AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MIDSTREAM COMBINATION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
1321
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
DELAWARE 94-3248415
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1301 MCKINNEY
HOUSTON, TEXAS 77010
(713) 754-3546
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID R. DUNN
PRESIDENT
1301 MCKINNEY
HOUSTON, TEXAS 77010
(713) 754-3546
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
TERRY M. KEE DAVID S. PETERMAN, P.C.
PILLSBURY MADISON & SUTRO LLP AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
235 MONTGOMERY STREET 1900 PENNZOIL PLACE -- SOUTH TOWER
SAN FRANCISCO, CALIFORNIA 94104 711 LOUISIANA STREET
HOUSTON, TEXAS 77002
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as
soon as practicable after the effective date of this Registration Statement
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE FEE(2)(3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value 33,928,605 shares Not Applicable Not Applicable $190,848
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares of Common Stock of the Registrant to be registered
is based upon the number of outstanding shares of NGC Corporation
Common Stock that NGC Corporation estimates will be issued and
outstanding as of the Closing Date (hereinafter defined), excluding
shares of NGC Corporation Common Stock owned by two industrial
stockholders of NGC Corporation which will be issued their shares of
the Registrant's Common Stock pursuant to an exemption from
registration under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis
of the market value of the number of shares of NGC Corporation Common
Stock to be cancelled in connection with the Combination, computed in
accordance with Rule 457(c) on the basis of the average of the high and
low prices per shares of NGC Corporation Common Stock on the New York
Stock Exchange on July 30, 1996.
(3) A fee of $202,714.18 was paid under Section 14(g) of the Securities
Exchange Act of 1934, as amended, in connection with the filing of
preliminary proxy materials with the Commission on June 7, 1996. Rule
457(b) under the Securities Act permits the fee required hereby to be
offset by the amount already paid under Section 14(g). Accordingly, no
additional fee is required to be paid with this filing.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORMS S-4 AND
PROXY STATEMENT/PROSPECTUS PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-4 ITEM LOCATION IN PROXY STATEMENT/PROSPECTUS
- ------------------------------------- ----------------------------------------
A. INFORMATION ABOUT THE RANSACTION
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus........ Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Table of Contents; Available
Information; Incorporation of Certain
Information by Reference
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information..................... Summary; Risk Factors; The Combination;
Contributed Warren Business; Contributed
NGBU Business
4. Terms of the Transaction........ Incorporation of Certain Information by
Reference; Summary; The Special Meeting;
The Combination; Certain Provisions of
the Combination Agreement; Comparisons
of Rights of Holders of NGC Common Stock
and New NGC Common Stock
5. Pro Forma Financial Information. Not Applicable (See Summary Business
Strategy and Operations of New NGC)
6. Material Contacts with Company
Being Acquired.................. Summary; The Combination; Certain
Provisions of the Combination Agreement
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters.................... Not Applicable
8. Interests of Named Experts and
Counsel......................... Not Applicable
9. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities...... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants...................... Not Applicable
11. Incorporation of Certain
Information by Reference......... Not Applicable
12. Information with Respect to S-2
or S-3 Registrants............... Not Applicable
13. Incorporation of Certain
Information by Reference......... Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants................. Outside Front Cover Page; Summary;
Contributed Warren Business; Contributed
NGBU Business; Summary Business Strategy
and Operations of New NGC
C. INFORMATION ABOUT THE ACQUIRING COMPANY
15. Information with Respect to S-3
Companies....................... Outside Front Cover Page; Available
Information; Incorporation of Certain
Information by Reference; Summary; The
Combination; Summary Business Strategy
and Operations of New NGC
16. Information with Respect to S-2
or S-3 Companies................. Not Applicable
17. Information with Respect to
Companies Other Than S-2 or S-3
Companies....................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents
or Authorizations Are to be
Solicited....................... Available Information; Incorporation of
Certain Information by Reference
(1) Date, Time and Place
Information................ Outside Front Cover Page; Summary; The
Special Meeting
(2) Revocability of Proxy...... Summary; The Special Meeting
(3) Dissenters' Rights of
Appraisal................. Summary; The Combination
(4) Persons Making the
Solicitation.............. Outside Front Cover Page; Summary; The
Special Meeting
(5) Interest of Certain Matters
to be Acted Upon and Voting
Securities and Principal
Holders Thereof............ Summary; The Special Meeting; The
Combination; Certain Provisions of the
Combination Agreement; Principal
Stockholders
(6) Vote Required for
Approval................... Summary; The Special Meeting
(7) Directors and Executive
Officers' Executive
Compensation, and Certain
Relationships and Related
Transactions............... Summary; Management and Operations After
the Combination
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited in an Exchange
Offer........................... Not Applicable
NGC CORPORATION
13430 NORTHWEST FREEWAY, SUITE 1200
HOUSTON, TEXAS 77040
To the Stockholders of NGC Corporation:
Enclosed are a Notice of Special Meeting of Stockholders, a Proxy
Statement/Prospectus, and a Proxy for a Special Meeting of Stockholders (the
"Special Meeting") to be held on Friday, August 30, 1996 at 9:00 a.m., Central
time, at 13430 Northwest Freeway, Suite 1200, Houston, Texas 77040.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve and adopt that certain Combination Agreement and Plan of
Merger (the "Combination Agreement"), dated as of May 22, 1996, among NGC
Corporation ("NGC"), Chevron U.S.A. Inc ("Chevron") and its wholly-owned
subsidiary, Midstream Combination Corp. ("Newco"), which provides for a
strategic combination (the "Combination") of NGC with substantially all of
Chevron's midstream assets (collectively, the "Contributed Businesses") and
certain strategic alliances. In particular, the Combination Agreement
contemplates that the following actions will take place:
(i) Chevron and certain of its affiliates (collectively, the
"Contributing Parties") will contribute to Newco their right, title and
interest in the Contributed Businesses (the "Contribution") in exchange
for (A) the issuance by Newco to Chevron of approximately 38.6 million
shares of Newco Common Stock and approximately 7.8 million shares of
Newco Series A Participating Preferred Stock, (B) the assumption by
Newco of an aggregate principal amount of approximately $155.4 million
in indebtedness of Chevron, subject to certain adjustments, (C) the
issuance by Newco of a promissory note payable on demand to the
Contributing Parties in the principal amount of $138.4 million, subject
to certain adjustments, and (D) the assumption by Newco of
substantially all of the liabilities and obligations related to the
Contributed Businesses, which NGC's management does not believe are
material when compared to the assets to be acquired;
(ii) NGC and Chevron, or affiliates thereof, will enter into
certain supply, sales and service agreements with respect to natural
gas, natural gas liquids and electricity pursuant to which, among other
things, New NGC (hereinafter defined) will have the right to (i)
purchase and/or market substantially all natural gas and natural gas
liquids produced or controlled by Chevron in the United States (except
Alaska) and to supply natural gas and feedstock to Chevron refineries
and Chevron Chemical plants in the United States and (ii) participate
in existing and future opportunities to provide electricity to United
States facilities of Chevron and Chevron Chemical, as well as to
purchase or market excess electricity generated by such facilities; and
(iii) immediately following the Contribution, NGC will merge
with and into Newco, and Newco will be the surviving corporation (in
such capacity, "New NGC") and will be renamed "NGC Corporation" and New
NGC, as successor in interest to NGC, will assume NGC's rights and
obligations under the aforementioned supply, sales and services
agreements.
Upon the consummation of the Combination, each issued and outstanding
share of NGC Common Stock will be automatically converted, without any action on
the part of the holder thereof, into one share of New NGC Common Stock, and each
share of Newco Common Stock and Newco Series A Participating Preferred Stock
will remain issued and outstanding as one share of New NGC Common Stock and New
NGC Series A Participating Preferred Stock, respectively. Upon consummation of
the Combination, the former NGC stockholders will own approximately 74.2% of the
issued and outstanding shares of New NGC Common Stock, and Chevron will own the
remaining approximately 25.8% of the issued and outstanding shares of New NGC
Common Stock and all of the issued and outstanding shares of New NGC Series A
Participating Preferred Stock. The New NGC Series A Participating Preferred
Stock is convertible into New NGC Common Stock upon the occurrence of certain
events. If all of the shares of New NGC Series A Participating Preferred Stock
were converted into shares of New NGC Common Stock, the former NGC stockholders
and Chevron would own approximately 70.5% and 29.5%, respectively, of the issued
and outstanding shares of New NGC Common Stock. Stockholders are urged to review
carefully the enclosed Proxy Statement/Prospectus which contains a detailed
description of the Combination.
THE BOARD OF DIRECTORS OF NGC BELIEVES THAT THE COMBINATION IS IN THE
BEST INTEREST OF NGC AND ALL OF ITS STOCKHOLDERS. ACCORDINGLY, ON MAY 20, 1996,
THE NGC BOARD UNANIMOUSLY APPROVED THE COMBINATION AGREEMENT AND THE COMBINATION
AND RECOMMENDS THAT THE NGC STOCKHOLDERS VOTE FOR APPROVAL OF THE COMBINATION
AGREEMENT AND THE COMBINATION. THE BOARD OF DIRECTORS OF NGC HAS RECEIVED A
WRITTEN OPINION FROM ITS FINANCIAL ADVISOR, LEHMAN BROTHERS INC., DATED AS OF
MAY 20, 1996, THAT THE CONSIDERATION TO BE PAID BY NGC FOR THE CONTRIBUTED
BUSINESSES PURSUANT TO THE COMBINATION AGREEMENT IS FAIR TO NGC FROM A FINANCIAL
POINT OF VIEW AS OF THAT DATE.
All stockholders are invited to attend the Special Meeting in person.
Pursuant to the Delaware General Corporation Law (the "DGCL"), the affirmative
vote of holders of at least a majority of the issued and outstanding shares of
NGC Common Stock is required to approve the Combination Agreement.
In order that your shares may be represented at the Special Meeting,
you are urged to promptly complete, sign, date and return the accompanying Proxy
in the enclosed envelope, whether or not you plan to attend the Special Meeting.
If you attend the Special Meeting in person you may, if you wish, vote
personally on all matters brought before the Special Meeting even if you have
previously returned your Proxy.
We appreciate the support of our stockholders and look forward to the
future of New NGC and its strategic business alliances with Chevron.
C. L. Watson
Chairman of the Board
Houston, Texas
August 2, 1996
Enclosures
NGC CORPORATION
13430 NORTHWEST FREEWAY, SUITE 1200
HOUSTON, TEXAS 77040
TEL: (713) 507-6400
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 30, 1996
------------------------
A Special Meeting of Stockholders (the "Special Meeting") of NGC
CORPORATION, a Delaware corporation ("NGC"), will be held on Friday, August
30, 1996 at 9:00 a.m., Central time, at 13430 Northwest Freeway, Suite 1200,
Houston, Texas 77040, for the following purposes:
(i) To consider and vote upon a proposal to approve and adopt a
Combination Agreement and Plan of Merger, dated as of May 22,
1996 (the "Combination Agreement"), that has been entered into
by NGC, Chevron U.S.A. Inc., a Pennsylvania corporation
("Chevron"), and Midstream Combination Corp., a Delaware
corporation and wholly-owned subsidiary of Chevron ("Newco"),
and the transactions contemplated thereby; and
(ii) To transact such other business as may properly come before
the Special Meeting or any adjournment(s) or postponement(s)
thereof.
The Combination Agreement provides for a strategic combination of NGC
with substantially all of Chevron's midstream assets and certain strategic
alliances (the "Combination"). In particular, the Combination Agreement
contemplates that the following actions will take place: (a) Chevron and certain
of its affiliates (collectively, the "Contributing Parties") will contribute to
Newco their right, title and interest in the Contributed Businesses (the
"Contribution") in exchange for (i) the issuance by Newco to Chevron of
38,623,210 shares of Newco Common Stock and 7,815,363 shares of Newco Series A
Participating Preferred Stock, (ii) the assumption by Newco of an aggregate
principal amount of approximately $155.4 million in indebtedness of Chevron,
subject to certain adjustments, (iii) the issuance by Newco of a promissory note
payable on demand to the Contributing Parties in the principal amount of $138.4
million, subject to certain adjustments and (iv) the assumption by Newco of
substantially all of the liabilities and obligations related to the Contributed
Businesses, which NGC's management does not believe are material when compared
to the assets to be acquired, (b) New NGC (hereinafter defined) and Chevron, or
affiliates thereof, will enter into certain ancillary supply, sales and service
agreements with respect to natural gas, natural gas liquids and electricity,
pursuant to which, among other things, New NGC will have the right to (i)
purchase and/or market substantially all natural gas and natural gas liquids
produced or controlled by Chevron in the United States (except Alaska) and to
supply natural gas and feedstock to Chevron refineries and Chevron Chemical
plants in the United States and (ii) participate in existing and future
opportunities to provide electricity to United States facilities of Chevron and
Chevron Chemical, as well as to purchase or market excess electricity generated
by such facilities; and (c) immediately following the Contribution, NGC will
merge with and into Newco, and Newco will be the surviving corporation (in such
capacity, "New NGC") and will be renamed "NGC Corporation" and New NGC, as the
successor in interest to NGC, will assume NGC's rights and obligations under the
aforementioned supply, sales and services agreements.
Stockholders of record of NGC Common Stock at the close of business on
July 19, 1996 (the "Record Date") will be entitled to vote at the Special
Meeting and any adjournment thereof. Only holders of record of NGC Common Stock
at the close of business on the Record Date are entitled to notice of, and to
vote at, the Special Meeting. A complete list of stockholders entitled to vote
at the Special Meeting will be available for examination by any NGC stockholder
at NGC's office, for purposes pertaining to the Special Meeting, during normal
business hours for a period of at least ten days prior to the Special Meeting.
You are cordially invited and urged to attend the Special Meeting in
person. Whether or not you plan to attend, please complete, sign, date and
promptly return the enclosed Proxy in the enclosed self-addressed, stamped
envelope. A stockholder of NGC who has given a proxy may revoke such proxy at
any time prior to its exercise at the Special Meeting.
THE BOARD OF DIRECTORS OF NGC HAS APPROVED AND ADOPTED THE COMBINATION
AGREEMENT AND THE COMBINATION. THE BOARD OF DIRECTORS OF NGC RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE COMBINATION AGREEMENT AND THE
COMBINATION. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS BEING
SOLICITED BY THE BOARD OF DIRECTORS OF NGC, WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING. YOUR COOPERATION IS APPRECIATED.
By order of the Board of Directors,
NGC CORPORATION
KENNETH E. RANDOLPH
SECRETARY
Houston, Texas
August 2, 1996
PROXY STATEMENT/PROSPECTUS
NGC CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 30, 1996
MIDSTREAM COMBINATION CORP.
33,928,605 SHARES
OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is
being furnished to the stockholders of NGC Corporation, a Delaware corporation
("NGC"), in connection with the solicitation of proxies by the Board of
Directors of NGC for use at a special meeting of stockholders of NGC to be held
on August 30, 1996, and any adjournments or postponements thereof (the "Special
Meeting"). At the Special Meeting, holders of shares of common stock, par value
$.01 per share, of NGC ("NGC Common Stock") on the close of business on July 19,
1996 (the "Record Date") will consider and vote upon a proposal to approve and
adopt a Combination Agreement and Plan of Merger, dated as of May 22, 1996 (the
"Combination Agreement"), that has been entered into by NGC, Chevron U.S.A.
Inc., a Pennsylvania corporation ("Chevron"), and Midstream Combination Corp., a
Delaware corporation and wholly-owned subsidiary of Chevron ("Newco"). The
Combination Agreement provides for a strategic combination of NGC with
substantially all of Chevron's midstream assets and certain strategic alliances.
In particular, the Combination Agreement contemplates that the following actions
will take place:
(i) Chevron, Chevron Pipe Line Company, a Delaware corporation
("CPL"), and Chevron Chemical Company, a Delaware corporation ("Chevron
Chemical" and together with Chevron and CPL, the "Contributing
Parties") will contribute to Newco their right, title and interest (the
"Contribution") in the Contributed Businesses (hereinafter defined) in
exchange for (A) the issuance by Newco to Chevron of 38,623,210 shares
of common stock, par value $.01 ("Newco Common Stock"), and 7,815,363
shares of Series A Participating Preferred Stock of Newco, par value
$.01 ("Newco Series A Participating Preferred Stock"), (B) the
assumption by Newco of an aggregate principal amount of approximately
$155.4 million in indebtedness of Chevron, subject to adjustment, (C)
the issuance by Newco of a promissory note payable on demand to the
Contributing Parties in the principal amount of $138.4 million (the
"Newco Note"), subject to certain adjustments and (D) the assumption by
Newco of substantially all of the liabilities and obligations related
to the Contributed Businesses, which NGC's management does not believe
are material when compared to the assets to be acquired;
(ii) NGC and Chevron, or affiliates thereof, will enter into
certain ancillary supply, sales and service agreements with respect to
natural gas, natural gas liquids and electricity, pursuant to which,
among other things, New NGC will have the right to (i) purchase and/or
market substantially all natural gas and natural gas liquids produced
or controlled by Chevron in the United States (except Alaska) and to
supply natural gas and feedstock to Chevron refineries and Chevron
Chemical plants in the United States and (ii) participate in existing
and future opportunities to provide electricity to United States
facilities of Chevron and Chevron Chemical, as well as to purchase or
market excess electricity generated by such facilities; and
(iii) immediately following the Contribution, NGC will merge
with and into Newco (the "Merger"), and Newco will be the surviving
corporation (in such capacity, "New NGC") and will be renamed "NGC
Corporation" and New NGC, as the successor in interest to NGC, will
assume NGC's rights and obligations under the aforementioned supply,
sales and services agreements.
The transactions contemplated by the Combination Agreement and the
agreements and other documents that will be entered into in connection with the
Combination Agreement shall hereinafter be referred to as the "Combination."
Following the consummation of the Combination, each issued and
outstanding share of NGC Common Stock will be automatically converted without
any action on the part of the holder thereof into one share of New NGC Common
Stock, and each share of Newco Common Stock and Newco Series A Participating
Preferred Stock will remain issued and outstanding as one share of New NGC
Common Stock and New NGC Series A Participating Preferred Stock, respectively.
This Proxy Statement/Prospectus also constitutes the prospectus for the
offering of shares of New NGC Common Stock to be issued in the Combination to
all holders of NGC Common Stock other than BG Holding and NOVA Gas (U.S.). In
connection therewith, Newco has filed a Registration Statement (of which this
Proxy Statement/Prospectus is a part) on Form S-4 (together with any amendments
thereto, the "Registration Statement") with the Securities and Exchange
Commission (the "SEC"). All information concerning NGC or New NGC contained or
incorporated by reference in this Proxy Statement/Prospectus has been furnished
by NGC, and all information concerning Newco and the Contributed Businesses
contained in this Proxy Statement/Prospectus has been furnished by Chevron.
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR INFORMATION THAT SHOULD BE
CONSIDERED REGARDING AN INVESTMENT IN NGC AND, UPON CONSUMMATION OF THE
COMBINATION, NEW NGC.
