1
EXHIBIT 10.4
AGREEMENT FOR SERVICES
BY AND BETWEEN
CONOCO INC.
(COMPANY)
AND
TRANSTEXAS GAS CORPORATION
(CONTRACTOR)
------------------------------------------
DATED AND EFFECTIVE MARCH 1, 1997
THIS AGREEMENT CONTAINS ARBITRATION AND INDEMNIFICATION PROVISIONS.
2
AGREEMENT FOR SERVICES
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Available Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Banked Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Cure Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Master Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Minimum Aggregate Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Minimum Annual Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Requested Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. CONDITIONS AND SUSPENSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Failure of Conditions and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Suspension and Resumption of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Early Termination for Lengthy Suspension(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Reduction of Available Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3. MINIMUM REQUEST OF SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Company Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Minimum Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Requested Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Calculation of Minimum Amount and Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Sole Remedy of Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Banked Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5. ACCOUNTING AND INVOICING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Company's Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Assignment of Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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5.4 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.5 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Early Termination by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Early Termination upon Satisfaction of Minimum Amount . . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Early Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Surviving Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 No Consequential or Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.8 Mediation and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.10 Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 No Rights Given to Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.15 Entire Agreement and Agreement Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.16 Controlling Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.17 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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AGREEMENT FOR SERVICES
THIS AGREEMENT FOR SERVICES ("Agreement"), dated and effective the 1st day of
March, 1997 ("Effective Date"), is between CONOCO INC., a Delaware corporation
whose address is 600 North Dairy Ashford, Houston, Texas 77079 ("Company"), on
one hand, and TRANSTEXAS GAS CORPORATION, a Delaware corporation whose address
is 1300 North Sam Houston Parkway E., Suite 310, Houston, Texas 77032-2949
("Contractor"), on the other.
In consideration of the mutual covenants and agreements hereinafter set forth,
Company and Contractor hereby agree as follows:
ARTICLE 1. DEFINITIONS
In this Agreement, the following terms shall have the following meanings:
1.1 "Affiliate" means a Person which owns a Party, is owned by a
Party, or is owned by a Person which owns a Party. A Person which is owned by
a Party is a "Subsidiary" of that Party. Ownership means the ownership
directly or indirectly, through one or more intermediaries, of fifty percent
(50%) or more of the shares or voting rights in a company, partnership or legal
entity. "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, excluding a
government or political subdivision or an agency thereof.
1.2 "Agreement" means this Agreement for Services between Company
and Contractor.
1.3 "Arbitration Agreement" shall be as defined in Section 7.8
hereof.
1.4 "Available Services" means the twenty-one (21) types of
Services being provided to Company within Texas Railroad Commission District 4
by Contractor and available to Company under the Master Contract, as specified
in Exhibit B thereof, as such types of Services may be reduced under Section
2.5 hereof.
1.5 "Banked Credits" shall be as defined in Section 4.2 hereof.
1.6 "Company" means Conoco Inc., a Delaware corporation, and any
successor or assignee of Company of its rights and obligations under this
Agreement.
1.7 "Contractor" means TransTexas Gas Corporation, a Delaware
corporation, and TransTexas Drilling Services, Inc., a Delaware corporation, as
assignee of TransTexas Gas Corporation under Section 7.4, together with any of
their Subsidiaries providing Services to Company under the Master Contract and
any permitted successor or assignee of Contractor of its rights and obligations
under this Agreement.
1.8 "Cure Period" shall be as defined in Section 2.2 hereof.
1.9 "Effective Date" means March 1, 1997, the date this Agreement
has come into effect.
1.10 "Master Contract" means the Master Services Contract between
Company and
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Contractor dated effective May 30, 1997, as the same may be amended from time
to time (or any successor agreement covering the Services).
1.11 "Minimum Aggregate Amount" and "Minimum Annual Amount" shall
be as defined in Section 3.2 hereof, calculated and credited in accordance with
Sections 3.3 and 3.4 hereof.
1.12 "Party" means Company or Contractor individually, as indicated
by the context. Company and Contractor are sometimes together referred to
herein as the "Parties".
1.13 "Requested Services" shall be as defined in Section 3.3
hereof.
1.14 "Services" shall be as defined in Section 1.1 of Exhibit A to
the Master Contract.
