ATTENTION:
----------
CONTAINS
PROTECTED MATERIALS
GAS SALES AGREEMENT
between
CNG GAS SERVICES CORPORATION
and
FALL RIVER GAS COMPANY
TABLE OF CONTENTS
ARTICLE 1
GENERAL REPRESENTATIONS AND WARRANTIES.................................... 1
1.1 Seller's General Representations and Warranties.................. 1
1.2 Buyer's General Representations and Warranties................... 2
ARTICLE 2
DEFINITIONS............................................................... 3
2.1 Definitions...................................................... 3
ARTICLE 3
CHARACTER OF SERVICE...................................................... 9
3.1 Character........................................................ 9
ARTICLE 4
GOVERNMENTAL ACTIONS...................................................... 9
4.1 Applicable Laws, Orders and Regulatons........................... 9
4.2 Prohibition of Performance....................................... 10
4.3 Duties........................................................... 10
4.4 Approval by Massachusetts Department of Public Utilities......... 10
4.5 Disallowance of Passthrough...................................... 11
ARTICLE 5
DELIVERIES AND RECEIPTS................................................... 12
5.1 Deliveries by Seller............................................. 12
5.2 Receipts by Buyer................................................ 12
ARTICLE 6
TITLE TRANSFER POINTS..................................................... 13
6.1 Identification................................................... 13
6.2 Risk of Loss; Indemnification.................................... 13
i
ARTICLE 7
TERM...................................................................... 13
7.1 Commencement Date................................................ 13
7.2 Term of Agreement................................................ 14
7.3 Limitation of Seller's Delivery Obligations after Commencement
Date............................................................. 14
ARTICLE 8
PRICING, CREDITING AND REIMBURSEMENTS..................................... 14
8.1 Amounts Payable by Buyer......................................... 14
8.2 Credit by Seller to Buyer's Account.............................. 15
8.3 Taxes............................................................ 16
8.4 Unavailability of Information.................................... 16
8.5 Alternative Commodity Unit Prices................................ 16
ARTICLE 9
QUANTITIES................................................................ 17
9.1 Nominated Quantity and Requested Deliveries...................... 17
9.2 Storage Account.................................................. 18
9.3 Required Notifications........................................... 19
9.4 Annual Adjustment to RQ.......................................... 19
9.5 Other Adjustments................................................ 19
ARTICLE 10
LIMITED DELIVERIES BY TRANSPORTING
PIPELINES AND SELLER SUPPLY ALLOCATION.................................... 20
10.1 Limited Deliveries by Transporting Pipelines..................... 20
10.2 Supply Allocation................................................ 20
10.3 Priority for Certain Quantities.................................. 22
10.4 Buyer Certification; Sanctions................................... 22
ii
ARTICLE 11
BILLING AND PAYMENT....................................................... 23
11.1 Basis of Billings............................................... 23
11.2 Seller's Statement.............................................. 25
11.3 Buyer's Payment................................................. 25
11.4 Payment Default................................................. 25
11.5 Disputed Charges................................................ 26
11.6 Adjustments..................................................... 27
11.7 Audits.......................................................... 27
11.8 Other Information............................................... 27
ARTICLE 12
PROCESSING AND MEASUREMENT................................................ 27
12.1 Processing...................................................... 27
12.2 Measurements.................................................... 27
ARTICLE 13
TRANSPORTATION............................................................ 28
13.1 Responsibility for Transportation............................... 28
ARTICLE 14
REPRESENTATIONS AND WARRANTIES............................................ 28
14.1 Jurisdictional Status........................................... 28
14.2 Quality and Pressure............................................ 28
14.3 Title........................................................... 29
14.4 Supply.......................................................... 29
ARTICLE 15
FORCE MAJEURE............................................................. 29
15.1 Suspension...................................................... 29
15.2 Definition of Force Majeure.................................... 30
15.3 Exclusion....................................................... 30
15.4 Other Effects................................................... 30
iii
ARTICLE 16
DAMAGES AND TERMINATION RIGHTS............................................ 31
16.1 Obtaining Alternate Supplies or Markets......................... 31
16.2 Buyer's Damages................................................. 32
16.3 Seller's Damages................................................ 33
16.4 Termination in Event of a Delivery Shortfall by Seller.......... 33
16.5 Effect of Article 16............................................ 34
ARTICLE 17
FINANCIAL RESPONSIBILITY.................................................. 34
17.1 Maintaining Buyer's Financial Responsibility.................... 34
17.2 Bankruptcy of Party............................................. 35
ARTICLE 18
ASSIGNMENT................................................................ 35
18.1 Assignment of the Agreement..................................... 35
ARTICLE 19
COLLATERAL DOCUMENTS...................................................... 36
19.1 Capacity Managment Agreement.................................... 36
19.2 Support Letter.................................................. 36
19.3 Guarantee....................................................... 36
19.4 Buyer's Agreements with Transporters............................. 36
19.5 Seller's Agreements with Transporters............................ 37
ARTICLE 20
TRANSPORTER PENALTIES..................................................... 37
20.1 Responsibility for Penalties.................................... 37
iv
ARTICLE 21
MISCELLANEOUS..............................................................37
21.1 Choice of Law...................................................37
21.2 Entire Agreement................................................38
21.3 Notices.........................................................38
21.4 Exclusion of Third Party Rights.................................38
21.5 Waiver..........................................................38
21.6 Confidentiality.................................................39
21.7 Refunds and Retroactive Price Adjustments.......................39
21.8 Severability....................................................39
21.9 Amendments and Other Modifications..............................40
21.10 Headings........................................................40
21.11 Arbitration.....................................................40
21.12 Further Assurances..............................................40
21.13 Reserve Auditor's Report........................................40
21.14 Additional Credit by Seller to Buyer's Account..................41
v
GAS SALES AGREEMENT
--------------------
THIS AGREEMENT, dated this 1st day of June, 1993, by and between CNG GAS
SERVICES CORPORATION, a Delaware Corporation, hereinafter referred to as
"Seller," and FALL RIVER GAS COMPANY, a Massachusetts Corporation,
hereinafter referred to as "Buyer," each hereinafter referred to sometimes as
"Party" or collectively as "Parties."
WITNESSETH:
WHEREAS, Seller desires to sell natural gas on a firm basis to Buyer
under and as provided by the terms and conditions of this Agreement; and
WHEREAS, Buyer desires to purchase natural gas on a firm basis from
Seller under and provided by the terms and conditions of this Agreement;
WHEREAS, Buyer, as a local distribution company with a public utility
service obligation to provide reliable and affordable Gas service to its
customers, requires a reliable, reasonably priced, firm source of Gas supply;
WHEREAS, Seller, as a merchant acquiring Gas supply for resale, requires
a firm market for such supply;
WHEREAS, Seller has furnished Buyer with a signed Letter from Seller's
parent corporation, Consolidated Natural Gas Company, describing the
organization and ownership of itself, and its subsidiaries, CNG Gas Services
Corporation and CNG Producing Company, as of the date hereof.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, Seller and Buyer mutually agree and covenant as follows:
ARTICLES 1
GENERAL REPRESENTATIONS AND WARRANTIES
1.1 Seller's General Representations and Warranties:
-----------------------------------------------
Seller makes the following general representations and warranties:
1
(a) Seller has or will acquire a supply of Gas which Seller desires
to sell and deliver to Buyer on a firm basis;
(b) Seller desires to enter into an agreement for the sale of Gas, as
set forth herein;
(c) Seller (i) holds all necessary corporate authorizations and
(ii) by the execution and delivery of this Agreement will not
violate its Articles of Incorporation or any applicable law or
regulation;
(d) Seller has duly appointed an officer or other agent to act as its
attorney-in-fact to execute this Agreement; and
(e) Seller possesses all required Governmental Authorizations,
and all such Governmental Authorizations are in full force and
effect.
1.2 Buyer's General Representations and Warranties
----------------------------------------------
Buyer makes the following general representations and warranties:
(a) Buyer desires to acquire a firm supply of Gas and to purchase
and receive such supply from Seller on a firm basis;
(b) Buyer desires to enter into an agreement for the purchase of
Gas, as set forth herein;
(c) Buyer (i) holds all necessary corporate authorizations and
(ii) by the execution and delivery of this Agreement will not
violate its Articles of Incorporation or any applicable law or
regulation;
(d) Buyer has duly appointed an officer or other agent to act as
its attorney-in-fact to execute this Agreement; and
(e) Buyer possesses all required Governmental Authorizations,
except for the authorizations identified in Section 4.4, and
all such Governmental Authorizations are in full force and
effect.
2
ARTICLES 2
DEFINITIONS
2.1 Definitions. The following terms, as used in this Contract, shall have
the meanings set forth below (whether or not such terms are capitalized
herein):
(a) "ABC Group" means the group of local distribution systems in
New England informally organized for the purpose of engaging in joint
negotiations for the purchase of Gas from Seller, and including Colonial
Gas Company, Fall River Gas Company, Town of Middleborough, Massachusetts,
Municipal Gas & Electric Department, and City of Norwich Department of
Public Utilities; provided the existence of such group shall not confer
any legal obligation on Buyer or Seller extending beyond the express
language of this Agreement or restrict the ability of Buyer or Seller to
separately negotiate and enter into mutually agreeable amendments to this
Agreement.
(b) "Alogonquin" means Algonquin Gas Transmission Company, or any
successor entity that may hereafter own or operate its gas transmission
facilities.
(c) "Back-Up Gas" means that supply of gas to be tendered by
Seller into CNG Transmission for redelivery into Texas Eastern under the
conditions specified in Sections 10.1 and 10.2.
(d) "Base Segment Capacity Entitlement" means the quantification
of Buyer's firm right to use Texas Eastern pipeline segments in Zones STX,
ETX, WLA, and ELA respectively, as such quantification may be stated from
time to time as a "Base Segment Capacity Entitlement" in Texas Eastern's
FERC Gas Tariff.
(e) "Billing Quantity" means the monthly quantity of Gas employed
for billing purposes hereunder, as further described in Section 11.1
hereof.
(f) "Btu" means the quantity of heat contained in one British
Thermal Unit, as defined in accordance with tariff and operating procedures
of Transporter. Where appropriate, "Btu's" shall mean the plural of the
aforementioned definition. The term "MMBtu" means one million (1,000,000)
Btu's.
(g) "Capacity Management Agreement" means that certain Capacity
Management Agreement dated as of the date hereof, which agreement further
defines Seller's rights and obligations with respect to Individually-
Certificated Capacity Rights and Unbundled Capacity Rights.
3
(h) "City Gate" means that point on the Algonquin system that
interconnects with Buyer's local distribution facilities and at which
Algonquin delivers and transfers custody of Gas to Buyer.
(i) "CNG Transmission" means CNG Transmission Corporate or any
successor person or entity that may hereafter own or operate its gas
transmission facilities.
(j) "Commodity Unit Price" means the amount in U.S. dollars payable
by Buyer for each MMBtu (as defined herein) of Gas included in the
Billing Quantity. Such price shall be computed on the "as delivered",
unsaturated (dry) condition of such gas.
(k) "Contract Year" means a period of twelve (12) consecutive
months, except as specified below. The first Contract Year shall begin on
the Commencement Date and shall end on May 31, 1994. The second and
subsequent Contract Years shall begin on June 1 and end on May 31 of the
following calendar year.
(l) "Day" means the 24-hour period as defined in the FERC Gas
Tariffs of Texas Eastern and Algonquin, respectively.
(m) "Entitlement Quantity" or "EQ" means (i) up to 29,799 MMBtu's
per Day of Gas, representing the sum of the MTQ and MSQ (as the MTQ
and MSQ may change, as provided in the definitions thereof below), to be
delivered into Algonquin for transportation to the City Gate minus
(ii) Transportation Shrinkage on Algonquin.
(n) "Extraneous Gas" means supplies available to Buyer under
existing contracts to cover periods of peak demand on Buyer's
distribution system, which supplies originate from such sources as
propane injection facilities, exchange or transportation arrangements
with other distribution companies in New England, or liquified natural
gas facilities located in the vicinity of Boston, Massachusetts. On or
before October 1, 1993, the parties shall prepare and complete a Schedule
of Extraneous Gas in substantially the form of Appendix IV hereto.
(o) "FERC" means the Federal Energy Regulatory Commission, or any
successor federal agency that may regulate the interstate transportation
of natural gas by pipeline.
4
(p) "Filed Rate" means the rate Transporter files with the FERC for
transportation (including storage) services and which Transporter is entitled
to collect, as reflected from time to time in the rate sheets contained in
Transporter's FERC Gas Tariff, notwithstanding that such rate may be subject
to refund. If two or more rates are stated for the same service, the highest
rate shall be deemed the Filed Rate.
(q) "Force Majeure Event(s)" shall be those event(s) described in Section
15.2.
(r) "Gas" means pipeline quality natural gas.
(s) "Governmental Authorization" means any material governmental license,
permit, franchise and other authorization of any federal, state, or local
governmental authority which is necessary for a Party to obtain before such
Party may lawfully execute this Agreement or commence the purchase or sale of
Gas hereunder.
(t) "Individually-Certificated Rights" mean the rights to use the capacity
of Transporter (i) conferred on Buyer through the execution of a service
agreement with Transporter and (ii) qualifying as transportation (including
storage) services individually certificated under Section 7(c) of the Natural
Gas Act, as amended from time to time. Individually-Certificated Capacity
Rights are documented in rate schedule(s) appearing in Transporter's FERC Gas
Tariff. Such Individually-Certificated Capacity Rights are further identified
in Exhibit "A" hereto.