------------------------
This Proxy Statement/Prospectus and the accompanying proxy are first
being mailed to NGC stockholders on or about August 2, 1996.
THESE SECURITIES IN THE COMBINATION HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------
The date of this Proxy Statement/Prospectus is August 2, 1996.
[MAP INSERT]
[The map will be of the United States and will indicate, among other things, the
approximate location of each material gathering and processing facility,
fractionator, terminal, marketing hub, underground storage facility, pipeline
and certain other assets and offices of NGC and the Contributed Businesses.]
2
AVAILABLE INFORMATION
NGC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information are available for
inspection and copying at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the regional offices of the SEC located at 7 World Trade Center, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60601. Copies of such materials can also be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 at the prescribed rates. The NGC Common Stock is listed on the New York
Stock Exchange (the "NYSE") and, as a result, the periodic reports, proxy
statements and other information filed by NGC with the SEC can be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
Newco has filed with the SEC the Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
shares of New NGC Common Stock to be issued pursuant to the Combination to all
holders of NGC Common Stock other than BG Holding and NOVA Gas (U.S.). This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. The Registration Statement, including
exhibits filed as a part thereof, are available for inspection and copying at
the SEC's offices as described above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
NGC's (i) Annual Report on Form 10-K/A for the year ended December 31,
1995, including the consolidated financial statements and schedule of NGC and
the report thereon by Arthur Andersen LLP and the financial statements of Accord
Energy Ltd. and the report thereon by Price Waterhouse contained in the Annual
Report, as filed with the SEC on July 26, 1996 (as so amended, the "Form 10-K"),
(ii) Quarterly Report on Form 10-Q/A for the three month period ended March 31,
1996, as filed with the SEC on July 26, 1996 (as so amended, the "Form 10-Q"),
and (iii) the Current Reports on Form 8-K dated January 21, 1996, May 22, 1996
and July 26, 1996, as filed with the SEC on January 23, 1996, May 24, 1996 and
July 31, 1996, respectively, are each hereby incorporated by reference herein.
All documents filed by NGC with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed incorporated by reference in this Proxy Statement/Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in this Proxy Statement/Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Proxy Statement/Prospectus shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained in this Proxy Statement/Prospectus or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
NGC undertakes to provide without charge to each person to whom a copy
of this Proxy Statement/Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference herein, other than the exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the information that
this Proxy Statement/Prospectus incorporates. Written or oral requests for such
copies should be directed to NGC Corporation, 13430 Northwest Freeway, Suite
1200, Houston, Texas 77040, Attention: Investor Relations, telephone number
(713) 507-6400.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus or in the
documents incorporated herein by reference in connection with the solicitation
and the offering made hereby and, if given or made, such information or
representation should not be relied upon as having been authorized by NGC or
Chevron. This Proxy Statement/Prospectus does
3
not constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Proxy Statement/Prospectus, or the solicitation of a
proxy from any person, in any jurisdiction in which it is unlawful to make such
offer, solicitation of an offer or proxy solicitation. Neither the delivery of
this Proxy Statement/Prospectus nor any distribution of the securities made
under this Proxy Statement/Prospectus shall, under any circumstances, create an
implication that there has not been any change in the affairs of NGC, Newco or
the Contributed Businesses since the date of this Proxy Statement/Prospectus
other than as set forth in the documents incorporated herein by reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON WRITTEN OR ORAL REQUEST FROM INVESTOR RELATIONS, NGC CORPORATION,
13430 NORTHWEST FREEWAY, SUITE 1200, HOUSTON, TEXAS 77040, TELEPHONE NUMBER
713/507-6400. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY AUGUST 22, 1996.
UNCERTAINTY OF FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus, including any documents that are
incorporated by reference as set forth in "Incorporation of Certain Information
by Reference", contains forward looking statements. Such statements are
typically punctuated by words or phrases such as "anticipate," "estimate,"
"projects," "management believes," "NGC believes" and words or phrases of
similar import. Such statements are subject to certain risks, uncertainties or
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected. Among the key factors
that may have a direct bearing on New NGC's results of operations and financial
condition are: (i) competitive practices in the industries in which New NGC will
compete, (ii) fluctuations in energy commodity prices which have not been
properly hedged or which are inconsistent with NGC's net open position in its
energy marketing activities, (iii) environmental liabilities to which New NGC
may become subject in the future which are not covered by an indemnity or
insurance, (iv) the ability of New NGC to successfully integrate the operations
of NGC and the Contributed Businesses after the consummation of the Combination,
and (v) the impact of current and future laws and governmental regulations
(particularly environmental regulations) affecting the energy industry in
general and New NGC's operations in particular. FOR ADDITIONAL DISCUSSION OF
THESE AND OTHER RISKS, SEE "RISK FACTORS" BEGINNING ON PAGE 20 OF THIS PROXY
STATEMENT/PROSPECTUS.
4
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION ..................................................... 3
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE ............................................................ 3
UNCERTAINTY OF FORWARD LOOKING
STATEMENTS .............................................................. 4
SUMMARY ................................................................... 7
Risk Factors ............................................................ 7
Summary Business Descriptions ........................................... 7
Ownership Structure and
Organization of New NGC After
Consummation of the
Combination ........................................................... 8
The Special Meeting ..................................................... 9
The Combination ......................................................... 11
Stockholder Agreements .................................................. 15
Ancillary Agreements .................................................... 16
Accounting Treatment .................................................... 16
Certain Federal Income Tax
Consequences .......................................................... 16
NYSE Listing ............................................................ 17
Appraisal Rights ........................................................ 17
Management After the Combination ........................................ 17
Comparative Rights of NGC and New
NGC Stockholders ...................................................... 17
Market and Market Prices ................................................ 17
Dividend Policy ......................................................... 18
Recent Developments ..................................................... 19
RISK FACTORS .............................................................. 20
Fluctuations in Commodity Prices;
Risk Management Activities ............................................ 20
Industry Consolidation and
Competition ............................................................. 21
Integration of Businesses ............................................... 21
Potentially Depressing Effect of
Future Sales of New NGC Common
Stock ................................................................. 22
Conflicts of Interest ................................................... 22
Control by British Gas, NOVA and
Chevron ............................................................... 23
Governmental Regulation and
Environmental Matters ................................................. 24
Principal Suppliers of Natural Gas
and Natural Gas Liquids ............................................... 24
Availability of Natural Gas Supply
for Processing ........................................................ 24
Prohibition Against Conducting
Certain Business Activities ........................................... 25
Failure by Chevron to Transfer
Assets Comprising the Contributed
Businesses ............................................................ 25
Title to Properties ..................................................... 26
Governmental and Regulatory Filings
and Approvals ......................................................... 26
THE SPECIAL MEETING ....................................................... 27
General ................................................................. 27
Purposes of the Special Meeting ......................................... 27
Vote Required ........................................................... 27
Voting of Proxies ....................................................... 27
Revocability of Proxies ................................................. 27
Solicitation of Proxies ................................................. 28
Record Date; Shares Entitled to
Vote .................................................................. 28
Quorum .................................................................. 28
THE COMBINATION ........................................................... 28
Background of the Combination ........................................... 28
Recommendation of the NGC Board of
Directors ............................................................. 31
Opinion of Independent Financial
Advisor ............................................................... 32
Operation of Newco Prior to the
Effective Time ........................................................ 36
Contribution; Merger; Conversion of
NGC Common Stock ...................................................... 36
Effective Time .......................................................... 37
Post-Combination Ownership
Structure ............................................................. 37
NYSE Listing ............................................................ 37
Appraisal Rights ........................................................ 38
Management After the Combination ........................................ 38
Governmental and Regulatory Filings
and Approvals ......................................................... 38
Accounting Treatment .................................................... 39
Certain Federal Income Tax
Consequences .......................................................... 39
CERTAIN PROVISIONS OF THE COMBINATION
AGREEMENT ............................................................... 41
General ................................................................. 41
Consideration Due to the
Contributing Parties .................................................. 41
Inability to Contribute Assets .......................................... 41
Consideration Adjustment ................................................ 43
Employee Matters ........................................................ 45
Environmental Matters ................................................... 45
Tax Matters ............................................................. 45
Representations and Warranties .......................................... 46
Conduct of Business Prior to
Combination ........................................................... 46
Certain Pre-Closing Covenants ........................................... 47
Conditions to the Combination ........................................... 48
Amendments and Waivers .................................................. 49
Termination ............................................................. 49
Adoption of Newco Certificate of
Incorporation ......................................................... 50
Effect of Combination on Certain
Debt of NGC ........................................................... 50
STOCKHOLDER AGREEMENTS .................................................... 50
Voting Agreements ....................................................... 50
New NGC Stockholders Agreement .......................................... 50
Scope of Business Agreement ............................................. 53
Registration Rights Agreement ........................................... 53
ANCILLARY AGREEMENTS ...................................................... 54
General ................................................................. 54
Natural Gas Purchase and Sale
Agreement ............................................................. 54
Master Alliance Agreement ............................................... 55
Master Natural Gas Processing
Agreement ............................................................. 55
5
PAGE
----
Master Natural Gas Liquids Purchase
Agreement ............................................................. 55
West Texas LPG Pipeline
Agreements ............................................................ 56
Operating Agreement (Houston Area
Pipelines) ............................................................ 56
Gas Supply and Service
Agreements ............................................................ 56
Master Power Service Agreements ......................................... 56
Feedstock Sale and Refinery Product
Purchase Agreements ................................................... 57
Feedstock Sale and Refinery Product
Master Services Agreement ............................................. 57
Barge Co. ............................................................... 57
CCC Product Sale and Purchase
Agreement ............................................................. 57
Chevron Chemical/Warren LP Services
Agreement ............................................................. 58
Galena Park Services Agreement .......................................... 58
Venice Operating Agreement .............................................. 58
Product Storage Lease and Terminal
Access Agreement (Venice) ............................................. 58
Lone Star Swap Transaction
Confirmation (CUSA/NGC Master
Swap Agreement) ....................................................... 58
APPRAISAL RIGHTS .......................................................... 58
CONTRIBUTED WARREN BUSINESS ............................................... 59
Business Description .................................................... 59
Description of Properties ............................................... 62
CONTRIBUTED NGBU BUSINESS ................................................. 65
Overview ................................................................ 65
History ................................................................. 65
Gas Supply .............................................................. 65
Gas Sales ............................................................... 65
Transportation and Storage .............................................. 65
Risk Management ......................................................... 66
Competition ............................................................. 66
Legal Proceedings ....................................................... 66
Employees ............................................................... 66
SUMMARY BUSINESS STRATEGY AND
OPERATIONS OF NEW NGC ................................................... 66
Business Strategy ....................................................... 66
Business and Properties of New
NGC ................................................................... 67
Inapplicability of Certain
Financial Information ................................................. 68
MARKET PRICE AND DIVIDENDS ON NGC
COMMON STOCK ............................................................ 69
MANAGEMENT AND OPERATIONS AFTER THE
COMBINATION ............................................................. 70
Board of Directors and Executive
Officers .............................................................. 70
Committees of the New NGC Board of
Directors ............................................................. 73
Compensation of Directors ............................................... 73
EXECUTIVE COMPENSATION .................................................... 74
Stock Option Grants ..................................................... 75
Option Exercises and Year End Value
Table ................................................................. 75
Employment Agreements ................................................... 75
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ............................................................ 78
Indebtedness of Management .............................................. 78
Business Relationships with NOVA;
NOVA's Other Gas Services
Businesses ............................................................ 78
Business Relationships with British
Gas; British Gas' Other Gas
Service Businesses .................................................... 79
Business Relationships with
Chevron; Chevron's Other
Businesses ............................................................ 80
PRINCIPAL STOCKHOLDERS .................................................... 81
DESCRIPTION OF NEWCO CERTIFICATE OF
INCORPORATION AND BYLAWS ................................................ 83
General ................................................................. 83
Newco Common Stock ...................................................... 83
Newco Preferred Stock ................................................... 83
Restrictions on Business
Activities ............................................................ 84
Takeover Statute and Related
Provisions ............................................................ 84
COMPARISON OF RIGHTS OF HOLDERS OF
NGC COMMON STOCK AND NEW NGC COMMON
STOCK ................................................................... 86
Certificate of Incorporation ............................................ 86
Bylaws .................................................................. 87
TRANSFER AGENT ............................................................ 88
LEGAL MATTERS ............................................................. 88
EXPERTS ................................................................... 88
STOCKHOLDER PROPOSALS ..................................................... 88
APPENDICES
APPENDIX I -- GLOSSARY OF CERTAIN CAPITALIZED TERMS, ABBREVIATIONS AND OIL AND
GAS INDUSTRY TERMS
APPENDIX II -- COMBINATION AGREEMENT AND PLAN OF MERGER
APPENDIX III -- FAIRNESS OPINION OF LEHMAN BROTHERS INC.
APPENDIX IV -- CERTIFICATE OF INCORPORATION OF NEW NGC
6
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT / PROSPECTUS. CERTAIN CAPITALIZED TERMS USED IN THIS
PROXY STATEMENT / PROSPECTUS ARE DEFINED ELSEWHERE HEREIN OR IN THE GLOSSARY
ATTACHED HERETO AS APPENDIX I (THE "GLOSSARY").
RISK FACTORS
STOCKHOLDERS OF NGC SHOULD CAREFULLY EVALUATE CERTAIN RISK FACTORS
REGARDING AN INVESTMENT IN NGC OR, UPON CONSUMMATION OF THE COMBINATION, NEW
NGC. SEE "RISK FACTORS."
SUMMARY BUSINESS DESCRIPTIONS
NGC
NGC is a leading North American marketer of natural gas, natural gas
liquids ("NGLs"), crude oil and electric power and is engaged in natural gas
gathering, processing and transportation through ownership and operation of
natural gas processing plants, storage facilities and pipelines. Through joint
ventures in both Canada and the United Kingdom, NGC has expanded geographically
its vision of providing customers having multiple energy commodity needs with
cost-effective products and value added services. Acting in the role of a
large-scale aggregator, processor, marketer and supplier of multiple energy
products and services, NGC has evolved into a "one-stop" energy commodity and
service provider.
NGC is a holding company that operates principally through two
subsidiaries, Natural Gas Clearinghouse ("Clearinghouse") and Trident NGL, Inc.
("Trident"). NGC was formed through a strategic business combination (the
"Trident Combination"), consummated on March 14, 1995, between Clearinghouse and
Trident NGL Holding, Inc. ("Holding"), under which Holding was renamed NGC
Corporation.
The principal executive office of NGC is located at 13430 Northwest
Freeway, Suite 1200, Houston, Texas 77040, and the telephone number of that
office is (713) 507-6400.
NEWCO/CONTRIBUTED BUSINESSES
Newco is a wholly-owned subsidiary of Chevron that was formed in order
to facilitate the consummation of the Combination and has conducted no
activities other than in connection with the Combination Agreement and the
Combination. The principal executive office of Newco is 1301 McKinney, Houston,
Texas 77010 and the telephone number at such address is 713/754-3546.
Pursuant to the Combination, the Contributing Parties will contribute
to Newco substantially all of the assets comprising Warren Petroleum Company and
Chevron's Natural Gas Business Unit and an undivided 49% interest in those
assets that constitute the West Texas LPG Pipeline (the "Contributed West Texas
LPG Pipeline Business"). As used in this Proxy Statement/Prospectus, (i) the
term "Warren" shall refer to Warren Petroleum Company, an unincorporated
division of Chevron, and the "Contributed Warren Business" shall refer to that
portion of Warren that Chevron is contributing to Newco (which, upon
consummation of the Combination, will become New NGC), (ii) the term "NGBU"
shall refer to the Natural Gas Business Unit, an unincorporated business unit of
the Chevron U.S.A. Production Co. division, and the "Contributed NGBU Business"
shall refer to that portion of NGBU that Chevron is contributing to Newco
pursuant to the Combination and (iii) the term "Contributed Businesses" shall
refer to the Contributed Warren Business, the Contributed NGBU Business and the
Contributed West Texas LPG Pipeline Business, collectively.
Warren engages in all aspects of the NGLs business including gas
gathering and processing, fractionating, storing, transporting and marketing.
Warren is responsible for virtually all of Chevron's domestic NGL purchases and
sales, its major gas processing operations east of the Rocky Mountains and
Chevron's international liquified petroleum gas ("LPG") activities. NGBU markets
Chevron's gas production from the lower 48 states and Chevron's Canadian
production that is exported to the United States. NGBU is also responsible for
the delivery of natural gas to Chevron's major United States downstream
7
facilities. When profitable opportunities are available, NGBU purchases gas for
resale and contracts for transportation or storage capacity. The West Texas LPG
Pipeline consists of approximately 1,950 miles of 10-inch to 14-inch diameter
pipeline that transports raw LPGs from natural gas processing plants located in
eastern New Mexico and West Texas to fractionation facilities and terminals in
Mont Belvieu, Texas. Upon consummation of the Combination, an affiliate of CPL
will own the other 51% of the West Texas LPG Pipeline and CPL will serve as
operator of the pipeline system.
NEW NGC
As a result of the combination of NGC with the Contributed Businesses'
gathering, processing and fractionation facilities, New NGC will be a leading
North American gatherer, processor, transporter and marketer of energy products
and services.
New NGC's integrated asset base will include, among other things,
interests in approximately 15,000 miles of natural gas gathering and
transmission pipelines, 57 gas processing plants, three NGL fractionation
facilities, 60 million barrels of NGL storage capacity, three NGL import/export
marine terminals, ten other NGL terminals and approximately 2,100 miles of NGL
pipelines.
NGC believes that New NGC's strategic alliances with Chevron, which
will include the right to market substantially all natural gas and natural gas
liquids produced or controlled by Chevron in the United States (except Alaska)
and to supply natural gas and feedstock to Chevron refineries and Chevron
Chemical plants in the United States, will further enhance New NGC's position as
a leading marketer of energy products and its business strategy of being an
"Energy Store" providing creative solutions for its customers. In addition, the
combination of NGC's and the Contributed Businesses' midstream assets and
marketing operations is expected to provide opportunities to reduce costs
through reduction or elimination of duplicative functions and through the
consolidation of certain facilities. Finally, after the Combination, NGC
believes that New NGC will have a stronger balance sheet than NGC based on a
comparison of NGC's debt-to-equity ratio immediately prior to the consummation
of the Combination with New NGC's expected debt-to-equity ratio immediately
after consummation of the Combination, thereby providing New NGC with greater
financial flexibility for growth through acquisitions and enhancements to
existing facilities.
NGC believes that New NGC will also be positioned to capitalize on
gathering, processing and marketing opportunities in Canada and on natural gas,
crude oil and electric power marketing opportunities in the United Kingdom and
potentially in Europe. In addition, NGC believes that New NGC will be positioned
to market electric power domestically through Electric Clearinghouse, Inc., a
wholly-owned subsidiary of NGC ("ECI"), as the deregulated electric power market
continues to evolve. Through an alliance with Chevron, New NGC will have
opportunities to provide electricity to Chevron's refineries, chemical plants
and other United States facilities and to market or purchase excess electricity
generated by such facilities.
