notification and provided Buyer desires to
continue the process to fix the price, Seller shall use commercially
reasonable efforts during that trading day to acquire futures contracts as
required to hedge the transaction at a price applicable at the Delivery
Point(s) that is no higher than the Quoted Price. If such contracts are
obtained by Seller, Seller shall immediately forward to Buyer by telecopy a
"Price Confirmation", in the form of Exhibit "D", for Buyer's signature.
8.3.3. Once an Alternate Price has been established for a
Month, the Alternate Price shall be irrevocable as to the affected quantities
("Alternate Quantities"), and shall not thereafter be subject to change
unless mutually agreed to by the Parties. If Alternate Prices are established
for Alternate Quantities in a particular month that are less than the total
quantities of gas purchased by Buyer in any month, and/or if more than one
Alternate Price for different Alternate Quantities have been established in a
particular month, then the first gas purchased during said month shall be the
first Alternate Quantities established, followed by any additional Alternate
Quantities in the order they were established, followed by Gas priced
pursuant to the provisions of Section 8.2.2 and 8.2; respectively.
8.3.4. The parties may establish an Alternate Price more
than once for a particular month so long as Buyer meets the requirements of
this Section 8.3
19
with respect to timing and quantities. Buyer's request for an Alternate Price
in a month shall not include any quantity of gas which, when combined with
quantities to which an Alternate Price(s) applies in such month, exceeds the
Daily Contract Quantity.
8.4.
8.4.1.
*CONFIDENTIAL TREATMENT REQUESTED*
8.4.2.
*CONFIDENTIAL TREATMENT REQUESTED*
20
*CONFIDENTIAL TREATMENT REQUESTED*
8.5. Seller shall pay or cause to be paid all taxes imposed on or with
respect to the gas prior to its delivery at the Delivery Points. Buyer shall
pay, or cause to be paid, all taxes on or with respect to the gas at and after
its delivery at the Delivery Points including, without limitation, any and all
federal, state or local sales, use, gross receipts, consumption, or other
similar tax or franchise fee that may arise from or be levied upon a sale under
this Agreement. If Seller is required to remit or pay such taxes, Buyer shall
promptly reimburse Seller for the tax paid. If Buyer is entitled to purchase
natural gas free from any such taxes or charges, Buyer shall furnish Seller the
necessary exemption or resale certificate covering the gas delivered hereunder
at the Delivery Points prior to initial deliveries. Buyer agrees to indemnify
and hold harmless Seller from any and all costs, charges and expenses of any
nature incurred by Seller as a result of Seller's reliance on Buyer's
representation of exemption.
8.5.1. Notwithstanding anything in this Agreement to the
contrary, in the event that a Btu, energy or similar tax is levied on Seller
or Seller's supplier, Buyer agrees to reimburse Seller for all Btu, energy or
similar taxes paid by Seller with respect to gas delivered hereunder or to
reimburse Seller for all such taxes reimbursed by Seller to Seller's
supplier. Any such reimbursement shall be invoiced by Seller and paid by
Buyer pursuant to Article 10 below. If Seller subsequently receives a refund
of any such tax reimbursed by Buyer, Seller shall refund any such amounts.
21
ARTICLE 9.
CREDIT WORTHINESS
9.1. Prior to the commencement of deliveries and sales of gas under
this Agreement, and at any time and from time to time thereafter, Buyer shall
furnish Seller with credit information as may be reasonably required to
determine Buyer's credit worthiness. If requested by Seller, Buyer shall
promptly furnish Seller with a satisfactory letter of credit, guarantee or other
good and sufficient security of a continuing nature and in a satisfactory
amount, as determined by Seller in its reasonable business judgement. At any
time Seller may suspend deliveries and sales of gas to Buyer if (i) Seller
determines that there has been a material adverse change in Buyer's financial
condition or if Buyer defaults in any payment obligation hereunder and such
default continues for five (5) calendar days, and (ii) Buyer fails to satisfy
Seller of its ability to pay, promptly after written notice of such event from
Seller. Seller will resume deliveries and sales of gas to Buyer at such time as
Buyer has satisfied Seller of its ability to pay.