(u) "Kosciusko Input Quantity" means the quantity of gas that Texas
Eastern from time to time may direct Buyer or Seller (as capacity manager of
Buyer's Unbundled Capacity Rights under the Capacity Management Agreement) to
tender at point(s) of interconnection with United Gas Pipeline Company and/or
Southern Natural Gas Company in the vicinity of Kosciusko, Mississippi in
order to maintain or increase the effective capacity of Texas Eastern's
pipeline system.
(v) "Maximum Storage Quantity" or "MSQ" means the maximum MMBtu's of
Storage Gas per day that can be withdrawn from storage and delivered into
Algonquin for transportation to the City Gate using Buyer's portfolio of
Individually-Certificated Capacity Rights and Unbundled Capacity Rights (as
reduced by Transportation Shrinkage on Algonquin). The MSQ is additional to
the MTQ. It is recognized that the MSQ is a changing quantity which is a
function, inter alia, of the balance of working gas credited by Transporter
to each storage customer's account, the month in which withdrawals are
scheduled, the pipeline capacity of
5
Transporter available from the storage facility to the City Gate, and, for
each Transporter, Transportation Shrinkage and the specific terms and
conditions of each storage rate schedule and associated transportation rate
schedule and general terms and conditions of Transporter applicable to
storage customers. Any such change in the MSQ shall not operate to increase
or decrease the MTQ or RQ hereunder and Seller shall have no obligation to
cover any change in deliveries caused thereby with increased or decreased
quantities of Reserved Gas.
(w) "Maximum Transportation Quantity" or "MTQ" means 17,814 MMBtu's per
day of Gas to be delivered to the City Gate using Buyer's portfolio of (i)
Individually-Certificated Capacity Rights and (ii) Unbundled Capacity Rights.
To the extent such Unbundled Capacity Rights and Individually-Certificated
Capacity Rights are subject to reduction due to annual contract quantity,
seasonal and other limitations stated in Transporter's FERC Gas Tariff, the
MTQ shall be correspondingly reduced. The MTQ is stated net of Transportation
Shrinkage on Texas Eastern and is additional to the MSQ.
(x) "Mcf" means one thousand (1,000) cubic feet.
(y) "Month" means the period beginning on the first day of the calendar
month and ending on the first day of the following calendar month, as further
defined in the FERC Gas Tariffs of Texas Eastern and Algonquin, respectively.
(z) "National Fuel Gas" means National Fuel Gas Supply Corporation or any
successor person or entity that may hereafter own or operate its gas
transmission facilities.
(aa) "Nominated Quantity" means that quantity of Gas per day that Buyer
notifies Seller pursuant to Section 9.1 that Buyer desires be delivered by
Algonquin to the City Gate, not to exceed the EQ.
(ab) "Party" means either Buyer or Seller, as the context requires.
(ac) "Resale Customer" means a residential, commercial, or industrial
customer who purchases Gas on a firm basis from Buyer.
(ad) "Resale Load" means the aggregate Gas consumption by Resale Customers,
to the extent such consumption is attributable to firm purchases of Gas from
Buyer.
6
(ae) "Reservation Fee" means the amount payable by Buyer each month during
the term hereof to obtain an available supply of Reserved Gas from Seller, as
specified in Section 8.1(a). Except as provided in Sections 15.4(a) and
16.2(c), the Reservation Fee shall not be refundable to or otherwise
recoupable by Buyer and shall not operate as a credit against any other
charge payable by Buyer hereunder, including any amount payable by Buyer as a
Commodity Charge.
(af) "Reservation Quantity" or "RQ" means 18,560 MMBtu's per day of
Reserved Gas to be made available by Seller for delivery into Texas Eastern,
plus adjustments necessary to track changes in Transportation Shrinkage, as
reflected in the rate or tariff sheet filings of Texas Eastern and/or
Algonquin with the FERC made effective after June 1, 1993, in the manner
specified in Appendix II hereto. Except as provided in Section 9.4 and 9.5
and Appendix II, the RQ shall be fixed for the term of this Agreement.
(ag) "Reserve Auditor" means Ralph E. Davis Associates, Inc., or any other
successor firm selected by CNG Producing Company to prepare a report
concerning CNG Producing Company's reserves for filing with the Securities
and Exchange Commission.
(ah) "Reserved Gas" means the Gas held or acquired by Seller for delivery
under the terms and conditions hereof, excluding Supplemental Gas and Back-Up
Gas; provided that in no event shall the use of such term or any other
provision of this Agreement be construed to create a dedication, commitment
or other charge against specific leases, properties or gas purchase contracts
owned or controlled by Seller, CNG Producing Company or any other entity
under common ownership and control with Seller. Further, this Agreement shall
not preclude Seller from selling to others Reserved Gas that Seller
determines is surplus to that required to satisfy Seller's delivery
obligations hereunder.
(ai) "Storage Account" means the account maintained by Seller for each
Contract Year reflecting the net balance from time to time of Storage Input
Quantities and Storage Output Quantities.
(aj) "Storage Gas" means Reserved Gas or other Gas which is stored at the
various underground storage fields pursuant to Individually-Certificated
Capacity Rights and Unbundled Capacity Rights.
7
(ak) "Storage Input Quantity" means the monthly quantity of Gas referred
to in Section 9.2 and Appendix III.
(al) "Storage Output Quantity" means the monthly quantity of Gas referred
to in Section 9.2 and Appendix III.
(am) "Texas Eastern" means Texas Eastern Transmission Corp. or any
successor entity that may hereafter own or operate its gas transmission
facilities.
(an) "Texas Eastern Supply Allocation Pool" means Gas produced and
available from wells or production platforms physically attached to or
normally delivered into the gathering or transmission facilities of Texas
Eastern.
(ao) "Title Transfer Point" shall be as described in Section 6.1 hereof.
(ap) "Transco" means Transcontinental Gas Pipe Line Corporation or any
successor person or entity that may hereafter own or operate its gas
transmission facilities.
(aq) "Transporter Costs" mean all amounts that would be payable to a
Transporter for the transportation (including storage) of the Billing Quantity
using the billing paths described in Section 11.1 hereof were Buyer (instead
of Seller) acting as shipper under the specific Rate Schedules listed in
Exhibit "A" hereto, including all amounts that would be payable as
reservation fees, demand charges, usage fees, volumetric fees, commodity
charges and storage injection and storage withdrawal charges. Transporter
Costs shall also include all additional charges that would be associated with
such transportation, including, but not limited to GRI charges, ACA charges,
take-or-pay charges, taxes imposed on the transportation or use of Gas,
transition costs and any other charges that any Transporter would be
authorized to collect under such circumstances pursuant to FERC Order Nos.
500, 528, 636, successor orders or otherwise as the result of governmental
action.
(ar) "Transportation Shrinkage" means fuel, line losses, storage losses
and other in-kind deductions of Gas that Transporter would be entitled to make
in accordance with Transporter's FERC Gas Tariff.
(as) "Transportation Shrinkage Quantity" means the positive difference
between Gas receipts by Transporter and Gas deliveries by Algonquin at the
City Gate using the billing paths described in Section 11.1 for the Billing
Quantity, reflecting Transportation Shrinkage. The Transportation Shrinkage
Quantity shall
8
be determined consistent with Section 11.1 and the example set
forth in Appendix II hereto.
(at) "Transporter" means each of Texas Eastern, Algonquin, CNG
Transmission, National Fuel Gas and Transco; to the extent such pipeline
renders service in connection with Buyer's Unbundled Capacity Rights and
Individually-Certificated Capacity Rights. Buyer expects to acquire on each
such pipeline the Unbundled Capacity Rights and/or Individually-Certificated
Capacity Rights identified in Exhibit "A" hereto.
(au) "Unbundled Capacity Rights" mean the firm rights to use the capacity
of Transporter (i) conferred on Buyer through the execution of a service
agreement with Transporter and (ii) qualifying as blanket certificate
transportation (including storage) services for purposes of 18 C.F.R. Part
284 or successor regulations. Unbundled Capacity Rights are documented in
rate schedule(s) appearing in Transporter's FERC Gas Tariff. Such Unbundled
Capacity Rights are further identified in Exhibit "A" hereto.
ARTICLE 3
CHARACTER OF SERVICE
3.1 Character
(a) Seller represents that it is not an entity subject to direct sales
regulation by the FERC, any state public utility commission, or any
other governmental agency; and
(b) Seller's obligation to sell and deliver and Buyer's obligation to
purchase and receive Gas are exclusively contractual and arise solely
under the provisions of this Agreement.
ARTICLE 4
GOVERNMENTAL ACTIONS
4.1 Applicable Laws, Orders and Regulations. This Agreement is subject to all
valid laws, orders, rules, and regulations of duly constituted federal,
local, and state governmental authorities having jurisdiction.
9
4.2 Prohibition of Performance. In the event that any federal, local, or
state governmental authority having jurisdiction over a Party at any time
prohibits performance of this Agreement in whole or in part in any material
respect, then the Party so affected may by giving notice thereof suspend
performance of this Agreement to the extent so prohibited, in which event the
other Party shall likewise be entitled to suspend its performance hereunder
to the extent its performance corresponds to the performance so prohibited.
The affected Party shall give prompt notice to the other Party of any such
governmental action. Any such suspension shall cause an extension of the
term of this Agreement coterminous with the period of suspension. During any
such period of suspension, the Parties shall negotiate in good faith the
substitution of feasible, nonprohibited alternative means of performance.
If, notwithstanding such good faith negotiations, the Parties are unable to
agree upon substitution of performance, as provided above, on or before 45
days after performance is first suspended pursuant to this Section 4.2, then
either Party may terminate this Agreement by giving notice to the other Party.
4.3 Duties. In all filings, discussions and other contacts with governmental
authorities relation to this Agreement (excluding such filings, discussions
or other contacts as may be made in connection with the litigation or
arbitration of disputes among the Parties hereunder) or any Governmental
Authorization sought in connection therewith, each Party shall be subject to
the following continuing duties:
(a) To fully inform the other Party of material developments;
(b) To vigorously advocate and defend the prudence and commercial
reasonableness of this Agreement;
(c) To refrain from seeking and to reasonably defend against any
governmental action that would materially and adversely modify the
right and obligations of either Party hereunder or trigger the
termination or suspension provisions of this Agreement;
(d) To otherwise exercise good faith in dealings with the other Party;
and
(e) Not to misrepresent any material fact relating to this Agreement to
any governmental authority.
4.4 Approval by Massachusetts Department of Public Utilities.
---------------------------------------------------------
(a) The Parties recognize that, to the extent it has a term that exceeds
one (1) year, this Agreement is subject to the approval of the
Massachusetts
10
Department of Public Utilities ("MDPU"). Accordingly, upon
execution of this Agreement, Buyer shall proceed with due diligence
and use its best efforts to obtain from the MDPU all requisite
authorizations and approvals to purchase and receive Gas in accordance
with the terms off this Agreement. Buyer shall furnish to Seller
copies of any and all petitions, testimony, exhibits, supporting
documentation and other evidence which are filed in support of Buyer's
request for approval of this Agreement from the MDPU (excluding
materials relating to Buyer's purchase agreements with other suppliers
and other commercially sensitive materials that Buyer treats as
confidential and proprietary).
(b) Buyer shall notify Seller of any ruling, order or
decision by the MDPU regarding the authorizations applied for above
("Authorization Order") and provide Seller with a copy of such
Authorization Order. If the Authorization Order approves this
Agreement without any condition, material change, or other
modification, then Buyer shall accept the authorizations contained
therein and/or otherwise required by law to enable Buyer to perform
its obligations under this Agreement. If the Authorization Order
denies approval of this Agreement or conditions approval on the
making of any material change or other modification, including
deletion or amendment of any term or provision of this Agreement,
then, promptly after the issuance of such Authorization Order, the
Parties shall then commence negotiations in good faith to attempt
to agree upon modifications of this Agreement which would be
responsive to the Authorization Order; provided, however, that
nothing contained herein shall obligate either Party to agree to
any modification which would, in the view of that Party, materially
and adversely affect the profitability or other benefits of this
transaction or render the performance or administration of this
Agreement commercially unfeasible. If the Parties fail to agree
upon such responsive modifications, then this Agreement shall
continue in full force and effect, in the form in which MDPU
approval was originally sought, but shall expire at the end of the
preliminary term identified in Section 7.2 (a). If the Parties
agree upon such responsive modifications, then Buyer shall accept
the authorizations contained in the Authorization Order and/or
otherwise required by law to enable Buyer to perform its
obligations under this Agreement, and this Agreement shall continue
in full force and effect, in the form so modified, until the end of
the term identified in Section 7.2 (b).