ARTICLE 2. CONDITIONS AND SUSPENSION
2.1 Conditions. Company's obligations under this Agreement are
conditioned on:
(a) Any necessary upgrade by Contractor to its equipment,
services, quality, and performance capabilities in order to meet
Company's standards for the Services, including without limitation
those standards for quality of materials and equipment, safety and
environmental performance, conformity with job specifications,
timeliness of delivery of Services, downtime, and timely payment of
its subcontractors, all as provided in the Master Contract;
(b) Continuing compliance by Contractor with the
standards referred to in Section 2.1(a); and
(c) The prices for the Services of Contractor being in
conformance with the pricing provisions of the Master Contract.
2.2 Failure of Conditions and Notices. If at any time Company
reasonably determines that, with respect to any of the types of Available
Services, Contractor (i) has not been meeting the conditions described in
Section 2.1 hereof, or (ii) has been unable, unwilling, or not ready to provide
Services when called within the call-out standards provided in Article 3 of
Exhibit B to the Master Contract (provided however, Contractor, without
penalty, may refuse to perform any Company Services request, howsoever made,
which does not provide Contractor with the minimum notice periods provided in
said Article 3), then Company may provide Contractor with a written notice of
noncompliance describing in sufficient detail the failure with respect to that
type of the Available Services. Contractor shall then have sixty (60) days to
cure its noncompliance with the condition(s) described in Section 2.1 hereof,
or such longer period as may be mutually agreed in writing by the Parties
("Cure Period"). If Contractor fails to cure during the Cure Period and
remains out of compliance with respect to at least the number of types of
Available Services as specified in the first column of the table in Section 2.3
hereof, requested within Texas Railroad Commission District 4, then Company may
suspend this Agreement as provided in Section 2.3 upon further written notice
to Contractor. As Contractor returns to compliance with respect to each type
of the Available Services, it will promptly provide written notice of its
compliance to Company. If Company disagrees, it will promptly provide written
notice to Contractor specifying the area of disagreement. Notwithstanding the
foregoing, Company may not issue a notice of noncompliance, and no suspension
of this Agreement may result, with respect to any type of Available Services
during calendar year 1997
Agreement for Services Page 2 CONFIDENTIAL
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for Contractor's failure to provide Services when called within the call-out
standards provided in Article 3 of Exhibit B to the Master Contract if such
type of Available Services has been requested by Company in a quantity that
would require the contemporaneous performance of Services for Company which
would exceed Contractor's capacity limitations of equipment or qualified
manpower, as such capacity and quantities are described (effective with the
Master Contract) in Exhibit B to the Master Contract.
2.3 Suspension and Resumption of Agreement. This Agreement and
Company's obligations and liability hereunder will be suspended during any
period after the Cure Period that Contractor may be out of compliance with the
conditions of this Agreement as provided in Sections 2.1 and 2.2 hereof,
commencing at the end of the Cure Period until resumption of the Agreement as
herein provided. When Contractor returns to compliance and all the conditions
described in Section 2.1 hereof have been met with respect to at least the
minimum number of types of Available Services being offered under the Master
Contract within Texas Railroad Commission District 4, as specified in the
second column of the following table, then the Agreement will be deemed to have
resumed.
Number of Types of Non-complying Minimum Number of Types of Available
Available Services for Agreement Services Required Number of Types of
Suspension to be in Compliance Available Services
5 17 21
4 17 20
4 16 19
4 15 18
4 14 17
3 14 16
3 13 15
2.4 Early Termination for Lengthy Suspension(s). If this
Agreement is suspended for more than one hundred eighty (180) consecutive days
for any single suspension of this Agreement, or more than three hundred
sixty-five (365) days in the aggregate for all suspensions of this Agreement
during the term of this Agreement, Company may upon thirty (30) days' written
notice to Contractor terminate this Agreement. Such termination notice may be
given in advance of the anticipated termination date, to be effective if the
conditions of this Section 2.4 are met.