The principal executive office of New NGC will be located at 13430
Northwest Freeway, Suite 1200, Houston, Texas 77040, and the telephone number of
that office will be (713) 507-6400.
As used herein, unless the context otherwise requires, (i) the term
"NGC" refers to NGC Corporation and its Subsidiaries, (ii) the term "Newco"
refers to Midstream Combination Corp., a wholly-owned subsidiary of Chevron, and
(iii) the term "New NGC" refers to Newco, as the surviving corporation in the
Combination, and its Subsidiaries upon consummation of the Combination. New NGC
will own all of the assets and operations of both NGC and the Contributed
Businesses.
OWNERSHIP STRUCTURE AND ORGANIZATION OF NEW NGC AFTER CONSUMMATION OF THE
COMBINATION
The chart below depicts the organization and ownership of New NGC
Common Stock on a pro forma basis after giving effect to the Combination. The
ownership percentages for certain stockholders set forth in the chart were
calculated using certain information set forth in the most recent Schedule 13D
filed with the SEC by each such stockholder. In order to more clearly set forth
the pro forma ownership interests of New NGC Common Stock, the chart does not
8
attribute beneficial ownership of certain shares of New NGC Common Stock to more
than one holder or group of holders, as the case may be, nor does the chart
attribute beneficial ownership of shares that an individual or group has the
right to acquire upon the exercise of options and warrants exercisable within 60
days of July 19, 1996, by such individual or group, and thus reflects certain
ownership percentages that differ from those set forth under the caption
"Principal Stockholders."
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------- ---------------- ---------------- ------------------- ---------------- ----------------
| | | | | | | PEP Individuals | | | | |
| BG Holding | | NOVA Gas | | Chevron | | and Associated | | Public | | Other |
| | | (U.S.) | | | | Persons | | Stockholders | | |
- ---------------- ---------------- ---------------- ------------------- ---------------- ----------------
| 25.8%(1)(2) | 25.8%(1) | 25.8%(1) | 11.3%(1) | 10.7%(1) | 0.6%(1)(3)
| | | | | |
---------------------------------------------------------------------------------------------
|
|
----------------
| New NGC |
----------------
|
|
----------------------------------------------------------------------------------------------------
| | | | |
| | | | |
- ---------------- -------------------- -------------------- -------------------- --------------------
| | | Natural Gas | | | | Warren Petroleum | | Electric |
| NOTTI(4) | | Clearninghouse | | Trident NGL, Inc.| | Company, | | Clearinghouse, |
| | | (5) | | | | Limited | | Inc. |
| | | | | | | Partnership (6) | | |
- ---------------- -------------------- -------------------- -------------------- --------------------
</TABLE>
- ------------
(1) These ownership percentages do not give effect to the 7,815,363 shares
of New NGC's Series A Participating Preferred Stock, $.01 par value per
share ("New NGC Series A Participating Preferred Stock") that will be
owned by Chevron after consummation of the Combination. Each share of
New NGC Series A Participating Preferred Stock is convertible into one
share of New NGC Common Stock upon the occurrence of certain events.
See "Description of Newco Certificate of Incorporation and Bylaws --
Newco Preferred Stock". If all of the shares of New NGC Series A
Participating Preferred Stock were converted into shares of New NGC
Common Stock, the ownership percentages of New NGC Common Stock would
be (i) BG Holding, 24.5%, (ii) NOVA Gas (U.S.), 24.5%, (iii) Chevron,
29.5%, (iv) the PEP Individuals and Associated Persons, 10.7%, (v) the
Public Stockholders, 10.3%, and (iv) Other, 0.5%.
(2) British Gas plc has announced its intention, subject to shareholder
approval, to enter into a de-merger transaction, which will create two
separate publicly-traded companies: TransCo International and British
Gas Energy. TransCo International will continue to own the shares of
New NGC Common Stock issued to BG Holding. British Gas Energy will
include British Gas plc's interests in the Accord Energy joint venture
with NGC.
(3) Includes shares held by the trustee of the NGC Savings Plan.
(4) NGC Oil Trading and Transportation, Inc., or NOTTI, is an indirect
wholly-owned subsidiary of NGC that conducts NGC's oil trading and
transportation activities, and, upon consummation of the Combination,
will continue to conduct such activities for New NGC.
(5) On the Closing Date, the Contributed NGBU Business will be operated by
Clearinghouse, which will conduct New NGC's natural gas marketing
operations.
(6) After the consummation of the Combination, New NGC will transfer the
assets and operations of the Contributed Warren Business to a
wholly-owned subsidiary named Warren Petroleum Company, Limited
Partnership ("Warren LP").
On May 22, 1996, NGC, BG Holdings, Inc., a Delaware corporation ("BG
Holding") and indirect wholly-owned subsidiary of British Gas plc, NOVA Gas
Services (U.S.) Inc., a Delaware corporation ("NOVA Gas (U.S.)") and indirect
wholly-owned subsidiary of NOVA Corporation, and Chevron entered into a
stockholders agreement (the "New NGC Stockholders Agreement"), the effectiveness
of which is conditioned upon the consummation of the Combination. The New NGC
Stockholders Agreement contains certain provisions relating to, among other
things, voting arrangements (including, among other things, provisions relating
to the election of directors), transfer restrictions and corporate governance.
See "Stockholders Agreements -- New NGC Stockholders Agreement" for further
information on the New NGC Stockholders Agreement.
THE SPECIAL MEETING
TIME, DATE AND PLACE. The Special Meeting is scheduled to be held on
Friday, August 30, 1996 at 9:00 a.m., Central time, at 13430 Northwest Freeway,
Suite 1200, Houston, Texas 77040.
9
PURPOSES OF THE SPECIAL MEETING. The purposes of the Special Meeting
are to (i) consider and vote upon a proposal to approve and adopt the
Combination Agreement and approve the transactions contemplated thereby,
including the Combination and (ii) transact such other business as may properly
be brought before the Special Meeting or any adjournments or postponements
thereof.
VOTE REQUIRED. The affirmative vote of the holders of at least a
majority of all outstanding shares of NGC Common Stock is required to approve
and adopt the Combination Agreement. As a result, abstentions, failures to vote
and broker non-votes will have the same effect as votes against the Combination
Agreement since they are not votes for approval. Pursuant to the Voting
Agreements (as hereinafter defined), holders of a sufficient number of shares
(approximately 80% of the issued and outstanding shares of NGC Common Stock as
of the Record Date) have agreed to approve the Combination Agreement and the
Combination.
VOTING OF PROXIES. Shares of NGC Common Stock represented by properly
executed proxies received at or prior to the Special Meeting, and which have not
thereafter been properly revoked as described below, will be voted in accordance
with the instructions indicated therein. If no instructions are indicated, such
proxies will be voted FOR approval and adoption of the Combination Agreement and
the Combination, and in the discretion of the proxy holder as to any other
matter that may properly come before the Special Meeting.
REVOCABILITY OF PROXIES. An NGC stockholder who has given a proxy may
revoke such proxy at any time prior to its exercise at the Special Meeting by
any manner permitted by law, including (i) giving written notice of revocation
by mail or facsimile to NGC prior to the Special Meeting or (ii) properly
submitting to NGC by mail or facsimile a duly executed proxy bearing a later
date. Submissions to NGC should be made to NGC Corporation, Attn: Corporate
Secretary, at 13430 Northwest Freeway, Suite 1200, Houston, Texas 77040,
facsimile number (713) 507-6808. Any beneficial owner whose shares of NGC Common
Stock are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to change such beneficial holder's vote
should contact such registered holder promptly and instruct such registered
holder on such beneficial owner's behalf. There is no guarantee that there will
be sufficient time prior to the Special Meeting for the registered holder to
deliver a revocation upon instruction by the beneficial owner.
SOLICITATION OF PROXIES. NGC will bear the cost of the solicitation of
proxies from its stockholders. In addition to the solicitation of proxies by
mail, directors, officers and employees of NGC may solicit proxies from
stockholders personally or by telephone, telegraph or facsimile transmissions.
Such directors, officers and employees will not be additionally compensated for
such solicitation but may be reimbursed for their out-of-pocket expenses
incurred in connection therewith. Arrangements may also be made with banks,
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of NGC Common Stock
held of record by such beneficial owners, and, upon request, NGC will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
RECORD DATE; SHARES ENTITLED TO VOTE. The close of business on July 19,
1996 has been fixed as the Record Date for determining holders of shares of NGC
Common Stock entitled to notice of and to vote at the Special Meeting. As of the
Record Date, 111,073,380 shares of NGC Common Stock were outstanding and held of
record by 273 holders. The NGC Common Stock is the only class of capital stock
of NGC issued and outstanding. Each stockholder of record as of the close of
business on the Record Date is entitled at the Special Meeting to one vote for
each share of NGC Common Stock held.
QUORUM. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of NGC Common Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum for the transaction of
business at the Special Meeting. Pursuant to the Voting Agreements, holders of a
sufficient number of shares (approximately 80% of the issued and outstanding
10
shares of NGC Common Stock as of the Record Date) to constitute a quorum have
agreed to attend the Special Meeting in person or by proxy and vote such shares
in favor of the Combination Agreement and the Combination.
THE COMBINATION
GENERAL. The description of the terms and conditions of the
Combination, the Combination Agreement and any related documents in this Proxy
Statement / Prospectus is qualified in its entirety by reference to the copy of
the Combination Agreement, attached as Appendix II to this Proxy Statement /
Prospectus, and to each of the other Appendices and exhibits to this Proxy
Statement / Prospectus. NGC stockholders are urged to read the Combination
Agreement and such other Appendices and exhibits carefully in their entirety.
CONTRIBUTION; MERGER; CONVERSION OF NGC COMMON STOCK. Pursuant to the
Combination Agreement, on the Closing Date and immediately prior to the
Effective Time (as defined in the Glossary), the Contributing Parties will
contribute the Contributed Businesses to Newco in exchange for (i) the issuance
by Newco to Chevron of 38,623,210 shares of Newco Common Stock and 7,815,363
shares of Newco Series A Participating Preferred Stock, (ii) the assumption by
Newco of an aggregate principal amount of approximately $155.4 million in
indebtedness owed by Chevron to an affiliate of Chevron, subject to certain
adjustments, (iii) the issuance by Newco to the Contributing Parties of the
Newco Note in an aggregate principal amount of $138.4 million, subject to
certain adjustments and (iv) the assumption by Newco of substantially all of the
liabilities and other obligations relating to the Contributed Businesses, which
NGC's management does not believe are material when compared to the assets being
acquired. NGC and Chevron, or affiliates thereof, will enter into certain
ancillary supply, sales and service agreements with respect to natural gas,
natural gas liquids and electricity pursuant to which, among other things, New
NGC (as successor in interest to NGC) will have the right to (i) purchase and/or
market substantially all natural gas and natural gas liquids produced or
controlled by Chevron in the United States (except Alaska) and to supply natural
gas and feedstock to Chevron refineries and Chevron Chemical, in the United
States and (ii) participate in existing and future opportunities to provide
electricity to United States facilities of Chevron and Chevron Chemical plants,
as well as to purchase or market excess electricity generated by such
facilities. See "Ancillary Agreements." After the Contribution, NGC will merge
with and into Newco, and Newco will be the surviving corporation in the Merger
and will continue its existence under the DGCL as "NGC Corporation."
Following the consummation of the Combination, each issued and
outstanding share of NGC Common Stock will be automatically converted without
any action on the part of the holder thereof into one share of New NGC Common
Stock, and each share of Newco Common Stock and Newco Series A Participating
Preferred Stock will remain issued and outstanding as one share of New NGC
Common Stock and New NGC Series A Participating Preferred Stock, respectively.
Upon consummation of the Combination, the former NGC stockholders will own
approximately 74.2% of the issued and outstanding shares of New NGC Common Stock
and Chevron will own the remaining approximately 25.8% of the issued and
outstanding shares of New NGC Common Stock and all of the issued and outstanding
shares of New NGC Series A Participating Preferred Stock. The New NGC Series A
Participating Preferred Stock is convertible into New NGC Common Stock upon the
occurrence of certain events. If all of the shares of New NGC Series A
Participating Preferred Stock were converted into shares of New NGC Common
Stock, the former NGC stockholders and Chevron would own approximately 70.5% and
29.5%, respectively, of the issued and outstanding shares of New NGC Common
Stock.
RECOMMENDATION OF THE NGC BOARD OF DIRECTORS. The Board of Directors
believes that the terms of the Combination are fair to and in the best interests
of NGC and its stockholders. ACCORDINGLY, THE NGC BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE COMBINATION AGREEMENT AND THE COMBINATION AND
RECOMMENDS THAT THE NGC STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE
COMBINATION AGREEMENT AND THE COMBINATION. For a discussion of the factors
11
considered by the NGC Board of Directors in reaching its decision and the
reasons given for its decision see "The Combination -- Background of the
Combination" and " -- Recommendation of the NGC Board of Directors." As
mentioned above, holders of approximately 80% of the outstanding shares of NGC
Common Stock as of the Record Date (including BG Holding, NOVA Gas (U.S.) and
certain of the executive officers of NGC) have agreed to vote for the approval
of the Combination Agreement and the Combination.
OPINION OF INDEPENDENT FINANCIAL ADVISOR. On May 20, 1996, Lehman
Brothers Inc., an internationally recognized investment banking firm ("Lehman
Brothers"), delivered an oral opinion to the effect that, based on various
considerations and assumptions, the consideration to be paid by NGC for the
Contributed Businesses was, as of that date, fair from a financial point of
view. Lehman Brothers subsequently confirmed its oral opinion by delivery of its
written opinion to the NGC Board of Directors dated as of May 20, 1996. In
rendering its opinion, Lehman Brothers, among other things, reviewed information
about the Contributed Businesses provided to it by Chevron and certain publicly
available and other information about the Contributed Businesses, reviewed
financial projections prepared by NGC relating to New NGC and NGC on a
standalone basis and by Chevron with respect to the Contributed Businesses,
conducted discussions with members of senior management of each of NGC, Warren
and Chevron, reviewed certain information relating to comparable transactions
and companies, reviewed financial information relating to the Combination and
reviewed the Combination Agreement and certain agreements to be entered into in
connection therewith.
A copy of the full text of Lehman Brothers written opinion which sets
forth assumptions made, procedures followed, matters considered and limits of
Lehman Brothers' review, is attached to this Proxy Statement/Prospectus as
Appendix III and is incorporated herein by reference, and should be read
carefully in its entirety.
REPRESENTATIONS AND WARRANTIES. The Combination Agreement contains
representations and warranties customary in transactions such as the Combination
by each of NGC and Chevron relating to, among other things, corporate status and
authority, the authorization and validity of the Combination Agreement,
capitalization, the business and operations of NGC and the Contributed
Businesses and governmental approvals and consents.
CONDUCT OF BUSINESS PENDING THE COMBINATION. The Combination Agreement
restricts the ability of NGC, Chevron (with respect to the Contributed
Businesses) and Newco to take certain actions and enter into certain
transactions pending the Combination.
CONDITIONS TO THE CONSUMMATION OF THE COMBINATION. The obligation of
NGC and Chevron to effect the Combination is subject to certain conditions or
waivers of such conditions, including, among others, the representations and
warranties in the Combination Agreement having been true and correct and no
material breaches thereof having occurred; the receipt of certain regulatory
approvals; the adoption and approval of the Combination Agreement by NGC's
stockholders; each party having received a legal opinion of the other party's
counsel; and the execution of certain agreements attached to the Combination
Agreement as exhibits.
GOVERNMENTAL AND REGULATORY APPROVALS. Under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), certain acquisition transactions,
including the Combination, may not be consummated unless certain information has
been furnished to the United States Federal Trade Commission (the "FTC") and the
United States Department of Justice and certain waiting period requirements have
been satisfied. Under the HSR Act, certain parties with significant interests in
the Combination, including NGC, Chevron, British Gas plc, NOVA Corporation, and
Messrs. C.L. Watson (Chairman, Chief Executive Officer and President of NGC),
Stephen W. Bergstrom (Senior Vice President of NGC and President of
Clearinghouse), Kenneth E. Randolph (Senior Vice President, General Counsel and
Secretary of NGC) and Jacob S. Ulrich (President of NGC's Accord Energy Ltd.
subsidiary), filed Notification and Report Forms under the HSR Act to provide
the FTC with certain information in order to allow the FTC to evaluate the
12
antitrust aspects of the Combination. On July 12, 1996, the FTC issued second
requests for information under the HSR Act to NGC and Chevron. The issuance of a
second request indicates that the FTC believes that the Combination raises
issues under the antitrust laws that require close examination.
NGC and Chevron have participated in discussions in which members of
the FTC Staff have expressed significant antitrust concerns concerning the
Combination, focused upon certain fractionation facilities and operations that
comprise a part of NGC and the Contributed Businesses. The FTC Staff is
continuing to investigate the Combination, and NGC and Chevron have supplied
documents and information in response to the FTC's second requests. To date,
there have been no discussions by NGC or Chevron with the Commissioners of the
FTC, and the FTC itself, to the knowledge of NGC and Chevron, has taken no
position with respect to the antitrust merits of the Combination. The outcome of
the ongoing investigation is uncertain.
NGC and Chevron are vigorously defending the legality of the
Combination under the antitrust laws. There can be no assurance, however, that
the FTC will not request the divestiture of certain assets in order to resolve
antitrust concerns that it may find are presented by the Combination. In the
event the FTC makes such a request and NGC and Chevron agree, the divestiture
commitment would likely be embodied in a consent decree requiring New NGC to
accomplish the divestiture within a specified period of time following
consummation of the Combination. In such an event, New NGC may not be able to
realize the full fair value of an asset that was required to be sold, or may be
required to dispose of an asset that it considers important in deriving the full
benefits and synergies from the Combination.
If the parties were unable to resolve any antitrust concerns expressed
by the FTC, either through a consent decree or through an FTC decision to close
its investigation, and were to proceed toward consummation of the Combination,
it is likely that the FTC would seek to enjoin the Combination, in whole or in
part, under the antitrust laws by filing a complaint in a United States District
Court requesting the court to temporarily enjoin the Combination until
administrative litigation before the FTC challenging the Combination is
commenced and resolved. Therefore, although the approval of the FTC is a
condition to the obligation of NGC and Chevron to effect the Combination which
could be waived, the practical effect of this process is that the Combination
will not be consummated until the issues raised by the FTC are resolved. See
"Certain Provisions of the Combination Agreement -- Inability to Contribute
Assets" and "Risk Factors -- Governmental and Regulatory Filings and Approvals."
Under Regulation 4064/89 of the Council of the European Communities, as
amended, and the rules and regulations promulgated thereunder (the "EU Merger
Regulation"), certain transactions may not be consummated until they have been
notified to and cleared by the competition authorities of the European
Commission. Accordingly, NGC, Chevron Corporation, British Gas plc, and NOVA
Corporation submitted to the European Commission a joint notification under the
EU Merger Regulation. On July 25, 1996, the European Commission cleared the
Combination.