4.2 Disallowance of Passthrough. Unless otherwise mutually agreed to in
writing, upon providing ninety (90) days prior written notice, Buyer may
terminate this Agreement in the event the MDPU or other federal, state or
local regulatory authority having jurisdiction over
11
Buyer issues a ruling, order or decision (with respect to which an appeal, in
the good faith judgment of Buyer, is not practicable) disallowing passthrough
by Buyer to its customers of any portion of the costs paid or payable to
Seller under this Agreement for any past or future period. During such ninety
(90) day notice period, the price of Gas shall not be changed from the price
as specified herein, regardless of any disallowance by such governmental
authority, except as mutually agreed by the Parties. Buyer shall immediately
provide a written copy to Seller of the ruling, order or decision setting
forth the disallowance. The parties shall then negotiate in good faith to
attempt to agree upon modifications of this Agreement that would eliminate
the grounds for such disallowance; provided however that nothing contained
herein shall obligate either Party to agree to any modification which would,
in the view of that Party, materially and adversely affect the profitability
or other benefits of the transaction or render the performance or
administration of this Agreement commercially unfeasible. Seller shall also
have the option to credit Buyer for the full amount of the disallowance in
which event the termination notice of Buyer shall be deemed withdrawn and
this Agreement shall continue in full force and effect with an appropriate
amendment to reflect Seller's continuing obligation to fully credit Buyer for
the disallowance for the remaining term of this Agreement. Buyer agrees not
to make a unilateral application to the MDPU or any other authority seeking a
disallowance, nor shall it take any affirmative action that has the intended
effect of enhancing or supporting any application to or action by the MDPU or
such other regulatory authority to effect such disallowance.
ARTICLE 5
DELIVERIES AND RECEIPTS
5.1 Deliveries by Seller. Seller shall tender to Transporter a sufficient
quantity of Gas, up to the sum of (a) the RQ, (b) the MSQ, and (c)
Transportation Shrinkage associated with (a) and (b), such that Transporter
may, in accordance with its FERC Gas Tariff, transport and deliver to
Algonquin and Algonquin may, in accordance with its FERC Gas Tariff,
transport and schedule for delivery at the City Gate a quantity of Gas
equivalent to the Nominated Quantity on each day throughout the term of this
Agreement. Notwithstanding the foregoing sentence, Seller shall not be
obligated to tender to Transporter such quantities of Gas that Seller may be
excused pursuant to Section 15.1 from tendering and/or Seller may be
obligated to tender to other Supply Allocation Customers (as defined below)
pursuant to Article 10; provided nothing in this Section 5.1 shall operate to
expand or limit Buyer's rights under Articles 15 and 16.
5.2 Receipts by Buyer. Except to the extent Buyer's obligations may be
suspended in accordance with Section 15.1, Buyer shall use its best efforts
to operate its distribution
12
facilities to accept Gas from Algonquin at rates consistent with Algonquin's
FERC Gas Tariff and in a manner intended to permit delivery by Algonquin to
Buyer on each day throughout the term of this Agreement of a quantity of Gas
corresponding to the Nominated Quantity.
ARTICLE 6
TITLE TRANSFER POINTS
6.1 Identification. The Title Transfer Point(s) for Gas sold and purchased
hereunder shall be at the City Gate; provided that if the FERC Gas Tariff of
any Transporter requires that Buyer, rather than Seller, have title to the
Gas in order for Gas to be stored or transported, the Parties shall establish
upstream Title Transfer Point(s) for the Gas subject thereto. Any such
upstream Title Transfer Point(s) shall be set forth in Exhibit "A" to this
Agreement. The Parties shall revise Exhibit "A" from time to time as
necessary to identify such upstream Title Transfer Points as are currently
operative. Regardless of whether title to Gas injected into storage is
transferred upstream as provided above. Buyer shall be entitled to receive
delivery at the City Gate of an equivalent quantity of Gas in the manner
specified in Section 5.1
6.2 Risk of Loss; Indemnification. Seller shall own and be deemed to be in
actual or constructive control and possession of the Gas until such Gas shall
have been delivered at the Title Transfer Point(s) identified in Section 6.1
hereof. Buyer shall own and be deemed to be in actual or constructive control
and possession of the Gas after delivery of such Gas to the Title Transfer
Point(s) identified in Section 6.1 hereof. As between the parties, each Party
shall bear the risk of loss for such Gas and for any injury or damage caused
thereby while such Gas is in its actual or constructive control or
possession; provided that Seller shall be and remain liable for any and all
damages attributable to processing and/or quality deficiencies occurring
after such Gas has been delivered to the Title Transfer Point(s) pursuant to
the exercise of Seller's rights under Section 12.1, notwithstanding Buyer's
control over and possession of such Gas.
ARTICLE 7
TERM
7.1 Commencement Date. This Agreement shall be deemed to have commenced on
June 1, 1993 ("Commencement Date"):
13
7.2 Term of Agreement.
(a) This Agreement shall be in effect for a preliminary term
beginning on the Commencement Date and ending on the earlier of the
date (i) Buyer may accept authorizations identified in and as
provided in Section 4.4 (b), or (ii) one year from Commencement
Date.
(b) In the event such acceptance occurs on or prior to the
date one year from the Commencement Date, this Agreement shall
continue until May 31, 1999, and shall further continue for
successive terms of one (1) year thereafter until and unless
terminated by either Party upon at least eleven (11) months written
notice to the other Party prior to the end of the then-current term.
7.3 Limitation of Seller's Delivery Obligations after Commencement Date. It
is recognized that Buyer may be conferred Unbundled Capacity Rights and/or
Individually-Certificated Capacity Rights on Transporters other than Texas
Eastern and Algonquin and that the absence of such Capacity Rights after the
Commencement Date may limit Seller's ability to deliver the quantity of gas
otherwise contemplated hereby. Accordingly, during the period after the
Commencement Date but prior to the date that all such Capacity Rights have
been conferred on Buyer and Seller becomes fully authorized under FERC
regulations to use such Capacity Rights for the service of Buyer hereunder,
Seller's delivery obligations in effect hereunder shall be limited to the
extent necessary to correspond with Capacity Rights that Seller may actually
use for the service of Buyer hereunder; provided that Seller shall at all
times during such period make commercially reasonable efforts to maximize
Seller's use of the effective capacity of such Capacity Rights that are then
conferred on Buyer and are usable by Seller. During such period and with
Buyer's approval, Seller may contract for interruptible transportation with
the affected Transporter or an alternative transporting pipeline as necessary
to mitigate the limits on Seller's ability to deliver the quantity of gas
otherwise contemplated hereby. If Buyer approves such contracting by Seller,
Buyer shall pay all transportation charges associated therewith.
ARTICLE 8
PRICING, CREDITING AND REIMBURSEMENTS
8.1 Amounts Payable by Buyer. The following amounts shall be payable to
Seller by Buyer hereunder:
14
(a) Reservation Fee. Each month during the term of this Agreement, Buyer
shall pay a Reservation Fee of $2.43 times the RQ;
(b) Reserved Gas Commodity charge. Each month during the term hereof,
Buyer shall pay a Reserved Gas Commodity Charge equal to the
product of (i) the portion of the Billing Quantity comprising
Reserved Gas and the Transportation Shrinkage Quantity and
(ii) the Reserved Gas Commodity Unit Price computed in
accordance with Appendix I hereto;
(c) Back-Up Gas Commodity Charge. Each month during the
term hereof, as limited by Section 11.1(b), when Back-Up Gas
is delivered by Seller pursuant to Section 10.1 or Section
10.2, Buyer shall pay a Back-Up Gas Commodity Charge equal to
the product of (i) the portion of the Billing Quantity
comprising Back-Up Gas and (ii) the Back-Up Gas Commodity Unit
Price computed in accordance with Appendix I hereto;
(d) Transporter Costs. Buyer shall pay the Transporter
Costs applicable during the term of this Agreement; and
(e) Costs Relating to Back-Up Gas. If Seller delivers
Back-Up Gas during the month, then, as limited by Section
11.1(b), Buyer shall reimburse Seller for all costs of the
type included within the definition of Transporter Costs and
that are payable to Seller, as provided in Section 10.1 or 10.2.
8.2 Credit by Seller to Buyer's Account. If a Transporter issues a refund
that pertains to a rate schedule and service comprising an Unbundled Capacity
Right and/or an Individually-Certificated Capacity Right and such refund
relates to charges of the type previously billed to and paid by Buyer as
"Transporter Costs", Seller shall recompute such Transporter Costs using the
reduced rates and charges forming the basis of such refund and, as soon as
reasonably practicable, shall credit Buyer's account with the positive
difference, if any, between the Transporter Costs, as paid by Buyer, and the
Transporter Costs, as so recomputed. In addition, Seller shall credit Buyer's
account with an amount equal to the time value of the cash flow realized by
Seller from such prior collections of Transporter Costs reflecting the higher
rates and charges. Such time value shall be computed using the interest rate
and procedures identified in 18 C.F.R. Section154.67(c)(2) or successor FERC
regulations. The obligation of Seller to make such adjustment(s) in favor of
Buyer shall survive the termination or expiration of this Agreement and shall
be paid in cash to the extent such adjustment(s) may exceed the amount
payable by Buyer to Seller hereunder.
15
8.3 Taxes. In the event any sales, use, excise, or transfer tax is imposed on
the transfer of natural gas under the terms of this Agreement, or if any tax
is imposed in any other manner so as to constitute directly or indirectly a
charge upon the privilege of transferring ownership of the natural gas
delivered to Buyer, such tax shall be the sole liability of Buyer. In
addition, if Buyer and/or Seller by reason of this Agreement becomes subject
to a public utilities gross receipts tax or any other gross receipts tax,
which tax is attributable to deliveries of Gas made by Seller hereunder, the
tax shall be the sole liability of Buyer and shall in no manner constitute an
obligation of Seller. It is agreed that in the event of the enactment of a
broad based energy tax, whether measured by carbon content, Btu content,
Mcf's, monetary value, or any other measure, the prices designated herein
exclude this tax, and that this tax will be an addition to the stated price
hereunder and constitute the liability of Buyer hereunder. In the event
Seller pays or remits any tax which by action of this Section is the
liability of Buyer, such amounts will be added to the payments due Seller
from Buyer under this Agreement. Buyer agrees to furnish to Seller required
documentation in support of any claimed exemptions from any tax considered
herein, including exemption certificates, registration numbers, and any other
documentation required for administration of this Section 8.3. As of the date
of this Agreement, no legislation has been enacted by any governmental
authority which would require tax reimbursements to be paid by Buyer to
Seller hereunder; provided that the Parties are aware, as of the date hereof,
that federal tax legislation may be enacted calling for a Btu-based tax on
gas. If Buyer makes tax reimbursements to Seller hereunder, and Seller
thereafter receives a refund of the taxes so reimbursed, Seller shall
promptly pay over such refund to Buyer.
8.4 Unavailability of Information. If published information required for the
pricing computation under Section 8.1 hereof and Appendix I hereto ceases to
be available for any reason, the Parties shall mutually agree on an alternate
index or price methodology yielding substantially similar results to those
produced by the previously employed index or price methodology. During
negotiations, the applicable index prices which continue to be available
shall be utilized. In the event the Parties fail to reach agreement on an
alternate index or price methodology within thirty (30) days after such
information ceases to be available, then the matter shall be determined by
arbitration pursuant to Section 21.11.
8.5 Alternative Commodity Unit Prices. Within 60 days after the Commencement
Date, the Parties shall enter into good faith negotiations concerning a
mechanism tracking postings for natural gas futures on the New York
Mercantile Exchange ("NYMEX") that would establish an alternative Commodity
Unit Price for Reserved Gas to be sold hereunder. It is contemplated that
Buyer could irrevocably select with reasonable advance notice to Seller such
alternative Commodity Unit Price for a period corresponding with the delivery
months for which futures prices are then posted by NYMEX. It is also
16
contemplated that such mechanism would (a) permit such alternative Commodity
Unit Price to track over time the differences in the market price for natural
gas delivered into Henry Hub and/or other NYMEX bench mark locations and that
for natural gas delivered into Texas Eastern and (b) provide Seller with
reasonable compensation for the transaction costs Seller may incur in
purchasing futures, options or other contracts necessary to hedge Buyer's
selected NYMEX-based price. Any mutual agreement concerning such alternative
Commodity Unit Price shall be set forth in a written amendment to this
Agreement and shall have prospective effect only.
ARTICLE 9
QUANTITIES
9.1 Nominated Quantity and Requested Deliveries.
(a) On or before 12:00 noon Eastern Time of the second day preceding the
Commencement Date and on each day thereafter during the term of
this Agreement, Buyer shall notify Seller of the Nominated Quantity
to be in effect on the second day following the day of
notification; provided that in no event shall Buyer notify Seller
of a Nominated Quantity that exceeds the EQ. In lieu of making
daily notifications as provided above, Buyer may notify Seller of
the Nominated Quantity that will apply (unless modified as provided
below) during each day of a specified period of up to one month.
(b) Based on Buyer's good faith projection of changes in its
City Gate receipts from that forming the basis for Buyer's previous
notification of the Nominated Quantity in effect for the day in
question, Buyer may notify Seller of Buyer's request that Seller
deliver a quantity of Gas that differs (more or less) from such
Nominated Quantity. Subject to any limitations in the FERC Gas
Tariff of the applicable Transporter(s), Seller shall accommodate
such request by Buyer; provided that Seller shall have the right to
utilize the no notice service embedded in any Transporter rate
schedules applicable to Buyer's Unbundled Capacity Rights, as
Seller determines is necessary to accommodate such request.
(c) At all times, the Nominated Quantity, Buyer's requests
under Section 9.1 (b) for quantities that differ therefrom, and
Buyer's actual receipts from Algonquin shall reflect that:
17
(i) With respect to Gas other than Extraneous Gas, Buyer is
receiving Gas to serve Buyer's Resale Customers in preference
to gas available from any other supplier; and
(ii) With respect to Extraneous Gas, Buyer is receiving not more than
the maximum quantity specified in the then-current Schedule of
Extraneous Gas; provided that (A) such maximum quantity shall
not apply during any period when the provisions of Sections
10.1, 10.2, or 15.1 apply and (B) nothing herein shall operate
to prevent the Parties from agreeing to waive such restriction
if the Parties agree that the delivery of additional volumes
of Extraneous Gas in lieu of City Gate deliveries hereunder
by Seller would be mutually beneficial.