ARTICLE 10.
BILLING AND PAYMENT
10.1. On or before the twelfth (12th) day of each month during the term
of this Agreement, Seller shall render a statement to Buyer for the total
quantity of gas delivered to Buyer during the preceding month and for any other
amount due under this Agreement. Buyer shall pay to Seller, on or before the
later of (i) the twenty-second (22nd) day of the month or the tenth (10th) day
after Buyer's receipt of Seller's statement, the amount due based on Seller's
statement. Payment shall be made by wire transfer (in immediately available
funds) and shall be directed to:
22
By Wire Transfer:
Coastal Gas Marketing Company
Account #4055 2643
Citibank, N.A., New York, N.Y.
T/R #0210 0008 9
To the extent that the actual quantity delivered to Buyer is not available to
Seller by the twelfth (12th) day of each month, Seller may bill Buyer based on
nominated quantities, subject to adjustment for any known periods when nominated
quantities were not delivered and subject to later correction based on actual
data. If a statement is rendered based on nominated quantities rather than
actual quantities, Seller shall render a corrected statement as soon as possible
after actual quantities are known, but not earlier than the date of Seller's
next statement.
10.2. Buyer shall have the right during normal business hours and upon
reasonable prior notice to examine the books, records and charts of Seller as
necessary to verify any statement, charge or computation made under or pursuant
to this Agreement. Seller shall have the right during normal business hours and
upon reasonable prior notice to examine the books, records and charts of Buyer
as necessary to verify Buyer's compliance with the terms and conditions of this
Agreement.
10.3. If, in the absence of a good faith dispute, Buyer fails to pay
the amount of any statement rendered by Seller when due, Seller may after five
(5) calendar days suspend the sale of gas to Buyer, without liability, until
payment is made and interest shall accrue on the amount not paid from the due
date until the date of payment, at the then current prime rate of interest plus
one percent (1%) charged by Citibank, N.A., New York, New York to its best
commercial and industrial
23
borrowers (but not to exceed any applicable maximum lawful rate of interest).
If Buyer in good faith disputes any portion of the amount of any statement
rendered by Seller, Buyer shall timely pay to Seller all of the undisputed
amount of the statement and shall notify Seller of the amount of the dispute and
the reasons for the dispute not later than the due date of the statement in
question. Buyer and Seller shall promptly confer with respect to the disputed
amount and if it is determined, by agreement or otherwise, that Buyer owes an
additional amount to Seller with respect to the unpaid, disputed amount of the
statement, Buyer shall promptly pay to Seller such additional amount with
interest thereon at the rate set forth above in this Section 10.3 from the
original due date of the disputed statement until the date of payment. This
clause shall not bar either party hereto from asserting any other remedy it may
have at law or equity.
10.4. If Buyer finds, within the later of (i) twenty-four (24) months
after the date of any statement rendered by Seller or (ii) twenty-four (24)
months after the date of any quantity adjustment by Seller's Transporter, that
it has been overcharged and if Buyer has paid same and makes a claim for refund
within such twenty-four (24) months, the overcharge, if verified by Seller,
shall be refunded within thirty (30) days, without interest. If Seller finds,
within the later of (i) twenty-four (24) months after the date of any statement
rendered by Seller or (ii) twenty-four (24) months after the date of any
quantity adjustment by Seller's Transporter, that there has been an undercharge
in the amount billed in such statement, Seller may within such twenty-four (24)
month period submit a statement for such undercharge to Buyer and Buyer upon
verifying the same, shall pay the undercharge to Seller within thirty (30)
24
days, without interest. No adjustments shall be made unless the other Party is
notified of a claim prior to the expiration of the twenty-four (24) month
period.