NGC and Chevron have made or anticipate making certain filings with
various federal, state and local governments and agencies. These filings relate
to, among other things, filings by the parties with local governments to effect
the transfer of real estate that is a part of the Contributed Businesses,
filings with the Federal Energy Regulatory Commission (the "FERC") regarding the
contribution by Chevron to Newco of the Contributed West Texas LPG Pipeline
Business, and filings with the United States Coast Guard regarding the transfer
by Chevron of barges to a joint venture between Chevron and New NGC. Other than
the filings and approvals set forth above, NGC and Chevron are not aware of any
other governmental or regulatory approvals required for the consummation of the
Combination, other than compliance with applicable securities laws.
TERMINATION. The Combination Agreement may be terminated at any time
prior to the Effective Time (as defined in the Glossary) (a) by mutual consent
of the Board of Directors of NGC and Chevron; (b) by either NGC or Chevron if
the Combination has not occurred by the close of business on September 30, 1996,
other than as a result of a failure to fulfill any obligation or covenant under
13
the Combination Agreement by the terminating party (other than the covenant to
exercise reasonable actions to consummate the Combination); (c) by NGC, upon any
breach of any representation, warranty or covenant on the part of Chevron set
forth in the Combination Agreement, other than breaches which in the aggregate
would not reasonably be expected to have a Material Adverse Effect (as defined
in the Glossary) in excess of $25 million in respect of the Contributed
Businesses; provided that if such breach is cured by Chevron within 30 calendar
days after notice thereof through the continuous exercise of its reasonable best
efforts, then NGC may not terminate the Combination Agreement as a result of
such breach, (d) by Chevron, upon a breach of any representation, warranty or
covenant on the part of NGC set forth in the Combination Agreement, other than
such breaches which in the aggregate would not reasonably be expected to have a
Material Adverse Effect on NGC in excess of $25 million; provided that if such
breach is cured by NGC within 30 calendar days after notice thereof through the
continuous exercise of its reasonable best efforts, then Chevron may not
terminate the Combination Agreement as a result of such breach, (e) by either
NGC or Chevron if either Chevron or NGC, respectively, solicits, initiates or
encourages the submission or communication of an Alternative Transaction (as
defined in the Glossary) or Significant Disposition (as defined in the
Glossary); or (f) by either party in the event a governmental entity shall have
issued an order, decree or ruling or taken any other action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Combination. Termination of the Combination pursuant to the provisions set forth
above may only be effected through written notice by the terminating party to
the other party, which notice shall set forth the basis for such termination.
The date on which the termination notice is received shall be deemed to be the
"Termination Date."
TERMINATION FEE. In the event the Combination Agreement is terminated
by NGC or Chevron because Chevron or NGC (as applicable) solicits, initiates, or
encourages the submission or communication of an Alternative Transaction or
Significant Disposition, then the breaching party shall pay the other party the
amount of $30 million as liquidated damages; provided, however, that in no event
shall a party be obligated to pay the other party $30 million in liquidated
damages if the other party, at the time it terminated the Combination Agreement,
could not satisfy the applicable conditions to Closing.
If within six months following the Termination Date, either Chevron or
NGC (an "Acting Party") signs a definitive agreement concerning, or issues a
public announcement contemplating consummation of, an Alternative Transaction or
a Significant Disposition with any Person (as defined in the Glossary) or
Affiliate (as defined in the Glossary) of such Person who, prior to the
Termination Date, has made or caused to be made a proposal to such Acting Party
communicating price terms for an Alternative Transaction or a Significant
Disposition, then the Acting Party shall pay to the other party the amount of
$30 million in liquidated damages; provided, however, that in no event shall the
Acting Party be obligated to pay $30 million in liquidated damages if the
Combination Agreement was terminated by the Acting Party as a result of a
failure by the other party to satisfy any of the applicable conditions to
Closing.
The Combination Agreement provides that in no event shall more than $30
million in liquidated damages be paid pursuant to the relevant termination
provisions thereunder, and in the event that either party pays or is obligated
to pay $30 million in liquidated damages under the Combination Agreement, each
party thereto shall thereafter be free to effect an Alternative Transaction or
Significant Disposition at any time without recourse by the other party.
ADOPTION OF CERTIFICATE OF INCORPORATION AND BYLAWS. Upon consummation
of the Combination, the certificate of incorporation of Newco, as the surviving
corporation in the Combination, will become the New NGC Certificate of
Incorporation and will be amended to change Newco's name to "NGC Corporation".
In addition, certain changes will be effected in the Newco Bylaws as a result of
the Combination. Consequently, the New NGC Certificate of Incorporation and
Bylaws will differ in some respects from the NGC Certificate of Incorporation
and Bylaws. For further information on the differences between the NGC
Certificate of Incorporation and Bylaws and the New NGC Certificate of
Incorporation and Bylaws, see " -- Comparative Rights of NGC and New NGC
14
Stockholders" and "Comparison of Rights of Holders of NGC Common Stock and New
NGC Common Stock."
STOCKHOLDER AGREEMENTS
The following is a brief summary of certain agreements which Chevron
and certain stockholders of NGC entered into on May 22, 1996 or will enter into
as of the Closing Date.
VOTING AGREEMENTS. In connection with the execution of the Combination
Agreement, Chevron entered into a voting agreement (collectively, the "Voting
Agreements") with each of BG Holding, NOVA Gas (U.S.), C.L. Watson, Chairman of
the Board, Chief Executive Officer and President of NGC, Bruce M. Withers, Vice
Chairman of NGC, Stephen W. Bergstrom, Senior Vice President of NGC and
President of Clearinghouse, H. Keith Kaelber, Senior Vice President, Chief
Financial Officer and President of the Financial Services Division of NGC and
Kenneth E. Randolph, Senior Vice President, General Counsel and Secretary of NGC
(collectively, the "Majority Stockholders"), which collectively own
approximately 80% of the outstanding shares of NGC Common Stock as of the Record
Date (collectively, the "Majority Stockholder Shares"). Pursuant to the Voting
Agreements, the Majority Stockholders have agreed to vote the Majority
Stockholder Shares, or upon the request of Chevron to grant Chevron an
irrevocable proxy to vote such shares, (i) in favor of the Combination Agreement
and the transactions contemplated thereby and (ii) against any proposal for the
amendment of the NGC Certificate of Incorporation or Bylaws or any merger,
consolidation, sale or purchase of assets, reorganization, recapitalization,
liquidation or winding up of or by NGC or sale of all or substantially all of
the stock or assets of a subsidiary of NGC (other than pursuant to the
Combination Agreement).
NEW NGC STOCKHOLDERS AGREEMENT AND REGISTRATION RIGHTS AGREEMENT. On
May 22, 1996, BG Holding, NOVA Gas (U.S.) and Chevron entered into the New NGC
Stockholders Agreement, which is conditioned upon and will become effective upon
the consummation of the Combination. The New NGC Stockholders Agreement provides
that such stockholders will vote their New NGC Common Stock, subject to certain
conditions, to elect as the 13 initial directors of New NGC (i) three designees
of the BG Group (as defined in the Glossary), (ii) three designees of the NOVA
Group (as defined in the Glossary), (iii) three designees of the Chevron Group
(as defined in the Glossary), (iv) the Chairman and Chief Executive Officer of
New NGC, (v) an officer of New NGC selected by the Chairman and Chief Executive
Officer of New NGC and (vi) two independent directors, one of whom may be
designated by Hicks, Muse, Tate & Furst Incorporated ("HMTF") pursuant to that
certain Stockholders Agreement, dated October 21, 1994 (the "Trident
Stockholders Agreement"), among NGC (as successor in interest to Holding), HMTF
and certain other parties thereto. The NGC Stockholders Agreement also provides,
among other things and subject to various conditions, exceptions, restrictions
and limitations, that (i) the BG Group, NOVA Group and Chevron Group will not
vote their New NGC Common Stock in favor of any amendment to the New NGC
Certificate of Incorporation or New NGC Bylaws, any merger involving New NGC or
certain other matters, in each case unless each of the BG Group, NOVA Group and
Chevron Group vote in favor of such action, (ii) none of the BG Group, NOVA
Group and Chevron Group shall dispose of or acquire New NGC Common Stock except
as permitted by the New NGC Stockholders Agreement and (iii) none of the BG
Group, NOVA Group or Chevron Group shall enter into an international joint
venture with New NGC for a two year period commencing on the Closing Date,
except as provided in the New NGC Stockholders Agreement.
Pursuant to the Combination Agreement, NGC and BG Holding, NOVA Gas
(U.S.) and Chevron will enter into a registration rights agreement (the "New NGC
Registration Rights Agreement") on the Closing Date. Subject to certain
limitations, the New NGC Registration Rights Agreement will grant BG Holding,
NOVA Gas (U.S.) and Chevron certain rights to demand that New NGC register their
shares of New NGC Common Stock under the Securities Act. In addition, in the
event that New NGC undertakes the registration of New NGC Common Stock for its
own account or for the account of any of its stockholders, BG Holding, NOVA Gas
(U.S.) and Chevron will have certain rights to have their New NGC Common Stock
15
registered in connection therewith. However, the rights of such parties under
the New NGC Registration Rights Agreement are expressly subordinate to the
registration rights of certain parties to the Trident Stockholders Agreement.
For a more detailed description of these agreements, see "Stockholder
Agreements."
ANCILLARY AGREEMENTS
In connection with the Combination, New NGC and Chevron, or affiliates
thereof, will enter into certain ancillary supply, sales and service agreements
with respect to natural gas, natural gas liquids and electricity, pursuant to
which, among other things, New NGC (as successor in interest to NGC) will have
the right to (i) purchase and/or market substantially all natural gas and
natural gas liquids produced or controlled by Chevron in the United States
(except Alaska) and to supply natural gas and feedstock to Chevron refineries
and Chevron Chemical plants in the United States and (ii) participate in
existing and future opportunities to provide electricity to United States
facilities of Chevron and Chevron Chemical, as well as to purchase or market
excess electricity generated by such facilities.
ACCOUNTING TREATMENT
The Combination will be accounted for as a purchase of the Contributed
Businesses by NGC. New NGC, as the surviving corporation, will reflect, in its
consolidated financial statements, the assets and liabilities of NGC at book
value and the assets and liabilities of the Contributed Businesses at the fair
market value (determined in accordance with accounting guidelines) of the
consideration to be paid to the Contributing Parties for the Contributed
Businesses. In accordance with accounting guidelines, the fair market value of
the Contributed Businesses shall be based upon (i) the market value of the NGC
Common Stock on and around January 21, 1996, the date on which NGC and Chevron
entered into the Exclusivity Agreement and (ii) the amount of indebtedness that
New NGC will assume or issue in connection with the Combination.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion briefly summarizes certain of the principal
federal income tax consequences associated with the Merger to an NGC stockholder
who is a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States and
who holds shares of NGC Common Stock as a capital asset. However, the following
discussion does not address the potential tax consequences applicable to
stockholders (i) who have received such shares in connection with the
performance of services, (ii) who are dealers in securities or (iii) who are
subject to special treatment under the Internal Revenue Code of 1986, as amended
(the "Code"), such as insurance companies, tax-exempt organizations, nonresident
alien individuals or foreign entities.
The following summary is based on the Code, applicable Treasury
Regulations promulgated under the Code ("Treasury Regulations"), judicial
authority and administrative rulings and practice, all as of the date hereof.
There can be no assurance that future legislative, judicial or administrative
changes or interpretations will not materially alter the statements and
conclusions set forth herein. Furthermore, the following discussion addresses
only certain federal income tax matters and does not consider any state, local
or foreign tax consequences of the Combination Agreement or the transactions
contemplated thereby.
EACH STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES OF THE COMBINATION AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY AND THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
The Merger has been structured with the intention that it qualify as a
reorganization under Section 368(a)(1) of the Code. Akin, Gump, Strauss, Hauer &
Feld, L.L.P., counsel to NGC, has delivered an opinion to NGC that states that,
subject to the qualifications and assumptions contained therein, the Merger
16
will qualify as a reorganization under such section and, therefore, no gain or
loss will be recognized by NGC or its stockholders (except to the extent that
the NGC stockholders receive any cash pursuant to the Merger), Newco or New NGC.
The aggregate adjusted tax basis and holding periods of the New NGC Common Stock
received by the NGC stockholders will be the same as that for the NGC Common
Stock exchanged therefor. The tax basis and holding periods of NGC in its assets
will carry over to New NGC.
NYSE LISTING
The NGC Common Stock is listed on the NYSE under the trading symbol
"NGL". The NYSE has preliminarily indicated that it will continue to list the
NGC Common Stock that is converted into New NGC Common Stock after the
consummation of the Combination under the same trading symbol (NGL). Prior to
the consummation of the Combination, NGC anticipates that it will file a
supplemental listing application to list the shares of New NGC Common Stock that
Chevron will own immediately following the consummation of the Combination.
APPRAISAL RIGHTS
Holders of NGC Common Stock who have not voted in favor of the
Combination will not have any appraisal rights or any right to receive cash for
their shares of NGC Common Stock under Delaware law.
MANAGEMENT AFTER THE COMBINATION
At the Effective Time, the number of directors of New NGC will be
increased from three to 13, and the directors of New NGC will include each of
the ten directors of NGC as of the Effective Time and the three individuals who
are serving as directors of Newco immediately prior to the Effective Time. The
senior management of New NGC will be comprised of the current members of NGC's
senior management, including Mr. C.L. Watson who will serve as New NGC's
Chairman, Chief Executive Officer and President. In addition, Messrs. Stephen A.
Furbacher, formerly President of Warren, and Mark L. Hazelwood, formerly Senior
Vice President -- Pipeline Operations of Arco Transportation Company, have each
joined NGC and, upon consummation of the Combination, will join New NGC's senior
management as Senior Vice President of New NGC and President of Warren and
Senior Vice President of New NGC and President of New NGC Global Energy
Services, Inc., respectively.
COMPARATIVE RIGHTS OF NGC AND NEW NGC STOCKHOLDERS
Rights of NGC stockholders are currently governed by Delaware law, the
NGC Certificate of Incorporation and the NGC Bylaws. Upon consummation of the
Combination, the certificate of incorporation of Newco, as the surviving
corporation in the Combination, will become the New NGC Certificate of
Incorporation and will be amended to change Newco's name to "NGC Corporation".
In addition, certain changes will be effected in the Newco Bylaws as a result of
the Combination. Consequently, the New NGC Certificate of Incorporation and
Bylaws will differ in many respects from the NGC Certificate of Incorporation
and Bylaws. Namely, the New NGC Certificate of Incorporation will contain a
provision that restricts New NGC from selling certain types of products in
certain regions of the world without the approval of stockholders that own 85%
of the outstanding shares of New NGC Common Stock, subject to certain
exceptions. In addition, the New NGC Certificate of Incorporation will contain
provisions setting forth the terms of the New NGC Series A Participating
Preferred Stock, all of which will be owned by Chevron on the Closing Date. For
further information on the differences between the NGC Certificate of
Incorporation and Bylaws and the New NGC Certificate of Incorporation and
Bylaws, see "Comparison of Rights of Holders of NGC Common Stock and New NGC
Common Stock."
MARKET AND MARKET PRICES
The NGC Common Stock is listed and traded on the NYSE under the ticker
symbol "NGL". The closing sale price of NGC Common Stock on January 19, 1996,
the last full trading day preceding the public announcement of the execution of
the exclusivity agreement relating to the Combination (the
17
"Exclusivity Agreement"), as reported on the NYSE -- Composite Tape, was $9.00
per share. The closing sale price of the NGC Common Stock on May 21, 1996 (the
last full trading day prior to the public announcement of the execution of the
Combination Agreement), as reported on the NYSE -- Composite Tape was $15.375
per share. The closing sale price of NGC Common Stock on July 31, 1996, the last
full trading day preceding the printing of this Proxy Statement / Prospectus was
$16.250 per share. See "Principal Stockholders" for certain information on the
change in the percentage of stock ownership owned by certain executive officers,
directors and 5% stockholders of NGC as a result of the Combination.
The following table sets forth, for the calendar periods indicated, the
high and low per share sale prices of NGC Common Stock as reported on the NYSE
Composite Tape and related dividends paid per share of NGC Common Stock during
such periods.
HIGH LOW DIVIDEND
--------- --------- --------
1996
First Quarter........................ $ 12.750 $ 8.625 $ 0.0125
Second Quarter....................... 16.125 12.250 0.0125
Third Quarter (through July 31,
1996)................................ 17.000 15.250 0.0125 (1)
1995(2)
First Quarter........................ $ 11.500 $ 9.000 $ 0.0125
Second Quarter....................... 10.375 8.750 0.0125
Third Quarter........................ 10.375 9.000 0.0125
Fourth Quarter....................... 9.625 8.375 0.0125
1994(3)
First Quarter........................ $ 11.875 $ 8.875 $ 0.0125
Second Quarter....................... 10.000 8.000 0.0125
Third Quarter........................ 12.250 9.375 0.0125
Fourth Quarter....................... 11.125 9.375 0.0125
- ------------
(1) On July 9, 1996, NGC declared its quarterly dividend payable on
September 3, 1996 to stockholders of record on July 29, 1996.
(2) Stock price and per share dividend rate information relates to Holding
for the period commencing on January 1, 1995 and continuing through and
including March 13, 1995, the last trading day prior to the
consummation of the Trident Combination, and to NGC thereafter.
(3) Reflects the high and low price of Holding's common stock and the per
share dividend rate declared by Holding during the stated periods.
DIVIDEND POLICY
The holders of NGC Common Stock are entitled to receive dividends if,
when and as declared by the NGC Board of Directors out of funds legally
available therefor. NGC anticipates that New NGC will continue NGC's present
policy of paying quarterly dividends of $0.0125 per share of New NGC Common
Stock.
The NGC Credit Agreement (as defined in the Glossary) and NGC's Senior
Notes (as defined in the Glossary) do not contain any specific restrictions on
the ability of NGC or any of its subsidiaries to declare and pay dividends in
respect of its or their capital stock, although certain financial covenants
contained in such credit agreement and in the indenture covering the Senior
Notes may limit the ability of NGC to do so.
The indentures setting forth the terms and conditions of the 14% Senior
Subordinated Notes of Trident due 2001 and the 10.25% Subordinated Notes of
Trident due 2003 contain restrictions on Trident's ability to pay cash dividends
to NGC, which in turn may adversely affect NGC's ability to pay dividends to its
shareholders.