The provisions of this Section 9.1(c) shall cease to apply for an
individual month once Buyer has nominated and Algonquin has
confirmed for transportation to the City Gate a total monthly
quantity equal to the EQ times the number of days in such month.
9.2 Storage Account. On or before the tenth (10th) day of each month, Seller
shall furnish Buyer an updated Storage Account Schedule in the form attached
hereto as Appendix III to apply during the following month. Such schedule
will take into account the cumulative Storage Input/Output Quantities to date
for the current (April through March) storage injection/withdrawal season.
Because the FERC Gas Tariffs of the applicable Transporters provide that a
firm customer's injection and withdrawal rights are a function of such
customer's storage account inventories, as of a specific calendar date, the
Parties recognize that no definitive or absolute minimum and maximum Storage
Input Quantities and Storage Output Quantities can be identified for the
entire season on Appendix III. Nevertheless, Seller will track Buyer's
requested injections/withdrawals made during the current injection/withdrawal
season and project on a monthly basis, for the remainder of that season, a
default nomination of Storage Input/Output Quantities based on the assumption
that Buyer desires pro rata injections/withdrawals during each of the
remaining months of that season, subject to the constraints of Transporter's
FERC Gas Tariff and the key determinants set forth in Appendix III (e.g.
"turn targets", etc.). the default quantity shown therein will serve as
Buyer's binding nomination of the Storage Input/Output Quantity for the
following month, unless Buyer notifies Seller prior to the 10th business day
prior to the end of the current month of a different Storage Input/Output
Quantity falling within the range of the maximum and minimum quantities set
forth on the current Storage Account Schedule. In addition, Seller will
project, given the above mentioned constraints and assumptions, a minimum and
maximum Storage Input/Output quantity for the upcoming month and will include
this quantity under the appropriate column on Appendix III. If Buyer wishes
to select a Storage Input/Output
18
Quantity between the minimum and maximum range so specified, it may do so by
notifying Seller as above in lieu of the defaulting quantity. all Storage
Input/Output Quantities, including any default quantity, shall become binding
on Buyer and Seller, unless otherwise mutually agreed, on the 10th business
day prior to the upcoming month.
9.3 Required Notifications. Each Party shall notify the other Party verbally
and, as soon thereafter as reasonably practicable, in writing of any known
event which might reasonably be expected to materially affect the delivery or
receipt of the Nominated quantity or the differing quantity requested by
Buyer pursuant to Section 9.1 (b).
9.4 Annual Adjustment to RQ. By giving at least 180 days prior notice, Buyer
may increase, because of a corresponding increase in Buyer's Resale Load, the
RQ effective at the beginning of each Contract Year; provided that (a) such
increased RQ shall not cause a corresponding increase in the MSQ or in
Seller's obligation to deliver Back-Up Gas and (b) Seller shall not be
obligated to accommodate an increase greater than ten percent (10%) of the RQ
previously in effect if Seller determines in its sole judgment reasonably
exercised that Seller has insufficient firm supplies available to it at
reasonable cost to satisfy such requested increase. At Buyer's request,
Seller will assist Buyer in procuring for Buyer's account and at Buyer's sole
expense the transportation arrangement desired by Buyer to effectuate
delivery of Reserved Gas attributable to the RQ increase pursuant to this
Section, including, but not limited to interruptible transportation
agreements, firm transportation agreements and capacity release agreements
with firm shippers on Texas Eastern, Algonquin, and other Transporters;
provided that Seller shall not be liable to Buyer in the event transportation
arrangements satisfactory to Buyer cannot be procured. If Buyer is successful
in procuring such transportation arrangements, the MTQ and EQ shall be
increased correspondingly.
9.5 Other Adjustments. If Buyer experiences what it reasonably believes to be
a permanent reduction in Resale Load during a Contract Year, Buyer may give
notice of its desire to reduce the RQ, the EQ and the MTQ to the extent of the
reduction in such load. If Buyer gives such notice, Buyer shall continue to
pay the Reservation Fee specified in Section 8.1(a) until the end of the then
current Contract Year. Thereafter, the Reservation Fee shall be computed
using the RQ set forth in Buyer's reduction notice. Upon receipt of any such
notice, Seller shall use reasonable efforts to sell Reserved Gas previously
earmarked for delivery to Buyer hereunder to others at the highest
Reservation Fee reasonably available. Reservation Fees collected from such
sales by Seller during the remainder of the then current Contract Year shall
be credited to Buyer's account up to the amount of the Reservation Fees that
would have been otherwise collected from Buyer. At Seller's request, Buyer
shall provide full and complete information regarding the plant closing or
similar occurrence affecting a Resale customer which caused the permanent
reduction in Resale Load.
19
ARTICLE 10
LIMITED DELIVERIES BY TRANSPORTING
PIPELINES AND SELLER SUPPLY ALLOCATION
10.1 Limited Deliveries by Transporting Pipelines. To the extent an
insufficient delivery of Gas to Buyer is attributable to a Transporter or
other transporting pipeline invoking its capacity curtailment plan or
otherwise limiting its deliveries, Seller will dispatch to Buyer only such
quantities of Gas as may then be transported consistent with the tariff and
procedures of the Transporter or other transporting pipeline. Seller shall
notify Buyer of such situation immediately upon obtaining actual notice
thereof, and shall identify in such notice the anticipated duration of such
limited deliveries by Transporter. To the extent permitted by such procedures
and tariff, Seller will, during periods when the ambient temperature in
Pittsburgh, Pennsylvania, as forecasted by Air Science Consultants or such
other independent meteorological weather consultant as may be retained by
Seller or by a firm affiliated with Seller, equals or exceeds 0 degrees
Fahrenheit during any 24-hour period, tender to CNG Transmission a quantity
of Back-Up Gas (in addition to such quantities of Reserved Gas and Storage
Gas as can then be transported to Buyer's City Gate) equal to the lesser of
(a) seventy percent (70%) of the RQ or (b) an amount which when combined with
the amount of Reserved Gas and Storage Gas (to the extent such Gas can then
be withdrawn and transported) delivered by Seller equals the Nominated
Quantity. In the event the forecasted ambient temperature described above is
less than 0 degrees Fahrenheit, Seller will tender to CNG Transmission such
quantity of Back-Up Gas, if any, that can be procured on the spot market from
suppliers with Gas that is then contractually uncommitted to other purchasers
or that has been released from prior contractual commitments. Whenever Seller
learns that the forecasted ambient temperature as described above is less
than 0 degrees Fahrenheit, Seller will promptly notify Buyer of this fact.
10.2 Supply Allocation. If Seller has, for any reason, an insufficient
supply of Gas to fully satisfy the total delivery nominations of (a) Buyer
under this Agreement, (b) other ABC Group customers of Seller under other
firm purchase contracts with Seller and (c) other similarly-situated firm
sales customers of Seller to whom Seller has heretofore or may hereafter
extend contractual supply allocation rights (each of such persons or entities
are referred to herein individually as "Supply Allocation Customer" and
collectively as "Supply Allocation Customers") and when the provisions of
Section 10.1 do not apply, Seller shall notify Buyer of such situation
immediately upon obtaining actual knowledge thereof, and shall identify in
such notice the anticipated duration of such supply insufficiency. During any
such period of supply insufficiency, Seller shall use the following
procedures to dispatch and allocate Gas:
20
(a) Seller shall discontinue deliveries to customers of Seller that
are served by interruptible or "at will" sales agreements;
(b) Remaining available gas will be dispatched from the Texas Eastern
Supply Allocation Pool to all Supply Allocation Customers in
proportion to the respective Nominated Quantity or other quantity
requested by each Supply Allocation Customer under the applicable
firm gas sales agreement;
(c) Seller will, during periods when the ambient temperature in
Pittsburgh, Pennsylvania, as forecasted by Air Science Consultants
or such other independent meteorological weather consultant as may
be retained by Seller or by a firm affiliated with Seller, equals
or exceeds 0 degrees Fahrenheit during any 24-hour period, tender
to CNG Transmission for the account of each Supply Allocation
Customer a quantity of Back-Up Gas (in addition to such quantities
of Reserved Gas and Storage Gas as can then be transported to the
city-gate or other point of transfer under the applicable gas
sales agreement) equal to the lesser of (a) seventy percent (70%)
of the RQ or other maximum daily delivery entitlement in effect
under the applicable gas sales agreement or (b) an amount which
when combined with the amount of Reserved Gas and Storage Gas (to
the extent such Gas can then be withdrawn and transported)
delivered by Seller equals the Nominated Quantity or other
quantity requested by the Supply Allocation Customer. In the event
the forecasted ambient temperature described above is less than 0
degrees Fahrenheit, Seller will tender to CNG Transmission such
quantity of Back-Up Gas, if any, that can be procured on the spot
market from suppliers with Gas that is then contractually
uncommitted to other purchasers or that has been released from
prior contractual commitments. Whenever Seller learns that the
forecasted anticipated ambient temperature as described above is
less than 0 degrees Fahrenheit, Seller will promptly notify Buyer
of this fact.
If Buyer receives the foregoing notice from Seller of a supply insufficiency,
Buyer may notify Seller within 2 days after receipt of such notice that it
does not desire to receive any Back-Up Gas during the anticipated period of
supply insufficiency. If Buyer gives such notice, Seller and Buyer shall be
released prospectively for this time period from their respective obligations
under this Agreement regarding the receipt and delivery of Back-Up Gas. Such
release of obligations shall continue until the first day of the month
following the month in which Seller gives notice that its supplies are no
longer insufficient and that supply allocation is no longer required;
provided that nothing in this Section 10.2 shall operate to expand or limit
Buyer's rights under Articles 15 and 16; and further provided
21
that during such period of release, Buyer shall continue to pay the entire
Reservation Fee hereunder, except to the extent otherwise provided in Section
16.2.
10.3 Priority for Certain Quantities. If during periods when Section 10.2
applies, Seller is notified by a Supply Allocation Customer that such Supply
Allocation Customer will be unable to render service to the priority-use
requirements specified in Sections 401 and 402 of the Natural Gas Policy Act
of 1978 (NGPA) and 18 C.F.R. Section 281.201. ET SEQ. of the FERC Regulations
("high-priority use requirements") or that adjustment of the dispatch
quantity is necessary to avoid irreparable injury to life or property
(including environmental emergencies) or to provide for minimum plant
protection ("emergency situation") unless such Supply Allocation Customer is
dispatched a certain quantity of Gas by Seller, such Supply Allocation
Customer will be afforded priority over all other quantities to be dispatched
to Supply Allocation Customers pursuant to Section 10.2 with respect to the
certain quantity so specified in such Supply Allocation Customer's notice to
Seller, but not to exceed the RQ or other maximum daily delivery entitlement
under the applicable gas sales agreement.
10.4 Buyer Certification; Sanctions. If Buyer gives notice to Seller
pursuant to Section 10.3, Buyer shall provide Seller, within 24 hours after
such notification, a sworn statement attesting:
(a) that all sources of gas supply available to Buyer outside its firm
purchase contract with Seller, including peak-shaving Gas and Gas
owned, leased or contract storage, were and are being utilized to
the maximum extent possible during the time period for which this
priority is in effect;
(b) that all interruptible services provided by Buyer on its system
were and are being interrupted during the time period for which
this priority is in effect; and
(c) that no alternate fuel could be utilized or is available to be
utilized to prevent the necessity for priority treatment.
In the event Buyer fails to provide such sworn statement within such 24-hour
period, all quantities given priority status by Seller pursuant to Section
10.3 shall be billed to Buyer, as Seller's liquidated damages, at a rate of
$25.00 per MMBtu; it being understood that such action by Buyer would cause
Seller damages in amounts that are difficult to quantify.
22
ARTICLE 11
BILLING AND PAYMENT
11.1 Basis of Billings.
(a) All billings for amounts due hereunder shall be based on the
Billing Quantity; provided that during any period when Seller's
or Buyer's performance is suspended pursuant to Section 15.1
or Seller's deliveries are reduced in accordance with Section
10.1 or 10.2, Buyer's payment obligation shall apply only to
such quantities as are actually delivered for Buyer's account.
The Billing Quantity shall be equal (for the applicable
month of delivery) to the sum of (i) the Nominated Quantities
(as modified pursuant to Section 9.1(b) and confirmed and
scheduled for transportation to the City Gate by Algonquin),
(ii) the Storage Input Quantity (if applicable), and (iii) the
Transportation Shrinkage Quantity minus the Storage Output
Quantity (if applicable); provided, however, that to the extent
possible, all such quantities shall be adjusted to reflect actual
deliveries prior to the rendering of the bill. To the extent such
adjustment cannot be made at such time, it shall be reflected in
the next bill.