2.5 Reduction of Available Services. At any time after 1997,
Contractor shall notify Company in writing at least thirty (30) days in advance
of Contractor's intent to withdraw a particular type of Services from the
Available Services; provided, however, if Company objects in writing, within
fifteen (15) days of receipt of Contractor's notice, then Contractor shall
continue to provide that type of Available Services for a further period of
ninety (90) days from the date of Company's objection. If during such ninety
(90) day period Company requests at least $ 50,000 of that type of the
Available Services from Contractor, then Contractor will continue to provide
said Services under the Master Contract and the number of types of Available
Services shall not be reduced. Contractor may reissue a new notice of intent
subject to the same process described above for Company's approval on the next
Price List review period as described in Section 2.02 of Exhibit C of the
Master Contract. If Company does not object, it will be considered that (i)
said type of the Available Services is withdrawn by
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Contractor, (ii) the number of types of Available Services will be reduced by
that type, and (iii) Company may issue no further notices of noncompliance to
Contractor hereunder with respect to the withdrawn type; provided, however in
no event shall the number of types of Available Services be reduced to less
than fifteen (15) types without express written approval from Company, which
may be withheld for any reason including convenience, and Contractor shall be
obligated hereunder to offer and provide to Company as Available Services at
least fifteen (15) types of the Services listed in Exhibit B of the Master
Contract at all times while this Agreement is in effect.
ARTICLE 3. MINIMUM REQUEST OF SERVICES
3.1 Company Obligation. Subject to the conditions and any
suspension or early termination provided in Article 2 hereof, and the early
termination and termination provisions of Article 6 hereof, Company and its
Affiliates will request Services from Contractor at least in the Minimum
Aggregate Amount and Minimum Annual Amount as defined and determined in
accordance with this Article 3.
3.2 Minimum Amount. Subject to the valuation, calculation, and
credits provided in Section 3.4 hereof, Contractor's sole remedy provided in
Section 4.1 hereof, and the early termination and termination provisions of
Articles 2 and 6 hereof, the minimum amount of Services to be requested of
Contractor by Company and its Affiliates is as follows:
Minimum Aggregate Amount: $ 130,000,000 in the aggregate for the term
of this Agreement
Minimum Annual Amount: $ 10,000,000 in each calendar year while this
Agreement is in effect for the entire
calendar year and not suspended as provided
in Section 2.3 hereof. For (i) calendar year
1997, (ii) the calendar year in which this
Agreement terminates (or terminates early),
and (iii) any calendar year during which this
Agreement may be suspended under Section 2.3,
the Minimum Annual Amount shall be $
10,000,000 multiplied by a fraction, the
numerator of which is the number of days in
that particular calendar year during which
this Agreement is in effect and not
terminated or suspended, and the denominator
of which is 365.
3.3 Requested Services. Services will be considered "requested"
under Sections 2.5 and 3.2 hereof when Company or its Affiliates request
Services under the Master Contract, in accordance with Section 1.1 of Exhibit A
or Section 3.01 of Exhibit C thereof, and, in either instance, Article 3 of
Exhibit B of the Master Contract ("Requested Services"). This Agreement does
not require Company or its Affiliates to request any Services, or Contractor to
perform any Services for Company or its Affiliates in response to a request.
To the extent Company or its Affiliates elect (for any reason including
convenience) not to request Services from Contractor, Contractor will have the
sole remedy, if any, provided in Section 4.1 hereof.
3.4 Calculation of Minimum Amount and Credits. The Minimum
Aggregate Amount and Minimum Annual Amount will be calculated and credited as
follows, whether or not the events or items provided below occur during any
periods of suspension of this Agreement:
(a) The amounts invoiced by Contractor to Company and its
Affiliates for
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Services provided under the Master Contract, whether or not performed
within Texas Railroad Commission District 4, less any of such invoiced
amounts which have been disputed by Company to the extent the dispute
is unresolved, will be credited against both the Minimum Aggregate
Amount and Minimum Annual Amount as of the date of the invoice.
(b) For the types of Services described in Exhibit B to
the Master Contract which are Requested Services of Contractor to be
performed within Texas Railroad Commission District 4, but not
performed by it for any reason other than:
(i) an event of force majeure, as defined in
Section 16.6 of Exhibit A to the Master Contract, occurring at
the site of the Requested Services, or
(ii) those Requested Services were not awarded to
Contractor when Contractor had been requested by Company, and
Contractor agreed, to compete to supply such Services by means
of a competitive bid, as provided in Section 3.01 of Exhibit C
to the Master Contract,
the amount invoiced by any provider other than Contractor for the
performance of the Requested Services (provided such performance meets
all material terms, conditions, and specifications of the original
request to Contractor) will be credited against both the Minimum
Aggregate Amount and Minimum Annual Amount as of the date of the third
party invoice.