18
RECENT DEVELOPMENTS
On February 12, 1996, Apache Corporation ("Apache") requested
arbitration to resolve issues arising under a gas marketing contract (the
"Apache Contract") with Clearinghouse pursuant to the arbitration provisions of
such contract. On February 26, 1996, Clearinghouse responded by denying Apache's
claims and by alleging several counterclaims of its own with respect to Apache's
performance under the Apache Contract. In connection with the arbitration
proceedings, on April 9, 1996, Apache filed a lawsuit against Clearinghouse in
the 55th Judicial District Court of Harris County, Texas (the "Court"). In that
lawsuit, Apache alleges that Clearinghouse is intentionally delaying the
progress of the arbitration, and requests relief, pursuant to the Texas General
Arbitration Act, in the form of an order appointing a third arbitrator,
compelling discovery and requiring Clearinghouse to assign certain contracts
allegedly belonging to Apache. Clearinghouse filed a response to the lawsuit on
May 6, 1996, asking that the Court dismiss Apache's application for relief or
abate the suit pending resolution of all matters by the arbitration panel
according to the terms of the Apache Contract. Clearinghouse has also requested
payment of all attorneys' fees and other litigation expenses incurred in
responding to and defending the lawsuit. Clearinghouse intends to vigorously
defend the lawsuit and the arbitration proceeding brought by Apache. In the
arbitration proceeding and again in the lawsuit, Apache claims that it is
entitled to actual damages in an unspecified amount in excess of $8 million, and
punitive damages calculated by tripling the amount of actual damages. NGC's
management believes, based on its review of the facts and consultation with
outside counsel, that the ultimate resolution of the Apache lawsuit will not
have a material adverse impact on NGC's financial position or results of
operations, and that any payments eventually made in connection with the
arbitration and/or the lawsuit will be less than the amount claimed. However,
the resolution of lawsuits and arbitration proceedings often involve matters and
have consequences that are beyond the control of the parties thereto and can
result in damage awards that have little relationship to the merits of the
lawsuit or arbitration proceeding, as the case may be. Accordingly, there can be
no assurance that the resolution of the Apache lawsuit and arbitration
proceeding will be as currently contemplated. The failure to resolve the Apache
lawsuit or arbitration proceeding in a manner currently contemplated by
management could have a material adverse effect on the results of operations and
financial condition of NGC and, upon consummation of the Combination, New NGC.
19
RISK FACTORS
THE FOLLOWING RISK FACTORS SHOULD BE EVALUATED CAREFULLY WITH THE
INFORMATION PROVIDED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, INCLUDING
INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH VOTING UPON THE
COMBINATION AGREEMENT AND THE COMBINATION AND/OR MAINTAINING AN INVESTMENT IN
NEW NGC.
FLUCTUATIONS IN COMMODITY PRICES; RISK MANAGEMENT ACTIVITIES
NGC's and the Contributed Businesses' products, including natural gas,
NGLs, crude oil and related byproducts, are commodities. The prices of these
commodities are subject to material changes in response to changes in the
weather, the seasons, relatively minor changes in supply and demand, general
economic conditions and other market conditions over which New NGC will have no
control. Other market conditions which will affect the business of New NGC
include the availability and prices of alternative energy and feedstock sources,
government regulation, industry-wide inventory levels and the impact of energy
conservation efforts.
NGC utilizes certain types of fixed-price contracts and other risk
management instruments in connection with its natural gas and NGL marketing
lines of business. These contracts include contracts which commit NGC to
purchase or sell energy commodities at fixed prices in the future (i.e.
fixed-price forward purchase and sales contracts), futures and options contracts
traded on the New York Mercantile Exchange ("NYMEX") and swaps and options
traded in the over-the-counter financial markets. The availability and use of
the foregoing types of contracts allow NGC to manage and hedge its fixed-price
purchase and sales commitments, to provide fixed-price commitments as a service
to its customers and suppliers, to reduce its exposure relative to the
volatility of cash market prices and to protect its investment in storage
inventories. NGC may, at times, have a bias in the market, within NGC's
established limits, resulting from the management of its portfolio. In addition,
by utilizing exchange for physical transactions allowed by the NYMEX, which
enable entities to take delivery of, or sell, a physical quantity of natural gas
in exchange for a futures position, NGC is able to secure additional sources of
physical natural gas supply, or create additional markets for existing supply,
through the use of natural gas futures contracts. Although NGC generally
attempts to balance its fixed-price physical and financial purchase and sales
contracts in terms of contract volumes and the timing of performance and
delivery obligations, net open positions often exist or are established due to
the origination of new transactions and the assessment of, and response to,
changing market conditions. NGC will establish a net open position in the market
when it believes, based upon information gained from its energy marketing
activities, that future price movements will be consistent with its net open
position. To the extent net open positions exist, NGC is exposed to the risk
that fluctuating market prices move in a manner that is not consistent with
NGC's net open position, which, depending on the magnitude of the price movement
and the net open position, may result in a material adverse effect on NGC's
financial position and results of operations.
NGC's marketing operations, exclusive of risk management activities,
are relatively insensitive to commodity price fluctuations since most of the
segment's purchase and sales contracts do not contain fixed-price provisions.
Generally, the prices contained in these contracts are tied to a current or
index price and, therefore, adjust with changes in overall market conditions.
Unlike NGC's marketing operations (exclusive of risk management activities),
NGC's natural gas gathering and processing businesses are sensitive to commodity
price fluctuations. Operating margins associated with natural gas gathering and
processing activities is sensitive to changes in NGL prices and to a lesser
extent, natural gas prices. Typically, field plant (as defined in the Glossary)
margins are impacted mainly by fluctuations in NGL prices, while straddle plants
(as defined in the Glossary) are impacted by fluctuations in both NGL and
natural gas prices, due to the nature of the gas processing contracts commonly
in place for each type of plant. A contraction of the margin between NGL and
natural gas prices results in lower unit margins on natural gas volumes
processed, and may also result in lower volumes processed, or lower recoveries
of certain NGLs (primarily ethane) at certain straddle plants. As the margin
between such prices approaches zero, NGC is contractually able to mitigate the
effect of such contraction by discontinuing NGL recovery at those plants where
20
recovery becomes uneconomical, until the margin between such prices expands and
again allows economical recovery of NGLs. A prolonged contraction of such
margins could materially affect the financial condition and results of
operations of NGC. Like straddle plant margins, operating margins associated
with third-party processing activities are not only sensitive to changes in both
NGL and natural gas prices, but also the relationship between the two.
INDUSTRY CONSOLIDATION AND COMPETITION
All phases of the businesses in which NGC is engaged are highly
competitive. In connection with both domestic and foreign operations, NGC
encounters strong competition from companies of all sizes, having varying levels
of financial and personnel resources.
NGC's management believes that the market for natural gas and related
products and financial instruments is becoming increasingly sophisticated and
efficient, and that this increasing sophistication and efficiency is causing
downward pressure on per-unit profit margins in the industry. The primary
factors contributing to this trend are the increasing availability of pricing
information to market participants in the natural gas industry, the increasing
number of products and services being offered in the industry and the entry of
new participants in the various markets related to the natural gas industry. In
addition, major oil and gas companies, utilities and large independents are
placing greater emphasis and resources on energy marketing and, in some
instances, have entered into joint ventures with other producers or have
acquired energy marketing companies to enhance their energy marketing expertise
and capabilities. Accordingly, the energy marketing industry has undergone rapid
consolidation recently and NGC believes that this trend will continue in the
future. The trend towards industry consolidation has been further accelerated by
the demands on the part of both suppliers and customers that marketing companies
have sufficient financial resources to deliver the energy commodity in the
quantities the customers contracted to purchase and/or pay for the quantities of
the energy commodity that suppliers have contracted to supply, which has caused
many of the energy marketing companies to fail or be sold to bigger industry
participants. Some of these new participants will have greater financial
resources than New NGC. Accordingly, NGC believes that its financial condition
and access to capital markets will have an increasingly important effect on
NGC's ability to compete effectively. Operationally, NGC believes that remaining
a low cost merchant and continuing to effectively combine value-added services,
competitively priced supplies and price risk management services will be
critical to achieving success in its natural gas marketing operations.
Independent electric power marketers are operating in a
rapidly-developing industry and, as a result, the competitive issues incumbent
on their operations are evolving as the industry evolves. NGC believes that many
of the competitive issues impacting its gas marketing operations will similarly
arise and impact the electric power marketing industry.
NGC's natural gas liquids, crude oil marketing and gas transmission
businesses face significant competition from a variety of competitors including
major integrated oil companies, major pipeline companies and their marketing
affiliates and national and local gas gatherers, processors, brokers, marketers
and distributors of varying sizes and experience. The principal areas of
competition include obtaining gas supplies for gathering and processing
operations, obtaining supplies of raw product for fractionation, the marketing
of NGLs, crude oil, residue gas, helium, condensate and sulfur, and the
transportation of natural gas, NGLs and crude oil, the location and operating
efficiency of facilities, the reliability of services and price and delivery
capabilities.
INTEGRATION OF BUSINESSES
The combination of NGC with the Contributed Businesses to form New NGC
has several potential operating and business risks. Among others, these risks
include (i) loss of, or additional expense in retaining, current customers of
NGC, the Contributed Warren Business and the Contributed NGBU Business, (ii)
failure to integrate management from NGC and the Contributed Businesses and the
resulting loss of efficiency or employees and (iii) the inability to effectively
control selling, general and administrative expenses. If the Combination is
consummated, there can be no assurance that New NGC will be successful in
integrating NGC and the Contributed Businesses or that anticipated enhanced
marketing
21
capabilities or geographic expansion will be realized nor can there be any
assurance that New NGC will realize the anticipated benefits of the proposed
Combination.
Following the Combination, New NGC will seek to reduce expenses by
eliminating or consolidating duplicative or unnecessary facilities, positions,
marketing programs and other expenses. Because of the inherent uncertainties
associated with merging companies, especially large companies, there can be no
assurance that New NGC will be able to realize the full cost savings or revenue
enhancements NGC currently expects to realize as a result of the proposed
Combination or that such savings or enhancements will be realized at the times
currently anticipated. Furthermore, there can be no assurance that any cost
savings which may be realized will not be offset by increases in other expenses,
operating losses, including losses due to problems in integrating the
Contributed Businesses and NGC or other material adverse effects of such
activities.
POTENTIALLY DEPRESSING EFFECT OF FUTURE SALES OF NEW NGC COMMON STOCK
Upon consummation of the Combination, New NGC will have approximately
149.7 million shares of New NGC Common Stock issued and outstanding. Of these
shares, approximately 33.9 million shares of New NGC Common Stock will be
registered under the Securities Act in connection with the Combination. As of
the date of this Proxy Statement/Prospectus, only approximately 16.1 million
shares are freely tradeable. Accordingly, upon consummation of the Combination,
the "public float" will be increased by approximately 110% (or by approximately
17.8 million shares). Prior to the date of the Special Meeting, almost all of
these additional shares were restricted for resale either by Rule 144 and/or
pursuant to lock-up agreements that expire on August 29, 1996. Since these
shares will become freely tradeable as a result of being registered in
connection with the Combination and/or the expiration of the lock-up period,
many of the holders thereof may elect to sell all or a portion of their shares
into the public securities market immediately following the consummation of the
Combination.
In addition, upon consummation of the Combination, BG Holding, NOVA Gas
(U.S.) and Chevron will each own approximately 38.6 million shares of New NGC
Common Stock or approximately 115.9 million shares in the aggregate (which
collectively will represent approximately 77.4% of the New NGC Common Stock). In
the event that all of the shares of the New NGC Series A Participating Preferred
Stock are converted into shares of New NGC Common Stock, BG Holding and NOVA Gas
(U.S.) will each own approximately 38.6 million shares of New NGC Common Stock
and Chevron will own approximately 46.4 million shares of New NGC Common Stock
or these parties will own approximately 123.7 million shares in the aggregate
(which collectively would represent approximately 78.5% of the New NGC Common
Stock). Subject to certain terms and conditions, BG Holding, NOVA Gas (U.S.) and
Chevron will each have the right to require New NGC to register their shares of
NGC Common Stock for resale under the Securities Act. See "Stockholders
Agreements -- Registration Rights Agreement." Unless registered under the
Securities Act, such shares will be subject to the resale restrictions of Rule
144 and Rule 144A promulgated under the Securities Act, which includes, in the
case of Rule 144, a two year holding period and volume limitations.
Given the relatively small size of the "public float" of NGC Common
Stock immediately prior to the consummation of the Combination, the sale of a
substantial number of shares of New NGC Common Stock into the public securities
market after the consummation of the Combination could have a potentially
depressing effect on its market price.
CONFLICTS OF INTEREST
After the Combination, British Gas plc, a United Kingdom corporation
("British Gas") which is the indirect parent company of BG Holding, NOVA
Corporation, an Alberta corporation ("NOVA") which is the indirect parent of
NOVA Gas (U.S.) and Chevron Corporation, a corporation which is the parent of
Chevron ("ChevCorp"), will each indirectly own approximately 25.8% of the
total outstanding shares of New NGC Common Stock. British Gas and NOVA are major
natural gas services companies with significant natural gas gathering,
processing, marketing and transportation operations. ChevCorp, as a fully-
integrated major oil and gas company, also engages in activities that will be in
competition with New NGC.
22
None of the agreements that have been or will be entered into among NGC, British
Gas, NOVA or Chevron pursuant to the Combination contain any restrictions on the
business that may be conducted by British Gas, NOVA or Chevron. Accordingly,
conflicts may arise among New NGC, on the one hand, and British Gas, NOVA or
Chevron, on the other, in connection with the conduct of their respective
businesses. These conflicts may be resolved in favor of British Gas, NOVA or
Chevron and against New NGC.
In addition, British Gas directly owns 51% of Accord Energy Ltd.
("Accord Energy") and an affiliate of NOVA directly owns approximately 50% of
Novagas Clearinghouse Limited Partnership ("NCL"), with NGC owning the other 49%
and approximately 50%, respectively. NCL engages in natural gas gathering,
processing and transportation and natural gas and natural gas liquids marketing
in Canada, while Accord Energy markets energy products in the United Kingdom.
The terms of the NCL arrangement do not restrict the business that may be
conducted by NOVA or NGC (or, upon consummation of the Combination, New NGC).
The terms of the Accord Energy joint venture contain certain restrictions on the
business that may be conducted by British Gas and NGC (and, upon consummation of
the Combination, New NGC). Accordingly, certain conflicts may arise as a result
of business conducted by Accord Energy and British Gas in the United Kingdom
and/or the business conducted by NCL and NOVA in Canada. These conflicts, should
they arise, may be resolved in favor of British Gas and NOVA. See "Description
of Newco Certificate of Incorporation and Bylaws -- Restrictions on Business
Activities."
CONTROL BY BRITISH GAS, NOVA AND CHEVRON
Upon consummation of the Combination, BG Holding, NOVA Gas (U.S.) and
Chevron will own, in the aggregate, approximately 77.4% of the outstanding New
NGC Common Stock. The New NGC Stockholders Agreement among such parties
provides, among other things, that the parties will vote their New NGC Common
Stock to elect three designees of each of BG Group, the NOVA Group and the
Chevron Group as nine of the 13 directors of New NGC. Accordingly, if BG
Holding, NOVA Gas (U.S.) and Chevron acted together as a group or if any two of
them acted in concert with one or more of the other board members (including the
two management designees or the two independent directors), they would be able
to control the outcome of many matters considered by the board. See "Stockholder
Agreements -- New NGC Stockholders Agreement."
The New NGC Bylaws provide that New NGC shall not take certain actions
unless approved by the affirmative vote of at least 11 directors. These actions
include, among other things, proposing amendments to the New NGC Certificate of
Incorporation, amending the New NGC Bylaws, entering into a new line of business
or making asset dispositions or acquisitions in excess of $10 million, subject
to certain exceptions. See "Comparison of Rights of Holders of NGC Common Stock
and New NGC Common Stock -- Bylaws." Accordingly, the directors designated by
any of BG Holding, NOVA Gas (U.S.) or Chevron will have the ability to block any
of these and other specified actions. In extraordinary corporate transactions,
such parties have effectively agreed to vote together as a group, and, in such
an event, would have the ability to control the outcome of these matters
submitted to a vote of New NGC's stockholders. As to other matters submitted to
a vote of the stockholders of New NGC, if BG Holding, NOVA Gas (U.S.) and
Chevron acted together as a group, they would have the ability to control any
action submitted to a vote of the New NGC Stockholders, except for the requisite
stockholder approval needed to approve the corporate action described under the
caption "Description of Newco Certificate of Incorporation and Bylaws --
Restrictions on Business Activities." The New NGC Stockholders Agreement also
contains certain other provisions, including, among other things, restrictions
on the transfer and acquisition of New NGC Common Stock by such parties. See
"Stockholder Agreements -- New NGC Stockholders Agreement."
In addition, the New NGC Certificate of Incorporation will provide that
the New NGC Board of Directors will have the authority to issue shares of
preferred stock in one or more series and to fix the rights and preferences of
the shares of any such series without stockholder approval. See "Description of
Newco Certificate of Incorporation and Bylaws -- Newco Preferred Stock." Any
series of preferred stock authorized by the board would likely be senior to the
New NGC Common Stock with respect to dividends, liquidation rights and possibly
voting, and could discourage an unsolicited takeover proposal, a merger or a
23
tender offer that is in the best interest of the stockholders of New NGC or that
is favored by the holders of a majority of the outstanding shares of New NGC.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
NGC's and the Contributed Businesses' operations are both subject to
federal, state and local laws and regulations protecting the environment. Such
laws and regulations have generally become more stringent in recent years, often
imposing stricter environmental standards and greater environmental liabilities
on a greater number of parties for breaching such standards. Many of the
gathering, processing and transportation assets that comprise the Contributed
Businesses or a part of NGC have been in operation for more than 30 years and,
accordingly, were not constructed or, in the past, operated in compliance with
environmental laws or regulations that exist as of the date hereof. Accordingly,
the environmental laws and regulations as they exist today or as they may be
amended in the future may impose significant liability on New NGC for damages,
cleanup costs and penalties in the event of certain discharges in the
environment.
In connection with the Combination, Chevron has agreed to indemnify New
NGC against certain environmental liabilities related to the gathering,
processing and transportation assets that comprise a part of the Contributed
Businesses (the "Chevron Facilities"), in each case only to the extent that such
liabilities relate to such assets' operations prior to the Closing Date.
However, this indemnity is limited and, among other things, expires five years
after the Closing Date and only covers liabilities under environmental laws or
regulations in effect on the Closing Date. In addition, certain assets and
properties of NGC are covered by indemnities by third parties with respect to
environmental liabilities, which will generally inure to the benefit of New NGC
upon consummation of the Combination. However, the occurrence of any material
environmental liability, and/or the failure of an indemnitor to meet its
indemnification obligations with respect thereto, could have a material adverse
effect on New NGC's operations and financial condition.