(b) For billing and other transactional purposes hereunder, the
following rules shall apply, regardless of whether such methodology
corresponds with the actual physical flow of Gas to the City Gate
or into or out of storage:
(i) In determining the Billing Quantity for pricing hereunder,
Buyer shall be deemed to purchase Reserved Gas before
Back-Up Gas is purchased;
(ii) Buyer shall be deemed to purchase Back-Up Gas only when
Section 10.1 or Section 10.2(c) applies, and Buyer has
not given notice to Seller of Buyer's desire not to receive
Back-Up Gas, and Seller's delivery obligations respecting
Reserved Gas and Storage Gas are suspended pursuant to
Section 15.1. If such suspension provision does not apply,
the Gas, regardless of its physical source, shall be
considered Reserved Gas in accordance with the procedure
set forth in Section 11.1(b)(i) above;
(iii) In determining the Billing Quantity for pricing hereunder,
Buyer shall be deemed to have purchased Gas in proportion
to Buyer's Base Segment Capacity Entitlement and the
Kosciusko Input Quantity in effect from time to time;
23
(iv) In determining Transporter Costs, Seller shall be deemed to
have used the following billing paths to deliver Gas to
Buyer or for Buyer's account:
(A) General Billing Path. Unless otherwise provided herein,
Transporter Costs shall be determined as if the Billing
Quantity were (1) delivered into Texas Eastern at Zones
ELA, WLA, STX and ETX and Kosciusko, Mississippi in
proportion to Buyer's respective Base Segment Capacity
Entitlement for such zones and the Kosciusko Input
Quantity, (2) transported by Texas Eastern for
redelivery to Algonquin at the Filed Rate applicable
To Texas Eastern Rate Schedule CDS and (3) transported
by Algonquin to the City Gate at the Filed Rate in
effect from time to time under the appropriate rate
schedule(s);
(B) Storage Input Quantity Billing Path. Transporter Costs
shall be determined on the same basis as provided in
Section 11.1(b)(iv)(A) above. The Storage Input Quantity
shall be deemed to have been injected into storage at
the Filed Rate in effect from time to time under the
applicable Transporter rate schedules identified in
Exhibit "A" hereto and in proportion to the annual
maximum storage entitlement and at the points specified
in Buyer's service agreements under such rate
schedules;
(C) Storage Output Quantity Billing Path. Transporter
Costs shall be determined as if the Storage Output
Quantity were (1) withdrawn from storage and
transported to Algonquin at the Filed Rate in effect
from time to time under the applicable Transporter
rate schedules identified in Exhibit "A" hereto, in
proportion to the respective maximum transportation
quantities and at the points specified in Buyer's
service agreements with the applicable Transporters,
and (2) transported by Algonquin to the City Gate at
the Filed Rate in effect from time to time under the
appropriate rate schedule(s); and
(D) Back-Up Gas Billing Path. Transporter Costs shall be
determined by reference to the points within Texas
Eastern's
24
Market Area at which the Back-Up Gas is actually
redelivered by CNG Transmission to Texas Eastern.
(v) With respect to Back-Up Gas and the transportation charges
associated therewith, Buyer shall be deemed to have purchased
the quantities measured at the applicable receipt points into
CNG Transmission.
(c) The Parties understand that from time to time imbalances may arise
between the Billing Quantity, which is based on the quantity
nominated by Buyer pursuant to Section 9.1, and the quantity
physically delivered to Buyer by Algonquin at the City Gate.
Accordingly, the Parties recognize a continuing and mutual obligation
that survives the term of this Agreement to reconcile nominated
quantities with physical quantities and to settle positive or
negative imbalances through commercially reasonable means, including
but not limited to: (i) delivery by Seller of quantities designated
by Buyer pursuant to Section 9.1 but not received by Buyer and (ii)
with respect to quantities not nominated by Buyer pursuant to
Section 9.1 but received by Buyer, return by Buyer at no cost to
Seller of equivalent quantities at mutually agreeable locations and
times or payment by Buyer of an amount equal to the price under this
Agreement for Gas in effect at the time payment for the imbalance is
rendered.
11.2 Sellers Statement. Seller shall render a billing statement on or before
the tenth day of each month setting forth the amounts due from Buyer in
accordance with Article 8 for the preceding month based on the Billing
Quantity. Seller shall identify all Transporter Costs in such billing
statement or in a separate statement.
11.3 Buyer's Payment. Payment by Buyer shall be due ten (10) days after
receipt by Buyer of Seller's invoice. All the foregoing payments to Seller
shall be made by wire transfer in immediately available funds to the
following bank account, or to such other bank account as Seller may designate
from time to time:
CNG Gas Services Corporation
c/o Chase Manhattan Bank, New York
ABA #021000021
For deposit to Account No. 9102565117.
11.4 Payment Default. Except for any amount that Buyer disputes in
accordance with Section 11.5, should Seller fail to receive full payment of
any portion of any bill for when such amount is due, interest
on the unpaid portion of the bill shall accrue at the then
25
effective prime interest rate (Chase Manhattan Bank) plus two percent (2%) or
the then maximum lawful interest rate, whichever is lower, from the due date
until payment is received. Seller shall notify Buyer if Seller has failed to
receive Buyer's payment on or before five (5) days after the due date. If
such failure to pay continues for fifteen (15) days after the due date,
Seller, in addition to any other remedy it may have hereunder, may, upon
giving Buyer three (3) days prior notice, suspend further delivery of Gas
until such amount is paid.
11.5 Disputed Charges. If Buyer in good faith shall dispute the amount of
any such bill, Buyer shall timely pay to Seller such amounts as Buyer agrees
are correct. With respect to the portion of the bill that Buyer may determine
in good faith to be incorrect, Buyer shall follow either of the following
procedures:
(a) Within 15 days after the payment due date, Buyer shall furnish to
Seller a good and sufficient bond from a reputable and solvent surety
to secure payment to Seller of the amount ultimately found due upon
such bills after a final determination, then Seller shall not be
entitled to suspend delivery of Gas on account of such disputed claim
while such bond is in effect (unless other grounds for suspension by
Seller apply hereunder), and the dispute shall be resolved by
arbitration, as provided in Section 21.11. If it is determined that
Buyer does not owe the disputed amount, Seller shall reimburse Buyer
for the cost of the surety bond plus the amount of interest that has
accrued on the cost of the surety bond from the time the surety bond
was purchased by Buyer until such time as Buyer is determined not to
owe the disputed amounts, at the prime interest rate (Chase Manhattan
Bank) in effect at the time of Seller's original bill or the then
maximum lawful interest rate, whichever is lower; or
(b) Buyer shall pay the entire amount billed and shall identify in
writing the portion that Buyer determines in good faith to be
incorrect. In such event, Seller shall not be entitled to suspend
delivery of Gas on account of such dispute by Buyer (unless other
grounds for suspension by Seller apply hereunder), and the dispute
shall be resolved by arbitration, as provided in Section 21.11. If it
is determined that Buyer does not owe the disputed portion, Seller
shall refund the overpayment made by Buyer plus the amount of
interest that has accrued on such overpayment since the date it was
made at the prime interest rate (Chase Manhattan Bank) in effect at
the time of Seller's original bill or the then maximum lawful
interest rate, whichever is lower.
26
11.6 Adjustments. Subsequent to any bill having been paid, if any overcharge
or undercharge in any form whatsoever shall be found, Seller shall refund the
amount of any overcharge received by Seller, and Buyer shall pay the amount
of any undercharge due Seller within thirty (30) days after final
determination thereof, provided, however, no retroactive adjustment will be
made for any overcharge or undercharge identified or objected to for the
first time after a period of twenty-four (24) months from the last day of the
calendar year in which the invoice reflecting the overcharge or undercharge
was issued.
11.7 Audits. Each Party shall have the right, at its sole expense, to audit
the books and records of the other Party during the other Party's business
hours to determine the accuracy of any such billing statement or billing
rendered by the other Party; provided that neither Party shall exercise such
audit right more frequently than once per year. In conducting such audits,
Buyer and other members of the ABC Group shall reasonably coordinate the
timing of any such audit and to endeavor to retain the same auditing firm.
11.8 Other Information. Upon Seller's request, Buyer shall provide Seller
with a copy of all transportation requests and nominations made by Buyer to
Transporter for all Gas purchased hereunder.
ARTICLE 12
PROCESSING AND MEASUREMENT
12.1 Processing. Subject to the requirements of the FERC tariff of
Transporter transporting gas for Buyer's account, Seller reserves the
continuing right, without notice to Buyer, to cause all Gas delivered and
sold hereunder to be processed for the extraction of natural gas liquid
products; provided that the processing right of Seller in no way relieves
Seller of its obligations hereunder. When Seller exercises this right, Seller
shall indemnify and hold Buyer harmless from (a) all processing fees and
charges, (b) all Btu shrinkage resulting from such processing, (c) all
transportation charges applicable to Gas to be processed that are additional
to those that would otherwise be incurred by Buyer absent such processing,
and (d) all liabilities, losses or damages to persons or property resulting
from or relating to the processing, extraction or transportation of such
natural gas liquid products. Seller shall retain and have title to all such
natural gas liquid products.
12.2 Measurements. The measurement of the quantity and quality of all Gas
delivered at the Title Transfer Point(s) hereunder shall be conducted
consistent with the practice of Transporter and in accordance with the
provisions of its approved FERC tariff; provided
27
that if Transporter computes Btu's on other than an "as delivered" or
unsaturated basis, proper adjustments shall be made to convert measured
quantities to reflect the "as delivered" or unsaturated condition of the Gas
at the Title Transfer Point. Such tariff shall govern the procedures to be
followed and adjustments to be made, if any, in the event errors in
measurement are discovered.
ARTICLE 13
TRANSPORTATION
13.1 Responsibility for Transportation. Seller shall arrange transportation
of the Gas covered hereby to Buyer's City Gate using Buyer's Unbundled
Capacity Rights and Individually Certificated Capacity Rights or such other
transportation arrangements that Seller deems appropriate.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES
14.1 Jurisdictional Status. With respect to all Gas sold under this
Agreement, Seller warrants in the alternative that (i) all such Gas shall not
be subject to the jurisdiction of FERC under Section 7 of the Natural Gas Act
of 1938 ("NGA") or (ii) if such Gas is subject to such jurisdiction, all
authorizations from the FERC necessary to sell such Gas to Buyer have been
obtained.
14.2 Quality and Pressure. Seller warrants that all Gas delivered to Buyer
shall be of merchantable quality and warrants that all Gas when delivered to
the custody of Transporter or of an upstream pipeline(s) delivering Gas to
Transporter (a) shall meet or exceed the minimum specifications of
Transporter and any such upstream pipeline concerning quality and minimum Btu
value and (b) shall be so delivered in compliance with the pressure
requirements as set forth in the effective tariff of Transporter and any such
upstream pipeline (anywhere within the applicable pipeline's allowable
pressure range up to the maximum). Buyer's remedy for the breach of the
foregoing warranty shall be damages as calculated under Section 16.2
hereunder, or at the Buyer's option, replacement by the Seller at no
additional expense to Buyer of the quantity of non-conforming Gas with an
equivalent quantity of conforming Gas, and in either event, Seller shall
indemnify and hold Buyer harmless for any damages caused by such
non-conforming Gas. If Seller is required to make such replacement, upon
Seller's request,
28
Buyer shall assign to Seller, Buyer's rights, if any, as shipper, to the
quantity of non-conforming Gas, if any, retained by Transporter.
14.3 Title. Seller warrants that it has title to or the right to sell all
Gas delivered hereunder and that such Gas shall be free and clear from liens
and adverse claims by third parties upon delivery to Buyer or for Buyer's
account hereunder. Seller shall indemnify Buyer and hold it harmless from any
and all suits, actions, debts, accounts, damages, costs, losses, and expenses
arising from or out of adverse claims of any person or entity to said Gas.
14.4 Supply. Seller covenants that it will maintain under contract(s)
throughout the term of this Agreement a supply of Gas, which supply will not be
committed by Seller on a firm basis to any other purchaser or to any other
contract and will be sufficient to satisfy Seller's delivery obligations
under this Agreement; it being understood that such delivery obligations are
subject to the suspension provisions of Section 15.1 and the provisions of
Article 10 conditioning Seller's obligation to maintain and tender supplies
of Back-Up Gas.
ARTICLE 15
FORCE MAJEURE
15.1 Suspension. In the event either Party is prevented from performing its
respective obligation to deliver or to receive any quantity of Gas by force
majeure, as defined below, the obligation of that Party to deliver or to
receive Gas under this Agreement shall be suspended for the duration of such
event and to the extent of the quantity so affected by force majeure and such
Party shall not be considered to have breached its obligations hereunder. A
Party claiming force majeure hereunder shall, in good faith, take all
measures reasonably required to relieve itself of the cause of the force
majeure and shall promptly notify the other Party when such cause or causes
are removed. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty; provided that such settlement is pursued with reasonable
dispatch. The above reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing entities when such
course is or is deemed to be inadvisable or inappropriate in the discretion
of the Party having the difficulty. A Party shall give prompt notice and
reasonably full particulars to the other Party of the occurrence and duration
of any claimed force majeure event. During any period in which force majeure
prevents performance hereunder, Seller or Buyer shall continue to deliver or
receive that quantity of Gas which it may prudently deliver or receive in
light of the magnitude of the force majeure and in accordance with Article 10
hereof.