(c) For any Services which Contractor has an obligation
to correct or re-perform under the Master Contract, the actual
out-of-pocket expense to Company or its Affiliates resulting from the
required remedial Services (other than those expenses for which
Contractor is indemnified by Company under the Master Contract),
including any third party charges resulting therefrom, will be
credited against both the Minimum Aggregate Amount and Minimum Annual
Amount as of the date of the invoice for the Services which are
corrected or re- performed, whether by Contractor or a third party.
(d) All valid claims of Company and its Affiliates
against Contractor under the Master Contract will be credited against
both the Minimum Aggregate Amount and Minimum Annual Amount as of the
date the valid claims become due and payable, to the extent such valid
claims remain unpaid.
(e) Any amounts paid by Company to, or credited to,
Contractor and its Affiliates under that certain Interim Operating
Agreement among Company, TransTexas Gas Corporation, and TransTexas
Transmission Corporation, dated effective March 1, 1997, as amended,
together with all valid claims of Company under said Interim Operating
Agreement, to the extent the valid claims become due and payable and
remain unpaid, will be credited against both the Minimum Aggregate
Amount and Minimum Annual Amount as of the date of payment, crediting,
or such valid claims becoming due and payable, as the case may be;
provided, however, such amounts credited shall only include amounts
that are allocable to matters or work performed arising out of
activities of the types described in Exhibit B to the Master Contract.
(f) Any payments made by Company to Contractor under
Section 4.1(a) hereof will be credited against the Minimum Aggregate
Amount.
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(g) Any Banked Credits, as provided under Section 4.2
hereof, will be credited against both the Minimum Aggregate Amount and
Minimum Annual Amount as they are used.
The above amounts to be credited will be determined on a gross basis, and not
on a net basis, in the event such amounts apply or are allocable to facilities
and properties which Company and its Affiliates do not own one hundred percent
(100%). Each amount to be calculated and credited as set forth for any single
item as described in Section 3.4(a) through (e) and (g) above will be credited
only one time against both the Minimum Annual Amount and the Minimum Aggregate
Amount. Each amount to be calculated and credited as set forth for any single
item as described in Section 3.4(f) above will be credited only one time
against the Minimum Aggregate Amount.
ARTICLE 4. REMEDIES
4.1 Sole Remedy of Contractor. Company will pay Contractor the
following amounts, if any, as Contractor's sole remedy for any failure of
Company to comply with the provisions of Article 3 hereof:
(a) After each calendar year, the Minimum Annual Amount
less (i) the sum of all the credits allocable to that calendar year
determined in accordance with Section 3.4 hereof and less (ii) any
Banked Credits as provided in Section 4.2 hereof; and
(b) After termination of this Agreement (other than early
termination under Section 2.4, 6.2, 6.3, and 6.4 hereof), the Minimum
Aggregate Amount less (i) the sum of all the credits accrued under
this Agreement determined in accordance with Section 3.4 hereof and
less (ii) any remaining Banked Credits as provided in Section 4.2
hereof. No amount will be owed Contractor by Company under this
Section 4.1(b) for any reason if this Agreement terminates early as
provided in Section 2.4, 6.2, 6.3, or 6.4.
No damages or other amounts are owed by Company to Contractor under this
Agreement except as expressly provided in this Section 4.1, together with any
interest thereon as provided in Section 5.2. Company will account for, and
Contractor will invoice Company for, any amounts owed under this Section 4.1,
as provided in Article 5.
4.2 Banked Credits. Any credits allocable to a calendar year
under Section 3.4 which exceed the Minimum Annual Amount for that calendar year
("Banked Credits") will carry over from year to year and be credited against
the Minimum Annual Amount for subsequent calendar years and against the Minimum
Aggregate Amount. Banked Credits may be used only one time against a Minimum
Annual Amount, and will also be a credit against the Minimum Aggregate Amount.