ARTICLE 11.
REGULATION
11.1. This Agreement shall be subject to all valid applicable and
effective laws, orders, rules, regulations and directives of all duly
constituted federal, state and local governmental authorities having
jurisdiction.
ARTICLE 12.
WARRANTY
12.1. Seller warrants that it has the right to deliver the gas sold to
Buyer hereunder, free and clear of all liens, encumbrances and adverse claims.
Seller shall indemnify Buyer and save it harmless from suits, actions, debts,
accounts, damages, costs, losses and expenses arising from or out of this
warranty.
12.2. OTHER THAN THOSE EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO
GUARANTEES OR WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS, OR
SUITABILITY OF THE PRODUCT FOR A PARTICULAR PURPOSE NOTWITHSTANDING ANY COURSE
OF PERFORMANCE, USAGE OF TRADE OR LACK THEREOF INCONSISTENT WITH THIS PARAGRAPH.
ARTICLE 13.
POSSESSION AND CONTROL
13.1. As between the parties hereto, Seller shall be in exclusive control
and possession of, and shall bear responsibility for any loss of gas or any
damage or injury caused by the gas delivered hereunder until same shall have
been delivered to Buyer at the Delivery Points, after which delivery Buyer shall
be in control and possession of and bear the responsibility for such gas.
25
ARTICLE 14.
FORCE MAJEURE
14.1. The term Force Majeure, as employed herein, shall include but not
be limited to acts of God; strikes or other industrial disturbances; the direct
effect of governmental or judicial orders, actions, or interferences; civil
disturbances; war (declared or undeclared); sabotage; explosions; landslides;
lightning; earthquakes; fires; storms; floods and washouts; freezing, breakage,
operational failures or accidents to wells, machinery or lines of pipe; failure
of Seller's suppliers to supply gas due to an event of force majeure; failure of
Viking or Seller's Transporter to transport gas for any reason; the necessity
for making repairs to or alterations of machinery, wellhead equipment or lines
of pipe; and any other causes or occurrences, whether of the kind herein
enumerated or otherwise not within the control of the party claiming Force
Majeure, and which, by the exercise of due diligence, such party could not have
prevented or overcome. Refusal of either party to accede to demands of laborers
or labor unions which it considers unreasonable in its sole discretion shall not
deny it the benefits of this provision.
14.2. Except with regard to Buyer's or Seller's obligations to make
payments due under this Agreement, in the event either party hereto is rendered
unable, wholly or in part, by Force Majeure to carry out its obligations under
this Agreement, and which, by the exercise of due diligence, such party could
not have prevented or overcome, it is agreed that, upon such party's giving
notice and reasonably full particulars of such Force Majeure in writing or by
telecopy to the other party within a reasonable time after the occurrence of the
cause relied on, then the obligations of the party giving such notice, so far as
they are affected by such Force
26
Majeure, from its inception, shall be suspended during the continuance of any
inability so caused but for no longer period, and such party shall suffer no
prejudice as the result of the force majeure event. Either party's inability to
perform shall, as far as possible, be remedied with all reasonable dispatch. No
Force Majeure event shall change the term of this Agreement. However, the
parties recognize that the Daily Contract Quantity shall be reduced to the daily
quantity of gas, if any, delivered during such period of force majeure and that,
upon cessation of the event of force majeure, any subsequent increase in such
Daily Contract Quantity shall be subject to Section 4.1.5 above.
14.3. Buyer may not declare force majeure with respect to Alternate
Quantities.
ARTICLE 15.
TRANSFER AND ASSIGNMENT
15. 1. Any entity that shall succeed by purchase, merger or consolidation
to either party hereto shall be entitled to the rights and shall be subject to
the obligations of its predecessor in title under this Agreement. However, no
other assignment of this Agreement or of any rights or obligations hereunder
shall be made by either party without the written consent of the other party,
which consent shall not be unreasonably withheld. This Article 15 shall not
prevent either party from assigning, pledging or mortgaging its rights hereunder
as security for its indebtedness. This Agreement shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto.