PRINCIPAL SUPPLIERS OF NATURAL GAS AND NATURAL GAS LIQUIDS
NGC purchases natural gas from a variety of suppliers under contracts
with varying terms and conditions intended to ensure a stable supply of natural
gas. When purchasing natural gas, NGC considers price, location, liquids content
and quantities available. In 1995, NGC purchased natural gas in every major
producing basin in the United States and Canada from over 600 suppliers, ranging
from major producers to small independent companies. In recent years,
Pan-Alberta Gas Ltd. ("Pan Alberta Gas") and Apache were significant suppliers
of natural gas to NGC. An affiliate of NGC, NCL, acquired Pan Alberta Gas from
NOVA in the second quarter of 1995. In addition, effective September 30, 1995,
the Apache Contract terminated. NGC believes that it has been able to replace
the volumes previously supplied under the Apache Contract without causing a
material adverse effect on NGC's results of operations. Further, NGC believes
that the gas purchase and sale agreement with Chevron (the "Gas Purchase and
Sale Agreement"), pursuant to which New NGC will be entitled to purchase and/or
market substantially all natural gas and natural gas liquids produced or
controlled by Chevron in the United States (except Alaska), will provide it with
a steady source of natural gas for the foreseeable future. NGC believes that the
gas volumes provided to New NGC under this agreement will initially be
approximately 2 Bcf of gas per day and will constitute a significant percentage
of New NGC's gas supply. The Gas Purchase and Sale Agreement will have a primary
term of 10 years and will be automatically extended for five year periods
thereafter unless either party thereto provides the other party written notice
of such party's desire to terminate the agreement at least 60 days prior to the
expiration of the applicable term. Either party to the Gas Purchase and Sale
Agreement may terminate the agreement under certain limited circumstances,
including (i) a material breach of the agreement by the other party, (ii) the
other party dissolves or (iii) the other party becomes insolvent or is in
bankruptcy. The termination of the Gas Purchase and Sale Agreement could have a
material adverse effect on New NGC.
AVAILABILITY OF NATURAL GAS SUPPLY FOR PROCESSING
Natural gas is the primary source of natural gas liquids. To obtain
from natural gas suppliers volumes of committed natural gas reserves to supply
new natural gas gathering and processing projects, as well as to
24
attempt to maintain natural gas throughput and committed reserve levels for
existing facilities, New NGC will have to continually contract to process
additional natural gas provided from new or existing sources. Future natural gas
supplies available for processing at New NGC's plants will be affected by a
number of factors that are not within its control, including the depletion rate
of natural gas reserves currently connected and the extent of exploration for,
production and development of, and demand for, natural gas in the areas in which
NGC currently operates and in which New NGC will operate.
In the year ended December 31, 1995, a majority of the natural gas
supplied to Trident (a wholly-owned subsidiary of NGC that conducts a
substantial portion of NGC's NGL business) was under contracts with remaining
terms of five years or more. Long-term contracts do not provide protection from
shut-ins or supply curtailments by natural gas suppliers. Shut-ins or
curtailments due to low natural gas prices historically have not materially
affected Trident's field plant operations because a significant portion of the
gas supplied to its field plants is produced in association with crude oil or
condensate, which are priced independently of natural gas. However, certain of
Trident's straddle plants have been affected by curtailments and shut-ins.
Although Trident has historically been successful in contracting for new natural
gas supplies and in renewing natural gas supply contracts as they have expired,
there can be no assurance that it will be able to do so on a similar basis in
the future.
PROHIBITION AGAINST CONDUCTING CERTAIN BUSINESS ACTIVITIES
Under the New NGC Certificate of Incorporation, stockholders will
generally have to give their consent before New NGC can effect a sale of
petroleum products (other than natural gas) intended for consumption or resale
in certain parts of Africa, most of Asia, Australia and other areas of the
Pacific west of the International Date Line. The vote required to give such
consent is 85% of the outstanding shares of New NGC Common Stock. However, New
NGC will be permitted to conduct such activities without a stockholder vote to
the extent permitted by a Scope of Business Agreement between Newco and ChevCorp
(the "Scope of Business Agreement"). In addition, the stockholder vote
requirement will terminate when and if the Scope of Business Agreement
terminates. The effect of the foregoing charter and contractual provisions is to
give ChevCorp substantial control over any business New NGC may conduct with
Caltex Petroleum Corporation, a Delaware corporation ("Caltex") that is a 50% -
50% joint venture between ChevCorp and Texaco, Inc., or in competition
therewith. As the owner of Chevron, ChevCorp will be able to cause Chevron not
to give its approval to activities requiring stockholder approval under the New
NGC Certificate of Incorporation. At present, Chevron's vote alone is sufficient
to prevent the requisite stockholder consent from being obtained. In addition,
pursuant to the New NGC Stockholders Agreement, no member of the BG Group, NOVA
Group or Chevron Group may enter into an international joint venture with New
NGC for a two year period commencing on the Closing Date, subject to certain
exceptions. As a result of the provisions in the New NGC Certificate of
Incorporation, New NGC Stockholders Agreement and the Scope of Business
Agreement, New NGC could be effectively precluded from engaging in certain
business activities which would otherwise be supported by the Board of Directors
and management of New NGC and a majority of the outstanding shares of New NGC.
This in turn could have an adverse effect on the further development of New
NGC's business. See "Description of Newco Certificate of Incorporation and
Bylaws -- Restrictions on Business Activities," "The Combination -- Background
to the Combination" and "Stockholder Agreements -- New NGC Stockholders
Agreement."
FAILURE BY CHEVRON TO TRANSFER ASSETS COMPRISING THE CONTRIBUTED BUSINESSES
Certain assets, including, without limitation, gas supply contracts and
gas processing facilities, may not be transferred by the applicable Contributing
Party to Newco on or prior to the Closing Date without (i) such Contributing
Party receiving the approval of a third party, (ii) permitting a third party to
exercise certain preferential rights to purchase such Contributing Party's
interest in the asset or (iii) a significant loss in use of the asset to New
NGC. In such an event, such assets may not be contributed to Newco on the
Closing Date and shall be retained by Chevron (each, a "Retained Asset"). In the
event that Chevron retains a Retained Asset, the Combination Agreement provides
that Chevron and NGC shall agree to alternate means of transferring value or,
alternatively, to the "fair value" of such asset or assets, which
25
shall result in an adjustment to the consideration to be received by Chevron in
the Combination. In the event that Chevron and NGC do not agree on the fair
value, Chevron shall ascribe a fair value to the Retained Asset ("Minimum
Value"), which shall be binding on the parties for the purpose of closing. The
Minimum Value is subject to review in an arbitration proceeding prescribed by
the Combination Agreement in the event that the Retained Asset is not
subsequently transferred to New NGC by the first anniversary of the Closing
Date. See "Certain Provisions of the Combination Agreement -- Inability to
Contribute Assets."
In the event that Chevron is unable to transfer a Retained Asset to
Newco, New NGC may not receive the benefits from the Combination that NGC
anticipates it will receive. Further, should NGC and Chevron not be able to
agree upon the fair value of a Retained Asset and such asset is not transferred
to New NGC by the first anniversary of the Closing Date, there can be no
assurance that New NGC will be successful in an arbitration proceeding in
receiving the value that NGC ascribed to such asset when evaluating the
Combination.
TITLE TO PROPERTIES
A substantial portion of the Contributed Businesses consists of real
property. In the Combination Agreement, Chevron has made certain limited
representations and warranties as to the title of the real property assets that
comprise the Contributed Businesses and has granted New NGC certain rights to
indemnification in the event that Chevron is in breach of such representations
and warranties. However, the indemnification is generally limited to losses that
arise as a result of a third party title claim relating to such assets during a
two year period commencing on the Closing Date. NGC has conducted title due
diligence on certain of such real property assets that it believes to be
reasonable under the circumstances. However, there can be no assurance that the
real property assets comprising a part of the Contributed Businesses do not have
title defects that either (i) provide the basis for third party claimant to
dispossess or otherwise encumber such asset(s) after the expiration of the
indemnity or (ii) do not result in a third party claim but adversely affect the
marketability of such assets.
GOVERNMENTAL AND REGULATORY FILINGS AND APPROVALS
Under the HSR Act, certain parties with significant interests in the
Combination, including NGC, Chevron, British Gas, NOVA, and Messrs. Watson,
Bergstrom, Randolph and Ulrich, filed Notification and Report Forms under the
HSR Act to provide the FTC with certain information in order to allow the FTC to
evaluate the antitrust aspects of the transaction. On July 12, 1996, the FTC
issued second requests for information under the HSR Act to NGC and Chevron. The
issuance of a second request indicates that the FTC believes that the
Combination raises issues under the antitrust laws that require close
examination.
NGC and Chevron have participated in discussions in which members of
the FTC Staff have expressed significant antitrust concerns concerning the
Combination, focused upon certain fractionation facilities and operations that
comprise a part of NGC and the Contributed Businesses. The FTC Staff is
continuing to investigate the Combination, and NGC and Chevron have supplied
documents and information in response to the FTC's second requests. To date,
there have been no discussions by NGC or Chevron with the Commissioners of the
FTC, and the FTC itself, to the knowledge of NGC and Chevron, has taken no
position with respect to the antitrust merits of the Combination. The outcome of
the ongoing investigation is uncertain.
NGC and Chevron are vigorously defending the legality of the
Combination under the antitrust laws. There can be no assurance, however, that
the FTC will not request the divestiture of certain assets in order to resolve
antitrust concerns that it may find are presented by the Combination. In the
event the FTC makes such a request and NGC and Chevron agree, the divestiture
commitment would likely be embodied in a consent decree requiring New NGC to
accomplish the divestiture within a specified period of time following
consummation of the Combination. In such an event, New NGC may not be able to
realize the full fair value of an asset that was required to be sold, or may be
required to dispose of an asset that it considers important in deriving the full
benefits and synergies from the Combination.
26
If the parties were unable to resolve any antitrust concerns expressed
by the FTC, either through a consent decree or through an FTC decision to close
its investigation, and were to proceed toward the consummation of the
Combination, it is likely that the FTC would seek to enjoin the Combination, in
whole or in part, under the antitrust laws by filing a complaint in a United
States District Court requesting the court to temporarily enjoin the Combination
until administrative litigation before the FTC challenging the Combination is
commenced and resolved. Therefore, although the approval of the FTC is a
condition to the obligation of NGC and Chevron to effect the Combination which
could be waived, the practical effect of this process is that the Combination
will not be consummated until the issues raised by the FTC are resolved.
Private parties may also seek to take actions under the antitrust laws.
There can be no assurance that a challenge to the Combination on antitrust
grounds will not be made or, if such a challenge is made, what the result of any
such challenge will be. See "The Combination -- Governmental and Regulatory
Filings and Approvals."
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to stockholders of
NGC in connection with the solicitation of proxies by the NGC Board of Directors
for use at the Special Meeting of stockholders to be held on Friday, August 30,
1996, at 9:00 a.m., Central time, at 13430 Northwest Freeway, Suite 1200,
Houston, Texas 77040 and at any adjournments or postponements thereof.
This Proxy Statement/Prospectus also constitutes the Prospectus with
respect to 33,928,605 shares of New NGC Common Stock issuable in connection with
the Combination.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, holders of shares of NGC Common Stock will
consider and vote upon a proposal to approve and adopt the Combination Agreement
and transact such other business as may properly be brought before the Special
Meeting or any adjournments or postponements thereof. THE NGC BOARD OF DIRECTORS
HAS APPROVED THE COMBINATION AGREEMENT AND THE COMBINATION AND RECOMMENDS THAT
NGC STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE COMBINATION AGREEMENT
AND THE COMBINATION.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of all
outstanding shares of NGC Common Stock is required to approve and adopt the
Combination Agreement. As a result, abstentions, failures to vote and broker
non-votes will have the same effect as votes against the Combination Agreement
since they are not votes for approval. Pursuant to the Voting Agreements,
holders of a sufficient number of shares (approximately 80% of the issued and
outstanding shares of NGC Common Stock as of the Record Date) have agreed to
vote such shares in favor of the Combination Agreement and the Combination. See
"Stockholder Agreements -- Voting Agreements."
VOTING OF PROXIES
Shares of NGC Common Stock represented by properly executed proxies
received at or prior to the Special Meeting, and which have not thereafter been
properly revoked as described below, will be voted in accordance with the
instructions indicated therein. If no instructions are indicated, such proxies
will be voted FOR approval and adoption of the Combination Agreement and the
Combination, and in the discretion of the proxy holder as to any other matter
that may properly come before the Special Meeting.
REVOCABILITY OF PROXIES
An NGC stockholder who has given a proxy may revoke such proxy at any
time prior to its exercise at the Special Meeting by any manner permitted by
law, including (i) giving written notice of revocation by
27
mail or facsimile to NGC prior to the Special Meeting or (ii) properly
submitting to NGC by mail or facsimile a duly executed proxy bearing a later
date. Submissions to NGC should be made to NGC Corporation, Attn: Corporate
Secretary, at 13430 Northwest Freeway, Suite 1200, Houston, Texas 77040,
facsimile (713) 507-6808. Any beneficial owner whose shares of NGC Common Stock
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to change such beneficial holder's vote should
contact such registered holder promptly and instruct such registered holder on
such beneficial holder's behalf. There is no guarantee that there will be
sufficient time prior to the Special Meeting for the registered holder to
deliver a revocation upon instruction by the beneficial owner.
SOLICITATION OF PROXIES
NGC will bear the cost of the solicitation of proxies from its
stockholders. In addition to the solicitation of proxies by mail, directors,
officers and employees of NGC may solicit proxies from stockholders personally
or by telephone, telegraph or facsimile transmissions. Such directors, officers
and employees will not be additionally compensated for such solicitation but may
be reimbursed for their out-of-pocket expenses incurred in connection therewith.
Arrangements may also be made with banks, brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of NGC Common Stock held of record by such persons, and, upon
request, NGC will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith.
RECORD DATE; SHARES ENTITLED TO VOTE
The close of business on July 19, 1996 has been fixed as the Record
Date for determining holders of NGC Common Stock entitled to notice of and to
vote at the Special Meeting. As of the Record Date, 111,073,380 shares of NGC
Common Stock were outstanding and held of record by 273 holders. The NGC Common
Stock is the only class of capital stock of NGC issued and outstanding. Each
stockholder of record as of the close of business on the Record Date is entitled
at the Special Meeting to one vote for each share of NGC Common Stock held.
QUORUM
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of NGC Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum for the transaction of business at
the Special Meeting. Pursuant to the Voting Agreements, holders of a sufficient
number of shares (approximately 80% of the issued and outstanding shares of NGC
Common Stock as of the Record Date) to constitute a quorum have agreed to attend
the Special Meeting and vote such shares in favor of the Combination Agreement
and the Combination. See "Stockholder Agreements -- Voting Agreements."
THE COMBINATION
The following is a brief summary of certain aspects of the Combination.
BACKGROUND OF THE COMBINATION
At a regularly scheduled meeting of the NGC Board of Directors on
September 14, 1995, management presented its view of the future of the midstream
energy industry. Specifically, management described the competitive factors
which it believed were likely to lead to further consolidation of the midstream
natural gas industry and the opportunities existing as the domestic electric
power industry becomes deregulated. See "Risk Factors -- Competition and
Industry Consolidation" for further information on the competition and
consolidation in the energy services industry. Management further discussed the
business opportunities arising from industry consolidation and the feasibility
of exploiting these opportunities in furthering NGC's business strategy. See
"Summary Business Strategy and Operations of New NGC -- Business Strategy."
Among the opportunities discussed was the possibility of combining the
midstream assets of a large participant in the industry with NGC's assets,
operations and management. NGC's management observed
28
that several of the major integrated petroleum companies (the "Majors") owned
and operated significant midstream assets and stated its belief that certain of
the Majors might be interested in combining their midstream assets with NGC's.
The discussions focused on the benefits which might be realized from such a
transaction, including the potential for immediate and substantial increase in
asset base, capacity, supply and scope of operations, as well as the improved
operating results that would likely occur from a combination due to operating
efficiencies and the elimination of duplicative functions. The NGC Board of
Directors and NGC's management also discussed that any such transaction would
probably require the issuance of a significant number of shares of NGC Common
Stock for whatever assets were to be acquired, and that NGC's industrial
stockholders, British Gas and NOVA, which together owned approximately 70% of
the issued and outstanding shares of NGC Common Stock, would not support any
transaction in which the contributing party received a controlling voting
interest in the combined entity. The NGC Board concluded that the possibility of
a strategic combination was an attractive opportunity, and authorized management
to pursue preliminary discussions with the Majors to ascertain their level of
interest.
Beginning in September 1995, members of NGC management engaged in
informal discussions with several of the Majors (the "Candidates") with respect
to a possible combination of midstream assets. These discussions typically
included general expressions of each party's expectations as to how a
combination might be valued and structured, with most of the Candidates
indicating that they would insist upon acquiring a controlling voting interest
in the combined entity. During mid-November 1995, NGC's management reviewed its
discussions with the Candidates and concluded that a combination of midstream
assets was an attractive opportunity. Management noted that the selection of the
preferred Candidate would require an analysis of numerous factors, including the
interest of the Candidate in pursuing a combination, a comparison of operating
strategies and objectives and the ability to integrate the Candidate's midstream
assets with those of NGC. Management also discussed that any potential
combination would have to be structured so that the contributing party would not
receive a controlling voting interest in the combined entity. Based on these
criteria, management concluded that a combination of NGC with Chevron's
midstream assets presented the most attractive opportunity.
Based on NGC's preliminary discussions with the Candidates, NGC's
management believed that Chevron was the only Candidate that appeared to be
flexible in structuring the terms of the combination such that it would not have
a controlling interest in the combined entity. Further, Chevron expressed a high
level of interest in pursuing a strategic combination and shared NGC's vision
with respect to consolidation in the energy services industry and the model of a
"one-stop" energy service and commodity provider. Based on the success of NGC's
management in devising and implementing the "Energy Store" business strategy and
in combining the operations of Clearinghouse and Trident in the Trident
Combination, Chevron further believed that NGC's management had the ability to
pursue this vision. Chevron also indicated its interest in expanding its
participation in gas marketing and in entering the electric power marketing
industry. In addition, Chevron expressed its interest in pursuing a further
strategic alliance between it and the combined entity, pursuant to which the
combined entity would have the right to market substantially all natural gas and
natural gas liquids produced or controlled by Chevron in the United States
(except Alaska) and to supply natural gas and feedstock to Chevron refineries
and Chevron Chemical plants in the United States. NGC believed that the
midstream assets owned and operated by Chevron represented an excellent
strategic fit with the midstream assets acquired in the Trident Combination and
with NGC's historical gas marketing operations. NGC was also attracted to the
strategic alliance, which it felt would provide the combined entity with a
significant supply of natural gas and NGL's for processing and marketing.
Further, management believed that Chevron's presence in Canada, Europe and Asia
represented long-term growth opportunities for New NGC.
On November 21, 1995, NGC and Chevron entered into a Confidentiality
Agreement pursuant to which each party provided the other with certain
information to assist in evaluating the desirability of pursuing a strategic
combination. During the period between November 21, 1995 through December 8,
1995, representatives of NGC and Chevron met several times (in person or via
conference call) to discuss preliminary valuation issues and the structure of
the Combination. These conversations focused primarily on the tax and corporate
considerations affecting the structure of the Combination and the form and
amount
29
of consideration to be paid for the Contributed Businesses and what aspects of
Chevron's midstream businesses would constitute the Contributed Businesses. In
addition, the parties discussed certain strategic alliances between Chevron and
the combined entity. During this period, both NGC and Chevron began conducting
preliminary due diligence on the operations of Warren and NGBU and NGC,
respectively.