ARTICLE 5. ACCOUNTING AND INVOICING
5.1 Company's Quarterly Reports.
(a) Company will keep an accounting of the Minimum Annual
Amounts by calendar year, the applicable credits and Banked Credits,
and will furnish Contractor with quarterly reports, together with
sufficient detail and backup information concerning same, within sixty
(60) days after the end of the applicable quarter. Company will also
keep an accounting of the Minimum Aggregate Amount and the applicable
credits and Banked
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Credits, and will furnish Contractor with a final report, together
with sufficient detail and backup information concerning same, within
sixty (60) days after the termination of this Agreement. Contractor
will have thirty (30) days after receipt of a quarterly or final
report within which to review and object to same, and, subject to
Section 5.1(c), any failure to object within such time period will be
deemed a waiver AND RELEASE of Contractor's claims under this
Agreement for any amounts or items at variance with such reports.
After thirty (30) days from Contractor's receipt of a quarterly or
final report, if Contractor has not disputed an item, the report will
be deemed correct for all purposes, notwithstanding any statutes of
limitations or audit rights hereunder, subject, however, to Section
5.1(c).
(b) During the same thirty (30) day period after
Contractor's receipt of a quarterly or final report, Company will have
the right to submit any corrections to the report to Contractor, and
Contractor will have thirty (30) days after receipt of any corrected
quarterly or final report within which to object to same, and, subject
to Section 5.1(c), any failure to object within such time period will
be deemed a waiver AND RELEASE of Contractor's claims under this
Agreement for any amounts or items at variance with such reports.
After thirty (30) days from Contractor's receipt of a corrected
quarterly or final report, if Contractor has not disputed an item, the
report will be deemed correct for all purposes, notwithstanding any
statutes of limitations or audit rights hereunder, subject, however,
to Section 5.1(c).
(c) If Contractor has disputed an item, it will have the
audit rights provided in Section 7.6 with respect to the disputed
item, and Company will have the right to recalculate or correct any
disputed item while Contractor's audit period with respect to the
disputed item is open. If the disputed item is the result of a
disputed claim which Company has credited in its reports under Section
3.4(d) or (e), then upon final determination and payment, if any, of
the claim, Company will account for the claim in accordance with the
final determination and payment, if any, of the claim and will issue
any corrected reports as may be necessary from and after the date that
Company began including the claim in its reports, and any necessary
adjustments will be made between the Parties as a result of the final
determination of whether the claim was valid and when it became due
and payable.
5.2 Invoices. Contractor shall submit an invoice in U.S. Dollars
after the end of a calendar year and receipt of Company's fourth quarter report
for that calendar year for and only for, and Company shall pay Contractor, any
amounts owed under Section 4.1(a) of this Agreement for that calendar year.
Contractor shall submit an invoice in U.S. Dollars after termination of this
Agreement and receipt of Company's final report for and only for, and Company
shall pay Contractor, any amounts owed under Section 4.1(b) of this Agreement
upon termination. Contractor may not submit invoices for, or include in its
invoices under this Agreement, amounts which may become owed by Company or its
Affiliates to Contractor or its Affiliates under other contracts or
arrangements as may exist between or among them. Payment of Contractor's
invoice is due thirty (30) days from receipt of the invoice. Contractor shall
send all invoices to Company's address set forth below, along with supporting
documentation. Contractor will indicate the contract number assigned to this
Agreement on the front of the invoice. Invoices shall be sent to the following
address, unless changed by written notice to Contractor:
Conoco Inc.
Attn: Accounts Payable
P.O. Box 1700
Freer, Texas 78357
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If Contractor fails to invoice Company within 180 days from the end of a
calendar year or termination of the Agreement, as the case may be, Company
shall have no liability to Contractor for payment of same, or any portion of
it, and CONTRACTOR RELEASES COMPANY FROM ANY LIABILITY FOR SAME. Except as
expressly provided in Section 3.4, there shall be no right of offset between or
among the Parties, or their Affiliates and Subsidiaries, with respect to this
Agreement.
5.3 Assignment of Invoices. Except with Company's written
consent, which may be withheld for any reason including convenience (but
subject to Section 7.4), Contractor shall not assign its invoices or any right
to receive payment from Company under this Agreement to any third party, and
any attempt to do so shall be absolutely void and shall relieve Company from
liability for payment of same. Contractor may pledge its receivables under
this Agreement, provided that the same shall be expressly subordinate to
Company's claims and rights under this Agreement.