27
ARTICLE 16.
VIKING CAPACITY
16.1.
*CONFIDENTIAL TREATMENT REQUESTED*
16.2.
*CONFIDENTIAL TREATMENT REQUESTED*
16.3.
*CONFIDENTIAL TREATMENT REQUESTED*
16.3.1.
*CONFIDENTIAL TREATMENT REQUESTED*
28
16.4.
*CONFIDENTIAL TREATMENT REQUESTED*
ARTICLE 17.
ASSIGNMENT OF TCPL CAPACITY
17.1. If, for any reason, this Agreement is terminated by either party
prior to October 31, 2007, Seller shall assign the TCPL Capacity to Buyer for
the remainder of the term of the Transportation Contract pursuant to which
Seller receives such capacity. Buyer agrees to accept such assignment. Buyer
and Seller shall do all things necessary to expedite such assignments. If Buyer
determines that it (or any affiliated entity) no longer requires the TCPL
Capacity for the purpose of transporting gas to Buyer's Facilities, then Seller
shall have the right of first refusal with respect to the assignment of the TCPL
Capacity, SUBJECT TO ANY APPLICABLE TARIFF.
17.2. If for any reason TCPL does not permit the assignment of the TCPL
Capacity from Seller to Buyer as described in Section 17.1, then Buyer shall
indemnify Seller against any and all costs associated with the TCPL Capacity
from the date of termination of this Agreement through the later of (i) October
31, 2007, or (ii) the end of the primary term of the Transportation Contract for
the TCPL Capacity.
ARTICLE 18.
ENTIRE AGREEMENT
18.1. This Agreement constitutes the entire agreement between Seller
and Buyer for the sale and purchase of gas described herein. THIS AGREEMENT
SUPERSEDES ALL PRIOR NEGOTIATIONS, REPRESENTATIONS, CONTRACTS OR AGREEMENTS
EITHER WRITTEN OR ORAL FOR THE PURCHASE AND SALE OF GAS
29
DESCRIBED HEREIN. No modification, alteration, amendment, instruction or
interpretation of this Agreement shall be binding upon either party unless
agreed to in writing by the party to be bound.
ARTICLE 19.
LIMITATION ON CLAIMS
19.1. Neither Party shall be liable for any damages for any breach of
this Agreement, unless a claim is presented in writing within two (2) years
after the alleged damages occurred. The claim shall set forth in full the
nature, character, cause, and amount of the damage.
ARTICLE 20.
NOTICES
20.1. Dispatch information shall be furnished to the respective parties
hereto by telecopy to the appropriate number shown below and each such telecopy
shall be confirmed in writing. Any notice, request, demand, or statement (other
than dispatch information) provided for in this Agreement shall be in writing
and deemed given when deposited in the United States mail, certified, postage
prepaid, directed to the address of the parties as follows:
BUYER
NOTICES:
American Crystal Sugar Company
101 Third Street
Moorhead, MN 56560
Attn: Purchasing Manager
Telecopy: (218) 236-4494
30
INVOICES & STATEMENTS:
American Crystal Sugar Company
101 Third Street
Moorhead, MN 56560
Attn: Accounts Payable
Telecopy:
------------------------
SELLER
NOTICES:
Coastal Gas Marketing Company
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046-0995
Attn: Transportation Dept.
Telecopy: (713) 877-7512
20.2. Either party may from time to time change or designate another
address for the purposes set forth above, and Seller may designate another
payment account, by written notice to the other party.
ARTICLE 21.
MISCELLANEOUS
21.1. No waiver by either Seller or Buyer of any default of the other
under this Agreement shall operate as a waiver of any future default, whether of
like or different character or nature.