29
15.2 Definition of Force Majeure. Force majeure means acts of God; strikes,
lockouts or other industrial disturbances; acts of the public enemy, wars,
blockades, insurrections, civil disturbances and riots, and epidemics;
landslides, lightning, earthquakes, fires, storms, hurricanes, floods,
washouts, extreme weather conditions impairing the operation of production,
transportation, or distribution facilities; orders, directives, restraints
and requirements of the government and governmental agencies, either federal
or state, civil, and military; failure of transportation because of an event
constituting force majeure or other excuse for interruption, curtailment or
discontinuation by Transporter of transportation or other services;
explosions, breakage, freezing, or accident to facilities or lines of pipe;
and any other cause not enumerated herein not within the control of the Party
claiming excuse, which prevents a party from performing under this Agreement
in the manner provided for herein (including the use by Seller or by Buyer of
Texas Eastern, Algonquin, and other Transporters); provided, however, that
such cause affecting performance by either Party shall not relieve it of
liability to the extent that the cause resulted from that Party's negligence
or willful misconduct. For purposes of this Section 15.2, an event of the
type described above that physically limits deliveries by United Gas Pipeline
Company of the Kosciusko Input Quantity into Texas Eastern, that causes a
physical reduction of transportation service by Texas Eastern, and that
applies to Buyer's Unbundled Capacity Rights and/or Individually-Certificated
Capacity Rights shall be considered an event of force majeure, but only if
Seller has made every reasonable effort to deliver this quantity of Gas to
Buyer utilizing receipt points and capacity into Texas Eastern other than at
Kosciusko.
15.3 Exclusion. Force majeure shall not include particularly the failure of
Seller to have available sufficient Gas supply on hand to permit Seller to
perform its obligations to deliver the RQ hereunder, unless such failure is
caused by an event of force majeure as described in Section 15.2 hereof.
15.4 Other Effects. In the event a Party suspends performance pursuant to
Section 15.1, the other Party shall have the following rights:
(a) If Seller is the Party suspending performance, and if the Force
Majeure Event does not relate to a pipeline, storage or other
facility under the dominion of Transporter or any other
transporting pipeline, Buyer shall receive a credit against the
Reservation Fee payable by Buyer ("Reservation Fee Credit") equal
to $.08 times (i) the sum of the Nominated Quantities for each
day of suspension during the applicable Month minus (ii) the sum
of Seller's actual City-Gate deliveries for each day of suspension
during that Month.
30
(b) If Buyer is the Party suspending performance, Buyer shall be
obligated to continue to pay all amounts payable hereunder,
including, but not limited to the Reservation Fee.
ARTICLE 16
DAMAGES AND TERMINATION RIGHTS
16.1 Obtaining Alternate Supplies or Markets. If (a) either Party fails, in
whole or in part, to perform its obligations under this Agreement, (b) such
failure results in a shortfall in deliveries by Seller or receipts by Buyer
from the quantity nominated by Buyer pursuant to Section 9.1 (a) (as modified
to reflect changes accommodated by Seller pursuant to Section 9.1(b)), and
(c) the obligations that a Party so fails to perform are not subject to the
suspension provisions of Article 15 (the foregoing three conditions are
hereafter referred to collectively in this Article 16 as "Damage Triggering
Conditions"), the other Party shall use its reasonable efforts to mitigate
the effect of such failure in accordance with the following procedures:
(a) If Seller fails to perform its obligation to deliver Gas to Buyer,
Buyer shall, without prejudice to its rights to collect damages
from Seller in accordance with Section 16.2, make commercially
reasonable efforts to secure a replacement source of supply on
either a firm or interruptible basis. If Buyer has secured a
replacement source of firm supply, once Seller regains its ability
to deliver Gas to Buyer, Seller shall have the option to (i) allow
Buyer to purchase from the replacement source; provided that Seller
shall resume deliveries of Gas under this Agreement as soon as
Buyer's obligation to purchase Gas from the replacement source has
expired, or (ii) require that Buyer discontinue receiving Gas from
the replacement source, provided that Seller shall pay to Buyer
an amount equal to that which is required to reimburse such
replacement supplier for any reservation fee, penalties, and other
charges for Gas contracted for but not taken by Buyer from such
replacement supplier. Buyer shall make commercially reasonable
efforts to obtain a least cost replacement source of Gas that can
be interrupted when Seller is once again able to perform, taking
into account Buyer's need for a reliable replacement source.
(b) If Buyer fails to perform its obligation to receive Gas from
Seller, Seller shall, without prejudice to its rights to collect
damages from Buyer in accordance with Sections 16.3 hereunder,
make commercially reasonable efforts to secure a replacement
interruptible market for the Gas which Buyer is
31
entitled to receive under this Agreement, provided that once Buyer
regains its ability to receive Gas from Seller, Seller shall
resume delivery to Buyer of that quantity of Gas that Seller is
obligated to deliver hereunder.
16.2 Buyer's Damages. During any period when the requirements of the Damage
Triggering Conditions applicable to Seller are fully satisfied, Buyer shall
be entitled to collect the following damages from Seller:
(a) An amount equal to the difference between (i) the actual amount
expended by Buyer to secure a quantity of replacement supplies
(such supplies not to exceed in any month a quantity of
replacement supplies equal to the number of days in the month
times the EQ) and (ii) the amount which would have been payable
as Commodity Charges pursuant to Section 8.1 if Seller had
delivered such supplies during the month. In addition, Seller
shall reimburse Buyer for any extra expense not included in the
foregoing amount that Buyer incurs in procuring such supplies
from the replacement source, including, but not limited to,
supplier reservation charges, transportation charges and overrun,
imbalance and other penalties assessed by Transporters or other
transporting pipeline. For purposes of the immediately preceding
sentence the term "extra expense" shall mean any such expense of
Buyer to the extent it exceeds that which would have been incurred
by Buyer if Seller had delivered Gas in the manner provided
herein;
(b) To the extent Buyer cannot obtain replacement supplies through
Algonquin or any other means and, as a result, is forced to
curtail Resale Customers or is unable to inject Gas into
storage, an amount equal to (i) (A) the Reservation Quantity times
the number of days in the month minus (B) the quantity of
replacement supplies included in the damage computation of Section
16.2(a) above minus (C) the quantity actually delivered by Seller
during the month times (ii) 2 times the Back-Up Gas Commodity Unit
Price in effect for that month; and
(c) A credit equal to the entire Reservation Fee otherwise payable by
Buyer for the month in which Seller's delivery shortfall occurs,
if the quantity that Seller fails to deliver on any Day during
that month exceeds 2% of the EQ and Buyer is on that Day ready,
willing and able to receive the entire quantity of Gas nominated
under Section 9.1(a), as modified to reflect changes accommodated
by Seller pursuant to Section 9.1(b).
32
Seller shall pay Buyer any damages to which Buyer is entitled under this
Section on or before the fifteenth (15th) day after Seller receives a written
calculation of the amount of such damages from Buyer.
16.3 Seller's Damages. During any period when the requirements of the
Damage Triggering Conditions applicable to Buyer are fully satisfied, Seller
shall be entitled to collect the following damages from Buyer (in addition to
such sums as may continue to be due and payable by Buyer under Article 8
hereof):
(a) An amount equal to the difference between (i) the actual revenues
realized by Seller from the sale of Gas in the replacement
markets with respect to the quantity of Gas equal to that
received by Buyer during such period from other sources, not
including Extraneous Gas, not to exceed for any Day the EQ and
(ii) the amount which would have been payable as Commodity
Charges pursuant to Section 8.1(b) if Buyer had received such
quantity of Gas during the month. In addition, Buyer shall
reimburse Seller for any extra expense not included in the
foregoing amount that Seller incurs in disposing of such Gas in
the replacement markets, including, but not limited to
transportation charges. For purposes of the immediately preceding
sentence the term "extra expense" shall mean any such expense of
Seller to the extent it exceeds that which would have been
incurred by Seller if Buyer had received Gas in the manner
provided herein; and
(b) To the extent Seller cannot obtain replacement markets, an amount
equal to (i) (A) the Reservation Quantity times the number of days
in the month minus (B) the quantity of replacement market
supplies included in the damage computation of Section 16.3(a)
above minus (C) the quantity actually received by Buyer during
the month times (ii) the Reserved Gas Commodity Unit Price in
effect for that month.
Buyer shall pay Seller any damages to which Seller is entitled in hereunder
on or before the fifteenth (15th) day after Buyer receives a written
calculation of the amount of such damages from Seller.
16.4 Termination in Event of a Delivery Shortfall by Seller.
(a) If a delivery shortfall by Seller (i) occurs for any reason, other
than a Force Majeure Event, (ii) exceeds 2% of the EQ times the
number of Days in which such delivery shortfall occurs, and (iii)
occurs during a cumulative period of seven (7) individual Days
during any March through November period or during a cumulative
period of four (4) individual Days during any
33
December through February period, Buyer may terminate this
Agreement; provided (i) such notice is given no later than
30 days after any such delivery shortfall occurs and (ii)
such termination shall be effective on the first Day of the
second month after such notice is received by Seller.
(b) If a delivery shortfall by Seller (i) occurs on account
of a Force Majeure Event not relating to a pipeline transporting
Seller's gas supplies for sale to Buyer hereunder, (ii) exceeds
2% of the EQ times the number of Days in which such delivery
shortfall occurs, and (iii) continues for a period in excess
of 60 Days, Buyer may terminate this Agreement; provided
(i) such notice is given no later than 30 Days after any
such delivery shortfall occurs and (ii) such termination shall
be effective on the first Day of the second month after such
notice is received by Seller.
(c) If a delivery shortfall by Seller (i) occurs on account of a
Force Majeure Event relating to a pipeline transporting Seller's
gas supplies for sale to Buyer hereunder, (ii) exceeds 2% of the
EQ times the number of Days in which such delivery shortfall
occurs, and (iii) continues for a period in excess of 180 Days,
Buyer may terminate this Agreement; provided (i) such notice
is given no later than 30 Days after any such failure occurs
and (ii) such termination shall be effective on the first Day
of the second month after such notice is received by Seller.
16.5 Effect of Article 16. Except as provided in Sections 6.2, 12.1, 14.2 and
14.3, the damages specified in this Article 16 constitute the sole and
exclusive damage remedies available to a Party in the event of a breach of
any obligation specified herein (excepting the obligation to pay sums then
continuing to be due and payable hereunder) and shall be payable in the event
of such breach in lieu of any other damages available at law, including, but
not limited to, consequential or punitive damages; provided that nothing in
this Article 16 shall be construed to impair the right of either Party to
exercise a right to terminate this Agreement, as expressly provided for in
this Article 16 or elsewhere in this Agreement, or to put an end to this
Agreement by cancellation, as provided by law.
ARTICLE 17
FINANCIAL RESPONSIBILITY
17.1 Maintaining Buyer's Financial Responsibility. If Seller in its sole
judgment, reasonably exercised, determines that the financial responsibility
of Buyer has materially deteriorated from its condition on the Commencement
Date such that reasonable doubts
34
exist concerning Buyer's ability to make timely payments hereunder, Seller
shall give notice of such determination. During the four (4) days following
the giving of such notice, Buyer and Seller shall discuss and review Buyer's
financial information and whether such information adequately resolves such
doubts. If Seller determines that the financial information provided by Buyer
fails to adequately resolve such doubts or is incomplete or deficient, Seller
may, on the fifth (5) day following the giving of Seller's notice, initiate
advance cash payment (i.e., prepayment) procedures, or request other security
satisfactory to Seller. If requested by Seller, Buyer shall provide
satisfactory security on demand, and Seller may suspend deliveries hereunder
until such security is received by Seller. If Seller initiates advance cash
payment procedures or requests other security and such security is furnished
by Buyer, and if Buyer thereafter establishes that the grounds for Seller's
determination that Buyer's financial security is impaired or unsatisfactory
are no longer applicable, Seller shall discontinue advance cash payment
procedures and/or release the security previously furnished by Buyer and the
billing procedure hereunder shall revert prospectively to that set forth in
Article 11. Each Party shall have the right to set off any amounts due to the
other Party under this Agreement against any amounts due from the other Party
under this Agreement or any other agreement. The exercise of any right under
this section shall be without prejudice to any claims for damages or any
other right under this Agreement or applicable law.
17.2 Bankruptcy of Party. The filing of a petition in bankruptcy by either
Party, or the initiation by such Party of proceedings for reorganization
under the Bankruptcy Code, or the appointment of a receiver for such Party
(or for any property of such Party required for the performance of this
Agreement), or the filing of any insolvency proceeding against such Party, or
the execution by such Party of an assignment for the benefit of its creditors
shall constitute a breach by such Party of its warranties under this
Agreement. In addition Seller shall be deemed in breach of its warranties
under this Agreement if any of the foregoing acts or actions are taken by or
against Seller's affiliated corporation, CNG Producing Company, or Seller's
parent corporation, Consolidated Natural Gas Company. This Agreement may be
terminated by the other Party, upon fifteen (15) days written notice to the
Party breaching this Section 17.2. Such termination shall not be to the
exclusion of any other remedies available to the terminating Party under this
Agreement or applicable law.
ARTICLE 18
ASSIGNMENT
18.1 Assignment of the Agreement. This Agreement shall not be assigned in
whole or in part by either Party without the prior written consent of the
other Party, which consent
35
shall not be unreasonably delayed or withheld; provided, however, that
without the consent of the other Party, either Buyer or Seller, without
relieving itself of its obligations under this Agreement may assign this
Agreement to its parent corporation or to an entity with which it is under
common ownership and control. Any entity which shall succeed by purchase,
merger, or consolidation of the properties, substantially as an entity, of
Seller or of Buyer, as the case may be, shall be entitled to the rights and
shall be subject to the obligations of its predecessor in title under this
Agreement. This Agreement shall be binding on each Party's successors and
assigns.