At a regularly scheduled meeting of the NGC Board of Directors on
December 8, 1995, management updated the NGC Board on the discussions with
Chevron, including the parties' preliminary discussions on (i) the structure of
the transaction, (ii) the amount and form of the consideration to be paid for
the Contributed Businesses, (iii) the assets that would comprise the Contributed
Businesses and (iv) certain strategic alliances that might be entered into by
Chevron and the new entity. A general discussion of these issues ensued in which
management answered many questions posed by members of the board of directors.
After this discussion, the NGC Board of Directors authorized management to
pursue further discussions with Chevron regarding a potential strategic
combination and to conduct further due diligence on Warren and NGBU. During the
period between December 8, 1995 and January 21, 1996, representatives of NGC and
Chevron met several times to further discuss the strategic combination and to
conduct further due diligence on Warren and NGBU. These meetings continued to
concern the structure and value of the transaction, the form of consideration to
be received by Chevron and the strategic alliances that would be entered into by
Chevron and the new entity. During this period, NGC's management periodically
informed board members of the progress of the discussions with Chevron. On
January 21, 1996, NGC and Chevron entered into the Exclusivity Agreement
pursuant to which the parties agreed to negotiate exclusively with one another
through March 31, 1996 regarding the strategic combination of substantially all
of Chevron's North American midstream assets with NGC. The Exclusivity Agreement
also contemplated, among other things, that New NGC and Chevron would enter into
certain agreements and strategic alliances pursuant to which New NGC would
market substantially all of Chevron's production of natural gas and excess
electricity as well as supply energy and feedstock to substantially all of
Chevron's refineries and Chevron Chemical's Facilities in the United States. The
Exclusivity Agreement also set forth certain parameters as to the structure of
the Combination and the form and amount of consideration to be paid to Chevron.
During the period from January 22, 1996 through May 20, 1996,
representatives of NGC and Chevron conducted their due diligence investigations
and met to negotiate the terms and conditions of the Combination. During this
period, NGC's management continued to update NGC's directors on the progress of
the negotiations with Chevron. At a regularly scheduled board meeting convened
on March 14, 1996, the NGC Board of Directors reviewed the Exclusivity Agreement
and discussed with NGC's management the progress of the negotiations with
Chevron. A general discussion of these issues ensued in which management
answered questions posed by members of the board. Thereafter, negotiations with
Chevron continued on both the Combination Agreement and all of the related
agreements which defined Chevron's and New NGC's post-closing relationship. On
May 9, 1996, NGC held its annual meeting of the board of directors, where the
board of directors was again updated by management on the status of the
negotiations with Chevron. In addition, the board members discussed with NGC's
management the terms of a draft of the Combination Agreement that was
distributed to the board members during the week prior to the meeting. After
doing so, the NGC Board of Directors decided to wait on a more definitive draft
of the Combination Agreement and New Stockholders Agreement before voting on the
Combination.
After the annual board meeting, negotiations on the Combination
Agreement and related agreements continued, and NGC's management continued to
inform the board of the status of the negotiations. A telephonic meeting of the
NGC Board of Directors was held on May 20, 1996. Prior to the telephonic board
meeting, NGC's management circulated a draft of the Combination Agreement for
its board members' review. At the board meeting, the board was informed that
Lehman Brothers had rendered an oral opinion to that effect that, based on
various considerations and assumptions and subject to Lehman Brothers' final
review of the executed Combination Agreement and certain related agreements, the
consideration to be paid by NGC for the Contributed Businesses was, as of that
date, fair from a financial point of view. See " -- Opinion of Independent
Financial Advisor." NGC's management then provided the members of the board with
further information on the Combination Agreement (which had been circulated to
the board members the week before the board meeting) and the related agreements
that defined New NGC's relationship with
30
Chevron after consummation of the Combination, including the right of New NGC to
purchase and/or market substantially all natural gas and natural gas liquids
produced or controlled by Chevron in the United States (except Alaska) and to
supply natural gas and feedstock to Chevron refineries and Chevron Chemical
plants in the United States and participate in existing and future opportunities
to provide electricity to United States facilities of Chevron and Chevron
Chemical, as well as to purchase or market excess electricity generated by such
facilities. A general discussion of these agreements ensued in which NGC's
management answered certain questions posed by the board members. Among other
things, the board and NGC's management discussed the scope of business
limitation that Chevron proposed to include in the New NGC Certificate of
Incorporation and the Scope of Business Agreement. In determining whether to
accept the contractual and charter limitations, the board members considered,
among other things, the current scope of operations of NGC and the Contributed
Businesses, including the absence of any current NGC operations that would be in
conflict with these provisions. In addition, the NGC Board of Directors
considered the potential for an increase in New NGC's business if a favorable
contractual relationship developed with Caltex and Chevron's position that it
would not enter into the Combination in the absence of such provisions, which
Chevron deemed necessary to protect the integrity of its Caltex joint venture
from indirect competition by Caltex's two stockholders (i.e., Chevron and
Texaco). Finally, the NGC Board of Directors discussed the benefits that the
stockholders of NGC would derive from the Combination, notwithstanding the
prohibitions proposed to be contained in the New NGC Certificate of
Incorporation and Scope of Business Agreement. Following such discussion and
deliberations, the Board of Directors determined that the Combination was in the
best interest of NGC stockholders and thus unanimously approved the Combination
and the execution of the Combination Agreement and certain related agreements,
including those agreements described under the captions "Stockholder
Agreements" and "Ancillary Agreements." On May 22, 1996, NGC, Chevron and
Newco entered into the Combination Agreement and certain related agreements.
RECOMMENDATION OF THE NGC BOARD OF DIRECTORS
The NGC Board of Directors believes that the terms of the Combination
are fair to and in the best interests of NGC and its stockholders. ACCORDINGLY,
THE NGC BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE COMBINATION AGREEMENT
AND THE COMBINATION AND RECOMMENDS THAT THE NGC STOCKHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE COMBINATION AGREEMENT AND THE COMBINATION.
The belief of the NGC Board of Directors that the terms of the
Combination are fair to and in the best interests of NGC and its stockholders
and the resulting decision to approve the Combination Agreement were based upon,
among other things, (i) the opinion of Lehman Brothers, which is described
below, that the consideration to be paid by NGC for the Contributed Businesses
pursuant to the Combination Agreement is fair to NGC from a financial point of
view and (ii) the factors set forth under the caption " -- Background of the
Combination," including, without limitation, (A) the shared vision of NGC and
Chevron with respect to the consolidation in the energy services industry and
the model of a "one-stop" energy service and commodity provider, (B) the
strategic fit of the Contributed Businesses with the midstream assets acquired
in the Trident Combination and with NGC's historical gas marketing operations
and (C) the rights of New NGC to purchase and/or market substantially all
natural gas and natural gas liquids produced or controlled by Chevron in the
United States (except Alaska) and to supply natural gas and feedstock to Chevron
refineries and Chevron Chemical plants in the United States and participate in
existing and future opportunities to provide electricity to United States
facilities of Chevron and Chevron Chemical, as well as to purchase or market
excess electricity generated by such facilities.
The foregoing discussion of the information and factors considered and
given weight by the NGC Board of Directors is not intended to be exhaustive but
is believed to include the material factors the NGC Board of Directors
considered. In addition, in making the determination to approve and recommend
the Combination, considering the wide variety of factors considered in
connection with its evaluation of the proposed Combination, the NGC Board of
Directors did not find it practical to, and did not quantify or
31
otherwise attempt to assign any relative or specific weights to the foregoing
factors, and individual directors may have given different weights to different
factors.
OPINION OF INDEPENDENT FINANCIAL ADVISOR
In November 1995, NGC engaged Lehman Brothers to act as its financial
advisor in connection with the Combination. NGC instructed Lehman Brothers, in
its role as financial advisor, to evaluate the fairness, from a financial point
of view, to NGC of the consideration to be paid by NGC for the Contributed
Businesses in the Combination, and in such regard, to conduct such
investigations as Lehman Brothers deemed appropriate for such purposes. Lehman
Brothers advised the Board of Directors of NGC, in its written opinion dated as
of May 20, 1996, that the consideration to be paid by NGC for the Contributed
Businesses in connection with the Combination was fair to NGC from a financial
point of view. Lehman Brothers is not under any obligation to update its opinion
at Closing.
THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS, WHICH SETS
FORTH THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS OPINION, IS INCLUDED AS APPENDIX
III TO THIS PROXY STATEMENT/PROSPECTUS, AND IS INCORPORATED HEREIN BY REFERENCE.
THE FOLLOWING IS A SUMMARY OF LEHMAN BROTHERS' OPINION AND THE METHODOLOGY
LEHMAN BROTHERS USED TO RENDER ITS FAIRNESS OPINION.
No limitations were imposed by NGC on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. Lehman Brothers was not requested to and did not make any
recommendation to the Board of Directors of NGC as to the form or amount of the
consideration to be paid by NGC for the Contributed Businesses in the
Combination, which was determined through arm's-length negotiations between the
parties. In arriving at its opinion, Lehman Brothers did not ascribe an absolute
specific value to the Contributed Businesses but made its determination as to
the fairness, from a financial point of view, of the consideration to be paid by
NGC for the Contributed Businesses in the Combination on the basis of the
financial and comparative analyses described below. Lehman Brothers' opinion is
for the use and benefit of the Board of Directors of NGC and was rendered to the
Board of Directors of NGC in connection with its consideration of the
Combination. Lehman Brothers' opinion does not constitute a recommendation to
any stockholder of NGC as to how such stockholder should vote with respect to
the Combination. Lehman Brothers was not requested to opine as to, and its
opinion does not address, NGC's underlying business decision to proceed with or
effect the Combination.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i)
the Combination Agreement and the specific terms of the Combination; (ii) a
preliminary draft of this Proxy Statement/Prospectus and such other publicly
available information concerning NGC and Chevron that Lehman Brothers believed
to be relevant; (iii) historical and projected financial and operating
information with respect to the business, operations and prospects of NGC and
the Contributed Businesses furnished to Lehman Brothers by NGC and Chevron,
respectively; (iv) a trading history of NGC's common stock from March 14, 1995
to the present and a comparison of that trading history with those of other
companies that Lehman Brothers deemed relevant; (v) a comparison of the
historical financial results and present financial condition of NGC and the
Contributed Businesses with those of other companies that Lehman Brothers deemed
relevant; (vi) a comparison of the financial terms of the Combination with the
financial terms of certain other recent transactions that Lehman Brothers deemed
relevant; (vii) projected pro forma financial and operating results for New NGC
furnished to Lehman Brothers by NGC, including a comparison with historical and
projected information for NGC on a standalone basis; (viii) the relative
contribution of the Contributed Businesses and NGC to the historical and
projected financial and operating results of New NGC; (ix) certain projections
of cost savings and operating synergies expected to result from a combination of
the businesses of NGC and the Contributed Businesses furnished to Lehman
Brothers by NGC; (x) the pro forma ownership profile of New NGC; and (xi) the
proposed accounting treatment for the Combination, as described to Lehman
Brothers by NGC and its accountants. In addition, Lehman Brothers had
discussions with the management of NGC and of Chevron, in each case concerning
their respective businesses' operations, assets, financial condition and
prospects and the business, operations, assets, financial condition
32
and prospects of New NGC and undertook such other studies, analyses and
investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and relied upon the assurances of management of NGC that they were
not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of NGC, upon advice of NGC
Lehman Brothers assumed that such projections were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
management of NGC as to the future financial performance of NGC. With respect to
the financial projections of the Contributed Businesses, Lehman Brothers
reviewed such projections with Chevron and assumed that such projections were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of Chevron as to the future financial
performance of the Contributed Businesses. However, for purposes of its
analysis, Lehman Brothers made certain adjustments to the projections of the
Contributed Businesses. Lehman Brothers discussed these adjusted projections
with the management of NGC and they agreed with the appropriateness of the use
of such adjusted projections in performing Lehman Brothers' analysis. With
respect to the pro forma financial projections of New NGC, Lehman Brothers
relied on NGC's projections, the adjusted projections for the Contributed
Businesses and certain assumptions regarding cost savings, financing, accounting
treatment and other items. Lehman Brothers discussed the assumptions regarding
cost savings, financing, accounting treatment and other items with the
management of NGC and they have agreed with the appropriateness of the use of
such assumptions in performing Lehman Brothers' analysis. In arriving at its
opinion, Lehman Brothers assumed that New NGC will perform substantially in
accordance with such pro forma projections. In arriving at its opinion, Lehman
Brothers did not conduct a physical inspection of the properties and facilities
of NGC or of the Contributed Businesses and did not make or obtain any
evaluations or appraisals of the assets or liabilities of NGC or the Contributed
Businesses. Lehman Brothers' opinion necessarily was based upon market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of its opinion.
In connection with rendering of its opinion, Lehman Brothers performed
certain financial, comparative and other analyses as described below. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial and comparative analysis and the
application of those methods to the particular circumstances, and therefore,
such an opinion is not readily susceptible to summary description. Furthermore,
in arriving at its fairness opinion, Lehman Brothers did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Lehman Brothers believes that its analyses must be
considered as a whole and that considering any portion of such analyses and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the opinion. In
its analyses, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of NGC or Chevron. Any estimates contained in the
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
VALUATION ANALYSIS. Lehman Brothers prepared valuations of the
assets/operations to be contributed to New NGC by both NGC and Chevron. These
valuations of the separate businesses were analyzed before the consideration of
cost savings and operating synergies resulting from the Combination. In
determining valuation, Lehman Brothers used the following methodologies:
discounted cash flow analysis ("DCF Analysis"), comparable transactions analysis
and comparable company trading analysis. Each of these methodologies was used to
generate a reference enterprise value range for each of NGC and the Contributed
Businesses. The enterprise value range for each company was adjusted for
appropriate on and off balance sheet assets and liabilities to arrive at an
equity value range for each company. The reference value ranges were then used
to evaluate the terms of the Combination on a value basis. The value of the
total package of consideration being issued in the Combination to Chevron by NGC
varied widely with the changing stock
33
price of NGC and the various estimates of the cost savings and operating
synergies resulting from the Combination. Based on a comparison of such values,
the valuation analysis supported the conclusion that the consideration being
paid by NGC for the Contributed Businesses in the Combination was fair to NGC
from a financial point of view.
Because of the significant percentage of New NGC equity to be received
by Chevron pursuant to the Combination, the reference value ranges (in terms of
implied ownership levels) were also compared to the ownership interest specified
in the Combination Agreement. After adjusting the enterprise value ranges of the
Contributed Businesses for the approximately $296 million of assumed debt and
New NGC debt, the implied equity value ranges for the Contributed Businesses
were compared to the NGC equity value reference ranges to determine an implied
equity ownership percentage in New NGC for Chevron. The implied equity ownership
ranges for Chevron in New NGC derived using the various valuation methodologies
described below all support the conclusion that the consideration being paid by
NGC for the Contributed Businesses (i.e., 28.0% of New NGC -- after adjusting
for the $296 million of non-equity consideration) was fair to NGC from a
financial point of view because such analysis supported even higher ownership
percentages for Chevron than the 28.0% specified in the Combination Agreement.
The various valuation analyses are summarized below:
(i) Discounted Cash Flow Analysis -- Lehman Brothers prepared
an after-tax cash flow model for both NGC and the Contributed
Businesses utilizing information and projections provided by NGC and
Chevron. Lehman Brothers used a 10% discount rate and terminal value
EBITDA multiples of 7.0x - 8.0x for both entities. The 10% discount
rate was based on Lehman Brothers' review of the financial terms of
similar transactions in the midstream sector. The terminal value
multiples were selected based on the current trading multiples of
similar publicly-traded companies and the multiples from recent
acquisitions of similar assets and companies.
This methodology yielded a range of enterprise values and
equity values for the Contributed Businesses and NGC. The equity value
ranges ascribed to the Contributed Businesses were adjusted for the
approximately $296 million of non-equity consideration. Using the
midpoint of the equity value ranges, Chevron's equity contribution to
New NGC (as a percentage of the total equity being contributed to New
NGC) is slightly less than the equity interest in New NGC that Chevron
will own after consummation of the Combination.
(ii) Comparable Transactions Analysis -- Lehman Brothers
reviewed certain publicly available information on selected gas
gathering, processing and marketing transactions which took place from
May of 1994 to May of 1996, including Transok/Tejas Gas, Cornerstone/El
Paso, ENSERCH/Texas Utilities, Seagull Group/Tejas Power, Eastex/El
Paso Natural Gas, Hadson/LG&E, Trident NGL/Natural Gas Clearinghouse,
Meridian Oil/KN Energy, Grand Valley Gas/Associated Natural Gas,
Mitchell Energy/Centana Energy, and Valero Natural Gas Partners/Valero
Energy. Using publicly available information, Lehman Brothers
calculated the total purchase price (equity purchase price plus any
assumed obligations) multiples of certain historical and projected
financial criteria (such as earnings before interest, taxes,
depreciation and amortization ("EBITDA"), earnings before interest and
taxes ("EBIT"), and net property, plant and equipment ("Net PP&E")).
Lehman Brothers placed the most emphasis on EBITDA multiples. The
highest, average and lowest multiples of historical EBITDA were 17.2x,
10.4x and 7.0x, respectively. The highest, average and lowest multiples
of projected EBITDA (excluding instances where projected data was not
available) were 9.1x, 8.1x and 6.0x, respectively. Given NGC's leading
market position (in both gas and power marketing and gas processing),
consistent history of growth, projected growth profile, and strong
international operations, Lehman Brothers determined that NGC would
merit a premium EBITDA multiple when compared to the Contributed
Businesses. Lehman Brothers determined that, with respect to NGC, the
appropriate benchmark multiples for historical and projected EBITDA
were in the ranges of 9.0x - 11.0x and 8.0x - 9.0x, respectively, and
that with respect to the Contributed Businesses, the appropriate
benchmark multiples for historical and projected EBITDA were in the
ranges of 7.5x - 9.0x and 7.0x - 8.0x, respectively.
34
This methodology yielded a range of enterprise values and
equity values for the Contributed Businesses and NGC. The equity value
ranges ascribed to the Contributed Businesses were adjusted for the
approximately $296 million of non-equity consideration. Using the
midpoint of the equity value ranges, Chevron's equity contribution to
New NGC (as a percentage of the total equity being contributed to New
NGC) is slightly higher than the equity interest in New NGC that
Chevron will own after consummation of the Combination.
Because the market conditions, rationale and circumstances
surrounding each of the transactions analyzed were specific to each
transaction and because of the inherent differences between the
businesses, operations and prospects of the Contributed Businesses and
NGC and the acquired businesses analyzed, Lehman Brothers believed that
it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, and accordingly, also made
qualitative judgments concerning differences between the
characteristics of these transactions and the Combination that would
affect the acquisition values of the Contributed Businesses and NGC and
such acquired companies.