21.2. Buyer represents and warrants that it has full and complete
authority to enter into and to perform this Agreement. Seller represents and
warrants that it has full and complete authority to enter into and to perform
this Agreement. Each person who executes this Agreement on behalf of Buyer
represents and warrants that he or she has full and complete authority to do so
and that Buyer will be bound thereby. Each person who executes this Agreement
on behalf of Seller represents and warrants
31
that he or she has full and complete authority to do so and that Seller will be
bound thereby.
21.3. Seller agrees to request The Coastal Corporation to issue to
Buyer a guaranty in substantially the form of Exhibit "E, attached hereto and
made a part hereof. If The Coastal Corporation fails to issue such a guaranty
to Buyer on or before May 1, 1996, then Buyer may terminate this Agreement by
giving Seller written notice of termination prior to May 1, 1996 (after which
Buyer's right to so terminate will be waived.)
21.4. NEITHER BUYER NOR SELLER SHALL BE LIABLE TO THE OTHER PARTY FOR
SUCH PARTY'S CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES RESULTING FROM A
BREACH OF THIS AGREEMENT OR RESULTING FROM EITHER PARTY'S NEGLIGENCE ARISING OUT
OF OR RELATED TO THIS AGREEMENT.
21.5. This Agreement was prepared by both parties hereto and not by any
party to the exclusion of the other party. Drafts of this Agreement shall not
be used to interpret this Agreement.
21.6. The headings throughout this Agreement are inserted for reference
purposes only, and are not to be construed or taken into account in interpreting
the terms and provisions of any Article, nor to be deemed in any way to qualify,
modify or explain the effects of any such term or provision.
21.7. AS TO ALL MATTERS OF CONSTRUCTION AND INTERPRETATION, THIS
AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY THE LAWS OF THE STATE
OF MINNESOTA, NOTWITHSTANDING ANY CONFLICT OF
32
LAWS PRINCIPLES OF SAID JURISDICTION THAT MIGHT REQUIRE THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.
21.8. There is no third party beneficiary to this Agreement, and the
provisions of this Agreement shall not impart rights enforceable by any person,
firm or organization not a party or not a successor or assignee of a party to
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers in duplicate originals, as of the day
and year first above written.
COASTAL GAS MARKETING COMPANY
By: /s/ J.R. Milam
--------------------------
J.R. Milam
Vice President
"SELLER"
AMERICAN CRYSTAL SUGAR COMPANY
By: /s/ James J. Horath
--------------------------
Name: James J. Horath
Title: Chief Financial Officer
"BUYER"
(SIGNATURE PAGE TO GAS SALES CONTRACT DATED MARCH 20, 1996 BETWEEN AMERICAN
SUGAR COMPANY AS BUYER, AND COASTAL GAS MARKETING COMPANY, AS SELLER)
33
EXHIBIT "A"
DELIVERY POINTS
Crookston - Great Plains town border station or if applicable a direct
connection with Viking Gas Transmission.
East Grand Forks - Northern States Power town border station or if applicable a
direct connection with Viking Gas Transmission.
Moorhead - Northern States Power town border station or if applicable a direct
connection with Viking Gas Transmission.
EXHIBIT "B"
*CONFIDENTIAL TREATMENT REQUESTED*
*CONFIDENTIAL TREATMENT REQUESTED*
*CONFIDENTIAL TREATMENT REQUESTED*
EXHIBIT "C"
Gas Sales Contract
BETWEEN
Coastal Gas Marketing Company "Seller"
AND
American Crystal Sugar Company "Buyer"
*CONFIDENTIAL TREATMENT REQUESTED*
EXHIBIT "D"
Alternate Price Confirmation
*CONFIDENTIAL TREATMENT REQUESTED*
EXHIBIT "E"
[CORPORATE GUARANTY]
GUARANTY
*CONFIDENTIAL TREATMENT REQUESTED*
*CONFIDENTIAL TREATMENT REQUESTED*
2