ARTICLE 19
COLLATERAL DOCUMENTS
19.1 Capacity Management Agreement. Contemporaneously with the execution of
this document, the Parties are executing the Capacity Management Agreement.
19.2 Support Letter. Seller is furnishing contemporaneously with the
execution hereof, an executed support letter from Seller's parent,
Consolidated Natural Gas Company. A form of such letter is attached as
Exhibit "B" hereto.
19.3 Guarantee. Seller is furnishing contemporaneously with the execution
hereof, an executed written guarantee from Seller's affiliate, CNG Producing
Company, in the form and substance set out in Exhibit "C" hereto. If the
total common stockholders' equity of CNG Producing Company, as reflected in
the consolidating balance sheet contained in the most recent Form USS of
Consolidated Natural Gas Company filed with the Securities and Exchange
commission pursuant to the Public Utility Holding company Act of 1935, falls
below the sum of $150,000,000.00, Seller shall so notify Buyer. Upon receipt
of such notification, Buyer may request Seller to provide an additional
guarantee, conforming to the substance of Exhibit "C", from an affiliated or
non-affiliated entity having sufficient total common stockholders' equity
such that the combined total common stockholders' equity of CNG Producing
Company and such additional guarantor, as of the date of the foregoing
balance sheet and the date of the most recent audited balance sheet of the
additional guarantor, equals or exceeds the sum of $150,000,000.00. If Seller
fails to provide such additional guarantee on or before 60 days after Buyer's
request ("cut-off date"), Buyer may terminate this Agreement; provided (i)
such termination notice is given no later than 10 days after the cut-off date
and (ii) such termination shall be effective on the first day of the second
month after such notice is received by Seller.
19.4 Buyer's Agreements with Transporters. Buyer agrees to execute promptly
and in proper form any and all transportation (including storage) service
agreements with
36
Transporters (including amendments thereto) that may be required to perfect
Buyer's Unbundled Capacity Rights and Individually-Certificated Capacity
Rights and to maintain agreements to receive the same level of service in
full force and effect during the term hereof; provided nothing in this
Section 19.4 shall impair Buyer's right to convert or otherwise modify its
Unbundled Capacity Rights and Individually-Certificated Capacity Rights to
the extent permitted by FERC regulations and orders. Buyer also agrees to
execute an Operational Balancing Agreement or other service agreement with
Algonquin (covering gas flowing to the City Gate) and to maintain such
agreement in full force and effect during the term hereof. Buyer shall be
solely responsible for any balancing, payback or other obligations arising
under such service agreement.
19.5 Seller's Agreements with Transporters. Seller agrees to execute promptly
and in proper form the agreements with Transporters identified in the
Capacity Management Agreement. Seller also agrees to execute or to cause
Seller's affiliate, CNG Producing Company, to execute a service agreement with
Texas Eastern for TABS-1 service and to maintain such agreement in full force
and effect during the term hereof. Seller and/or CNG Producing Company shall
be solely responsible for any balancing, payback or other obligations arising
under such service agreement.
ARTICLE 20
TRANSPORTER PENALTIES
20.1 Responsibility for Penalties. Should any penalty be levied by
Transporter, Seller shall pay such penalty under protest. Thereafter, the
Parties shall investigate and determine whether such penalty was wrongfully
assessed by Transporter, and if not wrongfully assessed, whether Buyer was at
fault for causing the penalty to be incurred. If Buyer is determined to be at
fault, Buyer shall be liable for payment of such penalty and will reimburse
Seller in the event such penalty was earlier paid by Seller.
ARTICLE 21
MISCELLANEOUS
21.1 Choice of Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the state of Massachusetts, excluding the
conflict of laws principles applied in that state.
37
21.2 Entire Agreement. This Agreement (which includes attached hereto
Exhibits "A", "B", "C", and "D" and Appendices I, II, III, and IV), together
with the Capacity Management Agreement, constitutes the entire agreement
between the Parties covering the subject matter hereof and supersedes any and
all prior agreements, understandings, correspondence and other
communications, written or oral, regarding the subject matter covered by this
agreement and the Capacity Management Agreement.
21.3 Notices. Unless otherwise specified herein, any notice required or
permitted hereunder shall be in writing. Any such notice shall be deemed
given (i) when sent by Federal Express or other overnight delivery service to
the street address of the Parties shown below, or (ii) when transmitted by
facsimile transmission (FAX) to the Parties' respective numbers shown below:
(a) CNG Gas Services Corporation
One Park Ridge Center
Pittsburgh, PA 15244-0746
Attn: Director, Supply and Transportation
FAX NO. (412) 787-4260
(b) Fall River Gas Company
155 N. Main Street
Fall River, MA 02720
Attn: Jack Fanning
FAX NO. (508) 673-4290
Any FAX communication shall be promptly confirmed by mail. Either Party may
change such address or telephone number by giving prior notice to the other
Party.
21.4 Exclusion of Third Party Rights. This Agreement is for the sole and
exclusive benefit of the Parties hereto. Nothing expressed or implied herein
is intended to benefit any other person or entity not a Party hereto. None of
such persons or entities shall have any legal or equitable right, remedy, or
claim under this Agreement or any provision herein.
21.5 Waiver. Any waiver by either Party of performance due by the other Party
hereunder shall be without prejudice to the right of that waiving Party to
demand future performance which is in strict compliance with the terms hereof
by that other Party.
38
21.6 Confidentiality. This Agreement and all notices, statements,
correspondence, and other communications relating to the negotiation or
administration of this Agreement ("Agreement Information") are non-public,
confidential, and proprietary. Each Party shall keep such Agreement
Information strictly confidential for a period ending two (2) years after the
expiration or termination of this Agreement. Subject to any disclosure
obligations imposed upon Buyer as a governmental entity or as a private
entity subject to state public utility commission jurisdiction, to the
provisions of Section 11.7 permitting a coordinated audit by members of the
ABC Group and to the provisions of 21.11 permitting joint arbitration of
common issues, the Parties agree that they shall not disclose, reveal or
divulge the Agreement Information to any person other than a director,
officer, employee (including an employee of any affiliate of that Party),
auditor, or advisor of that Party who needs to know such Agreement
Information and is obligated to keep the Agreement Information strictly
confidential, without the prior written consent of the other Party or except
as may be required to comply with any statute, ordinance or order of a court
or governmental agency having subject matter jurisdiction. Each Party hereby
gives its consent in advance to disclosure of this Agreement in connection
with pricing arbitration proceedings involving such other Party; provided
such other Party takes steps to ensure to the extent permitted by law that
the record of such arbitration proceeding does not become public information.
In the event disclosure of Agreement Information is required to any
governmental agency, the Party making such disclosure shall seek confidential
treatment thereof by the governmental agency, including but not limited to,
exemption of Agreement Information (to the extent permitted by law) from
public access under any applicable freedom of information statute and the
redacting of any Agreement Information included in the public record to
delete pricing and other commercially sensitive data.
21.7 Refunds and Retroactive Price Adjustments. Except as provided in Section
8.2 and in the Capacity Management Agreement, neither Party shall be
obligated by this Agreement to flow through to the other Party or any other
person via refund, retroactive price adjustment, or other means any rate
refund or other payment received by that Party from any pipeline or other
entity that may transport the Gas delivered or received hereunder for the
account of that Party.
21.8 Severability. If any provision of this Agreement is held invalid,
illegal, or unenforceable to any extent, and for any reason, by a court of
competent jurisdiction, the remainder of this Agreement shall not be affected
thereby and shall continue in full force and effect to the full extent
permitted by law; provided, however, that if Article 10 or Section 14.3,
14.4, 19.2, 19.3 or 21.13 is held invalid, illegal, or unenforceable to any
extent, Buyer shall have the right to terminate this Agreement immediately.
In the event any provision is held invalid, illegal, or unenforceable, the
Parties shall meet promptly to work together in good faith to replace the
provision or term so as to effectuate the intent of the Parties regarding this
Agreement.
39
21.9 Amendments and Other Modifications. Amendments and other modifications
of this Agreement shall be or become effective only upon mutual execution of
written documents hereto by the duly authorized representatives of the
respective Parties.
21.10 Headings. The Article and Section headings in this Agreement are for
purposes of reference only and shall not affect the meaning of any provision
of this Agreement.
21.11 Arbitration. All claims, disputes and other matters in question arising
out of, or relating to this Agreement or the breach thereof shall be decided
by arbitration using a single arbitrator who (a) is acceptable to both
Parties, (b) has professional experience in and knowledge of the natural gas
industry, and (c) is not now and has not been an employee of or a consultant
for either Party within the past 5 years in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in force,
unless the parties agree otherwise. If there are common issues in
controversy involving two or more members of the ABC Group, such issues shall
be resolved in a joint arbitration proceeding: If the Parties fail to agree
on such single arbitrator, either Party may petition the United States
District Court for the District of Massachusetts for the appointment of such
arbitrator. This arbitration clause shall be specifically enforceable under
the prevailing arbitration law. The award rendered by the arbitrator shall be
final, and judgment may be entered upon it in accordance with the applicable
law in any court having jurisdiction thereof. Notice of a demand for
arbitration shall be filed in writing with the other party to this Agreement
and with the American Arbitration Association. The arbitration shall be
conducted in Boston, Massachusetts, or such other place as the parties may
agree. The parties shall continue to perform under this Agreement during any
arbitration proceedings, unless otherwise agreed in writing.
21.12 Further Assurances. Buyer and Seller agree that, from time to time,
each of them will take such actions as may be necessary to carry out the
purposes of this Agreement, including such temporary adjustments to the
nominating, dispatching and billing procedures stated herein as may be
reasonably required if the Commencement Date occurs other than on the first
day of the month.
21.13 Reserve Auditor's Report. At Buyer's request, Seller agrees to cause
CNG Producing Company to furnish a report from the Reserve Auditor concerning
the gas reserves of CNG Producing Company as of January 1 of the year in which
such request is made. A form of such report is attached hereto as Exhibit
"D". Such report shall constitute Agreement Information for purposes of
Section 21.6. If such report shows that the Proved Working Interest Gas
Reserves are less than 150 billion cubic feet, Buyer may terminate this
Agreement; provided (i) such termination notice is given no later than 10
days after such report is furnished by Seller and (ii) such termination shall
be effective on the first day of the second month after such notice is
received by Seller.
40
21.14 Additional Credit by Seller to Buyer's Account. Each month during the
term hereof, Seller shall credit Buyer's account with an amount equal to
one-twelfth (1/12) of the Reservation Fee payable to Texas Eastern pursuant
to Buyer's service agreement under Texas Eastern Rate Schedule CDS.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement to be
effective on the day and year first written above.
CNG GAS SERVICES CORPORATION, SELLER
By: Carter T. Funk
----------------------------
Title: V.P. & Gen Mgr
----------------------------
FALL RIVER GAS COMPANY, BUYER
By: xxx
---------------------------
Title: President
---------------------------
41
EXHIBIT "A"
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
Type of
Rate Contract Capacity Special Title
Transporter Schedule Number Right Transfer Point
----------- -------- -------- -------- --------------
TE(1) CDS 800297 Unbundled No
TE CDS 800109 Unbundled No
TE SS-1 400154 Unbundled No
TE SS-1 400155 Unbundled No
TE SS-1 400156 Unbundled No
TE FTS-7 331702 Ind. Cert(2) Oakford/
Lambertville
AL(3) AFT-E 93007E Unbundled No
AL AFT-E 9W006E Unbundled No
AL AFT-1 93405 Unbundled No
AL AFT-1 9B104 Unbundled No
AL AIT-1 931006B Unbundled No
AL AIT-1 9310075 Unbundled No
AL PTP 934003 Ind. Cert. Lambertville
TE IT-1 331053 Unbundled CNGT/
Lambertville
TE IT-1 331052 Unbundled Oakford/
Lambertville
CNGT(4) - GS2M TBD(5) TBD
CNGT - GS3M TBD TBD
_______________________
(1) Texas Eastern
(2) Individually certificated
(3) Algonquin
(4) CNG Transmission
(5) To be determined
i
EXHIBIT "B"
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
(Form of Support Letter)
----------------------
Date
Fall River Gas Company
155 N. Main Street
Fall River, MA 02720
Attn: Jack Fanning
Gentlemen:
Consolidated Natural Gas Company ("CNG") is aware that its CNG Gas
Services Corporation subsidiary ("GSC") has entered into a Gas Sales
Agreement dated June 1, 1993 with Fall River Gas Company. CNG owns 100% of
the capital stock of GSC and has established GSC as its principal marketing
arm of the CNG system.
CNG, since its inception in 1943, has always supported its subsidiaries
so that they fulfilled their obligations. In connection with the Gas Sales
Agreement, CNG confirms that it is its firm policy to (i) support GSC so that
it will be able to fulfill its obligations under agreements, such as the Gas
Sales Agreement with Fall River Gas Company, and (ii) take any and all
actions to assure that GSC will have sufficient resources to allow it to
fulfill its obligations under the Gas Sales Agreement.
Sincerely,
i
GUARANTEE
----------
THIS GUARANTEE is made this 1st day of August, 1993, by CNG Producing
Company, a Delaware Corporation, (hereinafter referred to as the "Guarantor")
in favor of Fall River Gas Company (hereinafter referred to as "Creditor").