5.4 Payment. Contractor's invoices shall be paid and payment made
by Company check in U.S. Dollars and submitted via U.S. mail in accordance with
Contractor's instructions set forth in its invoice; provided, however, if
electronic data interchange has been implemented between the Parties under the
Master Contract, then Company's payment shall be made by wire transfer to
Contractor's account if Contractor has included wiring instructions on its
invoice or subsequently informed Company in writing of the same.
5.5 Disputes. If Company disputes an item billed, Company shall,
within thirty (30) days of receiving Contractor's invoice, notify Contractor of
the item in dispute, specifying its complaint. In the event Company disputes
an invoice item, Company shall not delay payment of the undisputed part of the
invoice; provided that before Company is required to make any payment,
Contractor shall credit Company for the amount of such invoice which Company
disputes and provided further that the 30-day period referred to above shall
cease to run at the time Company notifies Contractor of such dispute and shall
recommence on the date that Company receives Contractor's credit. In addition,
Company will pay simple interest on the undisputed amount at the rate provided
in Section 5.6, calculated from the due date as provided in Section 5.2. The
issuance of a credit by Contractor shall not itself in any way be evidence of
acceptance by Contractor that Company is correct in disputing that part of the
invoice to which the credit relates. Payment of items in dispute shall be
withheld without interest until the dispute is resolved, at which point payment
in full of that agreed amount plus simple interest thereon at the rate provided
in Section 5.6 calculated from the due date of the original invoice, shall be
paid without delay. Payment of an invoice shall not prejudice the right of
Company to subsequently dispute any part of such invoice, subject, however, to
Section 5.1. Payment of undisputed amounts by Company shall not waive any
claims of Company which may arise under Section 5.1.
5.6 Interest. Should Company or Contractor fail to pay one to the
other any part of the monies herein agreed to be paid from one to the other on
or before the due date thereof, simple interest shall accrue on the amounts
unpaid at the lesser of six percent (6%) per annum or the maximum rate from
time to time permitted by law. Such accrual of interest shall not mitigate or
cure the defaulting Party's failure to make payment of amounts due and owing.
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ARTICLE 6. TERM
6.1 Term. The term of this Agreement shall commence on the
Effective Date set forth above and shall continue for a term of nine (9) years
plus any period of suspension as provided in Section 2.3 hereof, unless
terminated earlier as herein provided, at which time this Agreement will
terminate.
6.2 Early Termination by Company. This Agreement may be
terminated earlier by Company upon thirty (30) days' written notice to
Contractor as set forth in Section 2.4.
6.3 Early Termination upon Satisfaction of Minimum Amount. This
Agreement shall terminate at such time as the sum of the credits described in
Section 3.4 equals or exceeds the Minimum Aggregate Amount of $ 130,000,000.
6.4 Early Termination. Notwithstanding Section 6.1, if Contractor
(i) goes into liquidation (other than voluntarily for the purpose of
re-organization or reconstruction), (ii) makes an arrangement, composition or
compromise with its creditors, (iii) has a receiver appointed in respect of the
whole or any part of its assets, Company may at any time thereafter immediately
terminate this Agreement without any liability to compensate Contractor for
such termination or to make any further payments hereunder.
6.5 Surviving Obligations. Early termination of this Agreement
under Section 2.4, 6.2, 6.3, or 6.4 shall relieve Company of all liabilities
and obligations hereunder, including any obligations with respect to the
Minimum Aggregate Amount as set forth in Section 4.1(b), but shall not relieve
Company of any obligations with respect to amounts due and unpaid with respect
to the Minimum Annual Amount under Section 4.1(a) which may have accrued up to
the date of termination.
ARTICLE 7. MISCELLANEOUS
7.1 Notices. All notices required under this Agreement will be
properly made when delivered in person, mailed or sent by telex, courier
services or facsimile to the addresses set forth in Section 7.2.
7.2 Addresses. The notice addresses of Company and Contractor are
as follows, unless changed by written notice:
CONTRACTOR: TransTexas Gas Corporation
1300 North Sam Houston Parkway E., Suite 310
Houston, TX 77032-2949
Telephone No.: (281) 987-8600
Facsimile No.: (281) 986-8865
Attention: Arnold Brackenridge
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COMPANY: Conoco Inc.
600 N. Dairy Ashford
Houston, TX 77079
Telephone No.: (281) 293-5526
Facsimile No.: (281) 293-4424
Attention: MLS Leader
7.3 Publicity. No public statements shall be issued by any Party
relating to this Agreement without prior coordination with the other Party;
provided that nothing herein shall prevent a Party from supplying such
information or making such statements relating to such transactions as may be
required by any governmental authority or as such Party may consider necessary
in order to satisfy its legal obligations, but such Party shall furnish prior
notice thereof to the other Party. A Party may release information concerning
this Agreement to its attorneys, accountants, financial advisors, and potential
or current lenders as may be necessary or convenient, without prior notice to
the other Party.
7.4 Assignment. Upon thirty (30) days' prior written notice to
Contractor, Company may assign this Agreement to any Affiliate or third party
and, unless such assignee is approved in writing by Contractor, which may be
withheld for any reason including convenience, Company will not be relieved of
any obligations and liabilities accruing hereunder after the assignment is
effective. Except as otherwise provided in this Section 7.4, Contractor may
not assign this Agreement, or any right to receive payments hereunder (other
than as permitted under Section 5.3), without Company's prior written consent,
which may be withheld for any reason including convenience. Upon thirty (30)
days' prior written notice to Company, Contractor may assign this Agreement in
its entirety to TransTexas Drilling Services, Inc., a Delaware corporation;
provided, however, that the Master Contract shall be also assigned in its
entirety concurrently to TransTexas Drilling Services, Inc. and it shall agree
in writing with Company (i) to assume all of Contractor's liabilities and
obligations under and to be bound by all express and implied covenants,
conditions, and obligations of Contractor in and under this Agreement, and (ii)
expressly to adopt, ratify and confirm this Agreement. In the event of such
concurrent assignments as herein provided, TransTexas Gas Corporation will be
relieved of all obligations and liabilities accruing hereunder after the
concurrent assignments of this Agreement and the Master Contract are effective.
Company shall not have any obligation to make any payment under this Agreement
to TransTexas Drilling Services, Inc. prior to receipt of notice of said
assignments and the express assumption of obligations hereunder by TransTexas
Drilling Services, Inc. as herein provided.
7.5 No Consequential or Punitive Damages. Except for the remedies
expressly provided in this Agreement, each Party hereby waives and RELEASES the
other Party from, all actual, special, indirect, incidental, consequential, or
punitive or exemplary damages arising out of or resulting from this Agreement
OR ANY BREACH THEREOF, whether such damages are claimed under breach of
warranty, breach of contract, tort or any other theory or cause of action at
law or in equity, including all damages for loss of revenue, loss of profit,
loss of use of capital, lost opportunity, construction or production delays,
reduction or cessation of production or system throughput, loss of product,
reservoir loss or damage, losses resulting from failure to meet other
contractual commitments or deadlines, and losses resulting from downtime of
facilities or vessels, however and whenever arising under this Agreement,
WHETHER OR NOT BASED ON (AND INCLUDING) NEGLIGENCE, FAULT, OR STRICT LIABILITY
OF THE RELEASED PARTY (WHETHER SOLE OR CONCURRENT, OR ACTIVE OR PASSIVE).
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7.6 Audits. For a period of two years after providing Company
with notice of a disputed item in a Company quarterly or corrected quarterly
report provided to Contractor under Section 5.1, Contractor may audit Company's
records with respect to the disputed item. Such audits shall be conducted upon
reasonable notice and during normal business hours. Company shall cooperate
fully with Contractor during audits performed under this Section 7.6, including
furnishing to Contractor copies of all requested documents within the scope of
the audit, except for the invoices and other information with respect to a
provider of Services other than Contractor, which Contractor may audit only by
way of an independent auditing firm which shall not disclose the identity of
the third party associated with such information to Contractor.
7.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF TEXAS, EXCLUDING THE TEXAS RULES ON CONFLICTS OF LAWS.