WHEREAS, Creditor and CNG Gas Services Corporation (hereinafter referred
to as "Debtor") will enter into that certain Gas Sales Agreement dated as of
June 1, 1993, pursuant to which Creditor will purchase natural gas
(hereinafter referred to as the "Gas Sales Agreement"); and
WHEREAS, Guarantor, as the affiliated corporation of Debtor, has assets
of $1,265,815,000.00 as of March 31, 1993;
WHEREAS, as an inducement to Creditor to enter into the Gas Sales
Agreement, Guarantor has agreed to provide this Guarantee, as provided herein;
NOW, THEREFORE, for and in consideration of the premises, Guarantor
hereby agrees as follows:
1. GUARANTEE. Subject to the provisions hereof, Guarantor, including any
of Guarantor's successors, hereby irrevocably, absolutely and unconditionally
guarantees the timely performance of the obligations of Debtor to Creditor as
set forth in the Gas Sales Agreement ("Debtor's Obligations"). To the extent
that Debtor shall fail to perform any of Debtor's Obligations, Guarantor
shall perform or cause to be performed Debtor's Obligations. The liability of
Guarantor under this Guarantee shall be subject to the following:
(a) Any amendment, waiver, or modification of or addition or supplement
to or deletion from any of the terms of the Gas Sales Agreement shall
require Guarantor's consent;
(b) If Guarantor fails to perform any of Debtor's Obligations, Guarantor
shall be responsible to Debtor for only those damages for which
Debtor may be responsible, as set forth in Sections 6.2, 12.1, 14.2
and 14.3 and in Article 16 of the Gas Sales Agreement; and
(c) To the extent the Gas Sales Agreement permits alternative methods of
performance by Debtor, performance by Guarantor of any of such
methods of performance shall fulfill Guarantor's obligation under
this Guarantee, and Guarantor shall not be held to any different or
greater obligation than that of Debtor under the Gas Sales Agreement.
2. DEMANDS AND NOTICE. If Debtor fails or refuses to perform any of Debtor's
Obligations, Creditor shall notify Guarantor in writing of the manner in which
Debtor has failed to perform and demand performance by Guarantor. If Debtor's
failure or refusal to perform continues for a period of fifteen (15) days
after the date of Creditor's notice to Guarantor, and Creditor has elected to
exercise its rights under this Guarantee, Creditor shall make a demand upon
Guarantor (hereinafter referred to as a "Performance Demand"). A Performance
Demand shall be in writing and shall reasonably and briefly specify in what
manner Debtor has failed to perform the Debtor's Obligations, with a specific
statement that Creditor is calling upon Guarantor to perform under this
Guarantee. A Performance Demand in the foregoing form shall be deemed
sufficient notice to Guarantor that it must perform or cause to be performed
the Debtor's Obligation. A single written Performance Demand shall be
effective as to any specific default during the continuance of such default,
until Debtor or Guarantor has cured such default, and additional written
demands concerning such default shall not be required until such default is
cured.
3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
that:
(a) it is a corporation duly organized and validly existing under the
laws of the State of Delaware and has the corporate power and
authority to execute, deliver and carry out the terms and provisions
of the Guarantee;
(b) no authorization, approval, consent, or order of, or registration
or filing with, any court or other governmental body having
jurisdiction over Guarantor is required on the part of Guarantor for
the execution and delivery of this Guarantee; and
(c) assuming due authorization, execution and delivery hereof by
Creditor, this Guarantee constitutes a valid and legally binding
agreement of Guarantor.
4. SETOFFS AND COUNTERCLAIMS. Guarantor reserves to itself all rights,
setoffs, counterclaims and other defenses which Debtor is or may
be entitled to arising from or out of the Gas Sales Agreement,
except for defenses arising out of the bankruptcy, insolvency,
dissolution or liquidation of Debtor.
5. AMENDMENT OF GUARANTEE. No term or provision of this Guarantee shall
be amended, modified, altered, waived, supplemented or terminated
except in a writing signed by the parties hereto.
6. WAIVERS. Guarantor hereby waives (a) notice of acceptance of this
Guarantee; (b) presentment and demand concerning the liabilities of
Guarantor, except as expressly hereinabove set forth; and (c) any
right to require that any action or proceeding be brought against
Debtor or any other person, or except as expressly hereinabove set
forth, to require that Creditor seek enforcement of any performance
against Debtor or any other person, prior to any action against
Guarantor under the terms hereof.
Page 2 of 4
No delay of Creditor in the exercise of, or failure to exercise, any
rights hereunder shall operate as a waiver of such rights, a waiver of any
other rights or a release of Guarantor from any obligations hereunder.
7. NOTICE. Any Performance Demand, notice, request, instruction,
correspondence or other document to be given hereunder by any party to
another (herein collectively called "Notice") shall be in writing and shall
be deemed given when sent by Federal Express or other overnight delivery
service, or transmitted by facsimile transmission (FAX), as follows:
To Creditor:
Fall River Gas Company
155 N. Main Street
Fall River, MA 02720
Attn: Jack Fanning
FAX: (508) 673-4290
To Guarantor:
CNG Producing Company
CNG Tower
1450 Poydras Street
New Orleans, LA 70115-6000
Attention: General Counsel
FAX: (504) 593-7346
Any FAX communication shall be promptly confirmed by mail. Either party
may change such address or telephone number by giving prior notice to the
other party.
8. TERM. This Guarantee shall be effective for a term concurrent with
the term of the Gas Sales Agreement.
9. MISCELLANEOUS. This Guarantee shall be governed by and interpreted
in accordance with the laws of Massachusetts, excluding the conflicts of laws
principles applied in that state. This Guarantee shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of Creditor. This Guarantee Agreement shall not be pledged,
mortgaged, assigned or otherwise transferred to any person or entity;
provided that if the Gas Sales Agreement is pledged, mortgaged, or assigned
to any financier as permitted under the Gas Sales Agreement, pursuant to any
mortgage, indenture or similar agreement now in effect, or hereafter entered
into by Creditor, this
Page 3 of 4
Guarantee Agreement may be similarly pledged, mortgaged, or assigned; and
further provided, with Creditor's prior consent (which consent shall not be
unreasonably withheld), this Guarantee Agreement may be assigned to a person
or entity under common ownership and control with Guarantor in connection
with a business reorganization affecting Guarantor. The Guarantee embodies
the entire agreement and understanding between Guarantor and Creditor and
supersedes all prior agreements and understandings relating to the subject
matter hereof. The headings in this Guarantee may be executed in any number
of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, Guarantor and Creditor have caused this Guarantee to
be executed as of the day and year first above written.
CNG PRODUCING COMPANY
By: /s/ Paul P. [illegible]
---------------------------------
Title: Senior Vice President and CFO
---------------------------------
FALL RIVER GAS COMPANY
By: /s/ Jack [illegible]
---------------------------------
Title: Vice President - Gas Supply
---------------------------------
Page 4 of 4
EXHIBIT "D"
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
FORM OF RESERVE AUDITOR'S REPORT
--------------------------------
[Reserve Auditor's Letterhead]
Fall River Gas Company
155 N. Main Street
Fall River, MA 02720
Attn: Jack Fanning
Gentlemen:
[Reserve Auditor] has audited the Proved Reserves of gas attributable to
the interest of CNG Producing Company as of January 1, 199 . The quantity of
Proved Working Interest Gas Reserves (as defined by the Securities and
Exchange Commission) at that date is billion cubic feet,
measured at a pressure base of 14.73 psia and 60 degrees Fahrenheit. Based on
gas contract data reviewed by [Reserve Auditor] as of January 1, 199 , at
least billion cubic feet of that quantity are not subject to
restrictions due to firm gas sales contracts having a term of one year or
longer having been entered into as of that date by CNG Producing Company with
affiliated and non-affiliated purchasers.
The above estimate is intended to confirm CNG Producing Company's supply
position as of January 1, 199 .
Sincerely yours,
[RESERVE AUDITOR]
By:
---------------------------
Authorized Representative
i
APPENDIX I
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
COMMODITY UNIT PRICE COMPUTATION PROCEDURE
A. RESERVED GAS COMMODITY UNIT PRICE:
The Reserved Gas Commodity Unit Price for each month shall be equal to the
average of the "Index Prices" effective as of the first day of that month
(as listed on the table entitled "Prices of Spot Gas Delivered to
Pipeline), as published in INSIDE FERC'S GAS MARKET REPORT for that month,
for deliveries into Texas Eastern at Zones ELA, WLA, ETX, and STX and at
pipeline interconnection points with Texas Eastern at Kosciusko,
Mississippi ("Kosciusko"), as weighted in proportion to Buyer's
respective Base Segment Capacity Entitlement on Texas Eastern for each
such zone or point.
B. BACK-UP GAS COMMODITY UNIT PRICE:
The Back-Up Gas Commodity Unit Price for each month shall be equal to
product of (i) 2.0 and (ii) the "Index Price" effective as of the first
day of that month (as listed on the table entitled "Prices of Spot Gas
Delivered to Pipelines"), as published in INSIDE FERC'S GAS MARKET REPORT
for that month, for CNG Transmission Corp. (Appalachia); provided that
the Back-Up Gas Commodity Charge shall not exceed $3.85 per MMBtu into
CNG Transmission for deliveries made during the first Contract Year.
Until such time as INSIDE FERC'S GAS MARKET REPORT reports the Index Prices
for gas delivered into Texas Eastern, as specified above, the following
substitute indices shall be used:
1. LA Zone for WLA and ELA Zones:
2. TX Zone for STX and ETX Zones; and
3. The arithmetic average of prices listed for Texas Eastern at
Kosciusko, Mississippi under the column entitled "This Week" in the
table entitled
i
"Spot Prices on Interstate Pipeline Systems", as such table appears in the
each weekly edition of Natural Gas Week, as published during the applicable
month for Kosciusko.
ii
APPENDIX II
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
EXAMPLE ILLUSTRATING PROCEDURE
TO DETERMINE TRANSPORTATION SHRINKAGE QUANTITY
Key Principle:
RQ changes each month based on MTQ plus fuel related to transportation AND
fuel related to storage, on each Tansporter in chain. RQ is contingent upon
Nominated Quantities.
Therefore, if Pipelines X, Y, and Z are used to effect deliveries:
Reservation Quantity (RQ) = Maximum Transportation Quantity (MTG) +
Transportation Shrinkage Quantity (TSQ)
where the TSQ includes fuel on such quantities as are injected into
storage
TSQ(z)(Per Transporter) = MTQ(z)/(1-Fuel %(z)) - MTQ(z)
where (z) is the last pipeline in the chain and the one that effects
delivery at the City Gate.
TSQ(y)(Per Transporter) = MTQ(y)/(1-Fuel %(y)) - MTQ(y)
where (y) is the next to last pipeline in the chain and the one that
effects delivery to the last pipeline (z) in the chain, and where
MTQ(y) = MTQ(z) + TSQ(z).
TSQ(x)(Per Transporter) = MTQ(x)/(1-Fuel %(x)) - MTQ(x)
where (x) is the first pipeline in the chain and the one that effects
delivery to the next to last pipeline (y) in the chain, and where
MTQ(x) = MTQ(y) + TSQ(y).
Then:
TSQ = (MTQ/((1-Fuel Z)*(1-Fuel Y)*(1-Fuel X))) - MTQ
Sample Calculation:
Fuel Shrinkage Reciprocal MMBtu's Required
3.00% = Fuel Z 0.97 1,031
2.00% = Fuel Y 0.98 1,052
5.00% = Fuel X 0.95 1,107
RQ = 1,107 MMBtu's
MTQ = 1,000 MMBtu's
TSQ = 107 MMBtu's
i
APPENDIX III
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
STORAGE ACCOUNT SCHEDULE
APRIL 199 THROUGH MARCH, 199 SEASON
REVISED AS OF ______________
1) Activity to Date:
Cumulative Storage Input Quantities: ___ MMBtu's
Cumulative Storage Output Quantities: ___ MMBtu's
2) Target percentage fill (input) [e.g. 100%]; turn (output)
[e.g. 80%]
3) November inputs? yes/no; April outputs? yes/no
I. STORAGE INPUT QUANTITY
MONTH Minimum Maximum Default Actual*
April, 1993
May, 1993
June, 1993
July, 1993
August, 1993
September, 1993
October, 1993
November, 1993
- --------------
TOTAL
II. STORAGE OUTPUT QUANTITY
MONTH Minimum Maximum Default Actual*
October, 1993
November, 1993
December, 1993
January, 1994
February, 1994
March, 1994
April 1994
- --------------
TOTAL
*Column for informational purpose only, but used to calculate figures in
preceding columns.
i
APPENDIX IV
To Gas Sales Agreement
Dated June 1, 1993 Between
CNG Gas Services Corporation and
Fall River Gas Company
SCHEDULE OF EXTRANEOUS GAS
I. SOURCES OF EXTRANEOUS GAS:
A. Peak-shaving Gas available to Buyer's local distribution facilities
from the following propane injection and/or other facilities:
[TO COME]
B. Gas available to Buyer's local distribution facilities under the
following exchange or transportation agreements;
[TO COME]
C. Gas resulting from the evaporation of liquified natural gas
("LNG") and available from Distrigas of Massachusetts Corporation
or other suppliers located in the vicinity of Boston,
Massachusetts and available by pipeline, truck or other
means to Buyer's local distribution facilities.
II. MAXIMUM QUANTITIES OF EXTRANEOUS GAS:
Month MMBtu's Per Day
----- ---------------
April ____________
May ____________
June ____________
July ____________
August ____________
September ____________
October ____________
November ____________
December ____________
January ____________
February ____________
March ____________
i