7.8 Mediation and Arbitration. Compliance with this Section 7.8
shall constitute a condition precedent to either Party seeking judicial
enforcement of any provisions of this Agreement. Any dispute concerning this
Agreement shall be resolved under the mediation and binding arbitration
procedures of this Section 7.8 and that certain Dispute Resolution Agreement
among the Parties and others dated May 21, 1997 ("Arbitration Agreement"), all
the terms and provisions of which are hereby incorporated and adopted by the
Parties as though such Arbitration Agreement were set forth in full in this
Section 7.8. Company and Contractor will first attempt in good faith to
resolve all disputes by negotiations between management level individuals who
have authority to settle the controversy, pursuant to the procedures of Section
3.1 of the Arbitration Agreement. If either Party believes further
negotiations are futile, such Party may initiate the mediation process by so
notifying the other Party in writing. Both Parties shall then attempt in good
faith to resolve the dispute by mediation in Houston, Texas, employing
management level individuals with authority to settle the dispute, in
accordance with the Center for Public Resources Model Procedure for Mediation
of Business Disputes, as such procedure may be modified by mutual agreement of
the Parties. If the dispute has not been resolved pursuant to mediation within
sixty (60) days after initiating the mediation process, the dispute shall be
finally resolved through binding arbitration under the terms and provisions of
the Arbitration Agreement. The foregoing shall not preclude Contractor from
filing such liens as in its opinion may be necessary to protect its rights.
Contractor shall clear its own liens at its expense when the matter is settled
or upon completion of arbitration proceedings. The exercise of any such remedy
shall not waive the right of either Party to compel arbitration hereunder.
7.9 Expenses. Except as may otherwise be expressly provided in
the Arbitration Agreement, all costs, legal fees, and other expenses incurred
by each Party in connection with the preparation, negotiation, execution,
delivery, administration and enforcement of this Agreement, including those
incurred in any mediation, arbitration, or court proceeding, shall be for the
account of, and borne and paid solely by, such Party.
7.10 Relationship. Neither Company nor Contractor intend to create
a partnership, joint venture, agency, association, trust or other legal entity
between the Parties, or to constitute either Party as a partner or agent of the
other Party, and neither this Agreement nor any of the operations or activities
hereunder or pursuant hereto shall be construed or considered as creating such
a relationship or constituting either Party as a partner or agent of the other
Party or to impose a partnership, principal-agent or fiduciary, duty,
obligation, or liability between or with respect to the Parties hereto.
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7.11 No Rights Given to Third Parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any Person
or entity other than the Parties any rights or remedies under or by reason of
this Agreement.
7.12 Severability. If a provision of this Agreement is determined
to be void or unenforceable, this finding shall not render other provisions
void or unenforceable.
7.13 Waiver. The waiver on the part of any Party to this Agreement
of one or more of its rights under this Agreement shall not represent a
continuing waiver of such rights or prohibit such Party from demanding the full
performance of the other Party's obligations under this Agreement.
7.14 Headings. The headings and captions used in this Agreement
are for convenience only and shall not be deemed to be of a substantive nature
in construing this Agreement.
7.15 Entire Agreement and Agreement Modification. This Agreement
reflects the entire agreement between the Parties with respect to the subject
matter hereof. Except for any confidentiality agreements between the Parties,
all other oral, written or implied agreements, contracts, understandings,
conditions, or representations with respect to the subject matter hereof are
superseded by or merged into this Agreement. No modification of this Agreement
shall be of any force or effect unless it (i) is in writing, (ii) reflects the
effective date of the modification, (iii) is signed by both Parties, and (iv)
expressly indicates that it modifies this Agreement.
7.16 Controlling Document. In the event of any conflict under this
Agreement with the Master Contract, the terms and provisions of this Agreement
shall control and prevail.
7.17 Execution in Counterparts. Each text of this Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives effective as of the Effective Date.
CONOCO INC. TRANSTEXAS GAS CORPORATION
By: /s/ K. L. Vogel By: /s/ Arnold Brackenridge
------------------------------- -----------------------------
Name: K. L. Vogel Name: Arnold Brackenridge
----------------------------- ---------------------------
Title: Attorney-in-Fact Title: President
---------------------------- --------------------------
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