(iii) Comparable Company Trading Analysis -- Lehman Brothers
reviewed the public stock market trading multiples for selected
midstream companies with operations similar to NGC and the Contributed
Businesses including Aquila Gas Pipeline Corporation, USX-Delhi, KN
Energy, Tejas Gas Corporation, TPC Corporation and Western Gas
Resources, Inc. Using publicly available information, Lehman Brothers
calculated and analyzed the common equity market value multiples of
certain historical and projected financial criteria (such as net income
and cash flow from operations) and the adjusted capitalization
multiples of certain historical and projected financial criteria (such
as EBITDA, EBIT and Net PP&E). The adjusted capitalization of each
company was obtained by adding its long-term debt to the sum of the
market value of its common equity, the value of its preferred stock
(market value if publicly traded or liquidation value if not) and the
book value of any minority interest minus its cash balance. Lehman
Brothers placed the most emphasis on multiples of adjusted
capitalization to historical 1995 and projected 1996 and 1997 EBITDA.
The highest, average and lowest multiples of historical 1995 EBITDA
were 11.6x, 9.8x and 7.9x, respectively. The highest, average and
lowest multiples of projected 1996 EBITDA were 9.6x, 8.0x and 5.9x,
respectively. The highest, average and lowest multiples of projected
1997 EBITDA were 9.0x, 7.lx and 5.2x, respectively. For the same
reasons described above under "Comparable Transactions Analysis", the
superior growth profile and strategic position of NGC relative to the
Contributed Businesses caused Lehman Brothers to determine that with
respect to NGC the appropriate benchmark multiples for historical 1995
and projected 1996 and 1997 EBITDA were 10.0x - 11.0x, 8.0x - 9.0x and
7.0x - 8.0x, respectively, versus 8.0x - 9.5x, 7.0x - 8.0x and 6.0x -
7.5x, respectively, for the Contributed Businesses.
This methodology yielded a range of enterprise values and
equity values for the Contributed Businesses and NGC. The equity value
ranges ascribed to the Contributed Businesses were adjusted for the
approximately $296 million of non-equity consideration. Using the
midpoint of the equity value ranges, Chevron's equity contribution to
New NGC (as a percentage of the total equity being contributed to New
NGC) is slightly higher than the equity interest in New NGC that
Chevron will own after consummation of the Combination.
Because of the inherent differences between the businesses,
operations and prospects of the Contributed Businesses and NGC and the
businesses, operations and prospects of the companies included in the
comparable company group, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, and accordingly also made
qualitative judgments concerning differences between the financial and
operating characteristics of the Contributed Businesses and NGC and the
companies in the comparable company group that would affect the public
trading values of the Contributed Businesses and NGC and such
comparable companies.
CONTRIBUTION ANALYSIS. Lehman Brothers analyzed the relative income
statement contribution of the Contributed Businesses and NGC to New NGC based on
1996 and 1997 projected financial data and
35
assuming no cost savings or operating synergies. The analysis indicated that in
both 1996 and 1997 the Contributed Businesses would contribute a percentage of
New NGC's combined net income and combined cash flow from operations that was in
excess of the 28.0% equity interest that Chevron would receive in New NGC as a
result of the Combination.
PRO FORMA COMBINATION ANALYSIS. Using earnings estimates for the
Contributed Businesses and NGC prepared by their respective managements for the
years 1996 and 1997, Lehman Brothers compared the earnings per share and cash
flow per share of NGC on a stand alone basis, to the earnings per share and cash
flow per share of New NGC. Lehman Brothers performed this analysis under the
following scenarios: (i) assuming no operating synergies or cost savings and
(ii) assuming operating synergies and cost savings. Under the no operating
synergies or cost savings case, the Combination was slightly accretive to both
NGC's earnings and cash flow per share in 1996 and 1997. Under the operating
synergies and cost savings case, the Combination was substantially accretive to
both NGC's earnings per share and cash flow per share in 1996 and 1997. This
analysis also indicated that New NGC would have a lower ratio of long-term debt
to total capitalization and higher interest expense coverage ratios than NGC
would have had on a stand alone basis.
Lehman Brothers is an internationally recognized investment banking
firm engaged in, among other things, the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and other purposes.
The NGC Board of Directors selected Lehman Brothers because of its expertise,
reputation and familiarity with NGC and because its investment banking
professionals have substantial experience in transactions comparable to the
Combination.
Lehman Brothers has previously rendered certain financial advisory and
investment banking services to NGC, for which it has received customary
compensation. Pursuant to the terms of an engagement letter agreement, dated
January 9, 1996, between Lehman Brothers and NGC, NGC has paid Lehman Brothers a
financial advisory fee of $150,000. In addition, NGC has agreed to pay Lehman
Brothers a transaction fee of up to $4.5 million contingent upon the successful
completion of the Combination. The transaction fee is calculated based upon the
value of the consideration exchanged. Based on current estimates, the
transaction fee is expected to be in the range of $3.7 million to $4.1 million.
The financial advisory fee is creditable towards the transaction fee. In
addition, NGC has agreed to reimburse Lehman Brothers for its reasonable
expenses (including, without limitation, professional and legal fees and
disbursements) incurred in connection with its engagement, and to indemnify
Lehman Brothers and certain related persons against certain liabilities in
connection with its engagement, including certain liabilities that may arise
under the federal securities laws. Lehman Brothers also has performed various
investment banking services for Chevron in the past, and is currently engaged to
perform investment banking services for Chevron which are unrelated to the
Combination, and has received and will receive customary fees for such services.
In the ordinary course of its business, Lehman Brothers actively trades
in the debt and equity securities of NGC and Chevron for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
OPERATION OF NEWCO PRIOR TO THE EFFECTIVE TIME
Immediately prior to the Effective Time, Newco will have only one
issued and outstanding share of Newco Common Stock, which shall be owned by
Chevron, and will be operated as a shell corporation with only minimal
organizational capital.
CONTRIBUTION; MERGER; CONVERSION OF NGC COMMON STOCK
Pursuant to the Combination Agreement, on the Closing Date and
immediately prior to the Effective Time, the Contributing Parties will
contribute the Contributed Businesses to Newco in exchange for (i) the issuance
by Newco to Chevron of 38,623,210 shares of Newco Common Stock and 7,815,363
shares of Newco Series A Participating Preferred Stock, (ii) the assumption by
Newco of an aggregate principal amount of approximately $155.4 million in
indebtedness owed by Chevron to an affiliate of Chevron,
36
subject to certain adjustments, (iii) the issuance by Newco to the Contributing
Parties of the Newco Note in an aggregate principal amount of $138.4 million,
subject to certain adjustments and (iv) the assumption by Newco of all of the
liabilities and other obligations relating to the Contributed Businesses, other
than liabilities associated with (x) the offsite disposal of Hazardous Materials
(as defined in the Glossary) from the operation of the Contributed Businesses
prior to the time the Contributed Businesses are contributed to Newco pursuant
to the Contribution Agreement (the "Contribution Time"), (y) underpayment of
royalties on the production of natural gas prior to the Contributed Time and (z)
certain specified litigation (collectively, the "Assumed Liabilities").
Although NGC has conducted what it believes to have been reasonable due
diligence on the assets to be acquired and the liabilities to be assumed in the
Combination, it is difficult to definitively quantify the exact amount of the
ultimate liability arising from such assumption. However, given NGC's due
diligence investigation and right to indemnification under certain
circumstances, NGC's management currently believes that the Assumed Liabilities
will be in the range of $10 million to $20 million, and in any event that they
will not be material when compared to the assets to be acquired in the
Combination. NGC and Chevron, or affiliates thereof, will also enter into
certain supply, sales and service agreements with respect to natural gas, NGLs
and electricity, including agreements pursuant to which New NGC (as successor in
interest to NGC) will have the right to (i) purchase and/or market substantially
all natural gas and natural gas liquids produced or controlled by Chevron in the
United States (except Alaska) and to supply natural gas and feedstock to Chevron
refineries and Chevron Chemical plants in the United States and (ii) participate
in existing and future opportunities to provide electricity to United States
facilities of Chevron and Chevron Chemical plants, as well as to purchase or
market excess electricity generated by such facilities. See "Ancillary
Agreements." After the Contribution, NGC will merge with and into Newco, and
Newco will be the surviving corporation in the Merger and will continue its
existence under the DGCL as "NGC Corporation" and the separate existence of
NGC shall cease.
Following the consummation of the Combination, each issued and
outstanding share of NGC Common Stock will be automatically converted without
any action on the part of the holder thereof into one share of New NGC Common
Stock, and each share of Newco Common Stock and Newco Series A Participating
Preferred Stock will remain issued and outstanding as one share of New NGC
Common Stock and New NGC Series A Participating Preferred Stock, respectively.
EFFECTIVE TIME
The Combination Agreement provides that the Combination will become
effective at the time and on the date specified in the certificate of merger
relating to the merger of NGC with and into Newco, which will be filed with the
Secretary of State of the State of Delaware on the Closing Date. NGC anticipates
that, if all conditions to the Combination have been satisfied or waived and the
requisite approval from the NGC stockholders has been obtained on August 30,
1996, the certificate of merger will provide that the Merger, and hence the
Combination, will be effective at midnight on August 31, 1996. See "-- Certain
Provisions of the Combination Agreement -- Conditions to the Combination."
POST-COMBINATION OWNERSHIP STRUCTURE
As of the Effective Time, the former NGC stockholders will own, in the
aggregate, approximately 110.9 million shares of New NGC Common Stock (or
approximately 74.2% of the outstanding shares of New NGC Common Stock), and
Chevron will own approximately 38.6 million shares of New NGC Common Stock (or
approximately 25.8% of the outstanding shares of New NGC Common Stock) and
7,815,363 shares of New NGC Series A Participating Preferred Stock, which will
represent all of the issued and outstanding preferred stock of New NGC.
NYSE LISTING
The NGC Common Stock is listed on the NYSE under the trading symbol
"NGL". The NYSE has preliminary indicated that it will continue to list the NGC
Common Stock that is converted into New NGC Common Stock after the consummation
of the Combination under the same trading symbol (NGL). Prior to
37
the consummation of the Combination, NGC anticipates that it will file a
supplemental listing application to list the shares of New NGC Common Stock that
Chevron will own immediately following the Combination.
APPRAISAL RIGHTS
Holders of NGC Common Stock who have not voted in favor to the
Combination will not have any appraisal rights or any right to receive cash for
their shares of NGC Common Stock under Delaware law.
MANAGEMENT AFTER THE COMBINATION
At the Effective Time, the number of directors of New NGC will be
increased from three to 13, and the directors of New NGC will include each of
the ten directors of NGC as of the Effective Time and the three individuals who
are serving as directors of Newco immediately prior to the Effective Time. The
senior management of New NGC will be comprised of the current members of NGC's
senior management, including Mr. C.L. Watson who will serve as New NGC's
Chairman, Chief Executive Officer and President. In addition, Messrs. Stephen A.
Furbacher, formerly President of Warren, and Mark L. Hazelwood, formerly a
Senior Vice President -- Pipeline Operations of Arco Transportation Company,
have each joined NGC and, upon consummation of the Combination, will join New
NGC' senior management as a Senior Vice President of New NGC and President of
Warren and Senior Vice President of New NGC and President of New NGC Global
Energy Services, Inc., respectively. See "Management and Operations After the
Combination."
NGC and Chevron are also engaged in discussions regarding the
integration of NGC and the Contributed Businesses following the Effective Time
with the goal of, among other things, eliminating duplications in personnel,
responsibilities and functions. Following the Effective Time, it is anticipated
that a number of officers and other employees of New NGC may be terminated over
a transition period. The prospective management of New NGC may cause New NGC to
enter into arrangements with officers and other key employees of NGC or Chevron
and their subsidiaries who are terminated or who resign following the
Combination, including employment, retainer or various other arrangements, to
assure access to such employees' expertise and knowledge of NGC or Chevron
operations, as required.
GOVERNMENTAL AND REGULATORY FILINGS AND APPROVALS
HSR ACT. Under the HSR Act, certain acquisition transactions, including
the Combination, may not be consummated unless certain information has been
furnished to the FTC and the United States' Department of Justice and certain
waiting period requirements have been satisfied. Under the HSR Act, certain
parties with significant interests in the Combination, including NGC, Chevron,
British Gas, NOVA, and Messrs. Watson, Bergstrom, Randolph and Ulrich filed
Notification and Report Forms under the HSR Act to provide the FTC with certain
information in order to allow the FTC to evaluate the antitrust aspects of the
transaction. On July 12, 1996, the FTC issued second requests for information
under the HSR Act to NGC and Chevron. The issuance of a second request indicates
that the FTC believes that the Combination raises issues under the antitrust
laws that require close examination.
NGC and Chevron have participated in discussions in which members of
the FTC Staff have expressed significant antitrust concerns concerning the
Combination, focused upon certain fractionation facilities and operations that
comprise a part of NGC and the Contributed Businesses. The FTC Staff is
continuing to investigate the Combination, and NGC and Chevron have supplied
documents and information in response to the FTC's second requests. To date,
there have been no discussions by NGC or Chevron with the Commissioners of the
FTC, and the FTC itself, to the knowledge of NGC and Chevron, has taken no
position with respect to the antitrust merits of the Combination. The outcome of
the ongoing investigation is uncertain.
NGC and Chevron are vigorously defending the legality of the
Combination under the antitrust laws. There can be no assurance, however, that
the FTC will not request the divestiture of certain assets in order to resolve
antitrust concerns that it may find are presented by the Combination. In the
event the FTC makes such a request and NGC and Chevron agree, the divestiture
commitment would likely be embodied in a consent decree requiring New NGC to
accomplish the divestiture within a specified period of time
38
following consummation of the Combination. In such an event, New NGC may not be
able to realize the full fair value of an asset that was required to be sold, or
may be required to dispose of an asset that it considers important in deriving
the full benefits and synergies from the Combination.
If the parties were unable to resolve any antitrust concerns expressed
by the FTC, either through a consent decree or through an FTC decision to close
its investigation, and were to proceed toward consummation of the Combination,
it is likely that the FTC would seek to enjoin the Combination, in whole or in
part, under the antitrust laws by filing a complaint in a United States District
Court requesting the court to temporarily enjoin the Combination until
administrative litigation before the FTC challenging the Combination is
commenced and resolved. Therefore, although the approval of the FTC is a
condition to the obligation of NGC and Chevron to effect the Combination which
could be waived, the practical effect of this process is that the Combination
will not be consummated until the issues raised by the FTC are resolved. See
"Risk Factors -- Governmental and Regulatory Filings and Approvals."
EU FILING. Under the EU Merger Regulation, certain transactions may not
be consummated until they have been notified to and cleared by the competition
authorities of the European Commission. Accordingly, NGC, ChevCorp, British Gas,
and NOVA submitted to the European Commission a joint notification under the EU
Merger Regulation. On July 25, 1996, the European Commission cleared the
Combination.
OTHERS. NGC and Chevron have made or anticipate making certain filings
with various federal, state and local governments and agencies. These filings
relate to, among other things, filings by the parties with local governments to
effect the transfer of real estate that is a part of the Contributed Businesses,
filings with the FERC regarding the contribution by Chevron to Newco of the
Contributed West Texas LPG Pipeline Business, and filings with the United States
Coast Guard regarding the transfer by Chevron of barges to a joint venture
between Chevron and New NGC. Other than the filings and approvals set forth
above, NGC and Chevron are not aware of any other governmental or regulatory
approvals required for consummation of the Combination, other than compliance
with applicable securities laws.
ACCOUNTING TREATMENT
The Combination will be accounted for as a purchase of the Contributed
Businesses by NGC. New NGC, as the surviving corporation, will reflect, in its
consolidated financial statements, the assets and liabilities of NGC at book
value and the assets and liabilities of the Contributed Businesses at the fair
market value (determined in accordance with accounting guidelines) of the
consideration to be paid to the Contributing Parties for the Contributed
Businesses. In accordance with accounting guidelines, the fair market value of
the Contributed Businesses shall be based upon (i) the market value of the NGC
Common Stock on and around January 21, 1996, the date on which NGC and Chevron
entered into the Exclusivity Agreement and (ii) the amount of indebtedness that
New NGC will assume or issue in connection with the Combination.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the principal federal income tax
consequences associated with the Merger to an NGC stockholder who is a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States and who holds
shares of NGC Common Stock as a capital asset. The following discussion does not
address the potential tax consequences applicable to stockholders (i) who have
received such shares in connection with the performance of services, (ii) who
are dealers in securities or (iii) who are subject to special treatment under
the Code (such as insurance companies, tax-exempt organizations, nonresident
alien individuals or foreign entities).
The following summary is based on the Code, applicable Treasury
Regulations, judicial authority and administrative rulings and practice, all as
of the date hereof. There can be no assurance that future legislative, judicial
or administrative changes or interpretations will not materially alter the
statements and conclusions set forth herein. Any such changes or interpretations
could be applied retroactively and could
39
affect the tax consequences of the Combination Agreement to Chevron and its
stockholders, Newco, and NGC and its stockholders. No ruling has been requested
from the IRS with respect to any of the matters discussed herein and, thus, no
assurance can be provided that opinions and statements set forth herein (which
do not bind the IRS or the courts) will not be challenged by the IRS or would be
sustained by a court if so challenged. Furthermore, the following discussion
addresses only certain federal income tax matters and does not consider any
state, local or foreign tax consequences of the Combination Agreement or the
transactions contemplated thereby.
EACH STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES OF THE COMBINATION AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY AND THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
TAX-FREE REORGANIZATION. The Merger has been structured with the
intention that it qualify as a reorganization under Section 368(a)(1) of the
Code. Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to NGC, has delivered
an opinion to NGC to the effect that:
(i) the Merger will qualify as a reorganization under Section
368(a)(1) of the Code;
(ii) pursuant to Sections 361(a), 357(a) and 354(a) of the
Code, no gain or loss will be recognized by NGC pursuant to the Merger
or by the NGC stockholders upon the receipt of New NGC Common Stock in
exchange for their NGC Common Stock pursuant to the Merger (except to
the extent of any cash received);
(iii) pursuant to Section 358(a) of the Code, the aggregate
adjusted tax basis of the New NGC Common Stock received by each NGC
stockholder will be the same as the aggregate adjusted tax basis of the
NGC Common Stock exchanged therefor, increased to the extent gain is
recognized upon such exchange and decreased to the extent of cash or
other property received upon such exchange; and
(iv) pursuant to Section 1223(1) of the Code, the holding
period of the New NGC Common Stock received by each NGC stockholder
will include the period for which the NGC Common Stock was held by such
stockholder, provided that the NGC Common Stock was held as a capital
asset at the Effective Time of the Merger.
Such tax opinion relies, as to factual matters, on the present and
continuing accuracy of (i) factual representations made in the Combination
Agreement and (ii) certain factual matters addressed by representations and
letters by certain executive officers of NGC, Chevron, BG Holding and NOVA Gas
(U.S.). Additionally, Counsel has been instructed to assume for purposes of
forming its opinion that: (i) BG Holding, NOVA Gas (U.S.), and the management
stockholders of NGC will continue to hold the NGC Common Stock currently held by
them until the Effective Time; (ii) BG Holding, NOVA Gas (U.S.), and the
management stockholders of NGC will not acquire additional shares of NGC Common
Stock prior to the Effective Time; and (iii) the transactions contemplated by
the Combination Agreement and agreements referenced therein will be consummated
in compliance with all material terms and conditions as described in such
agreements, none which will have been or will be waived or modified by NGC,
Chevron and Newco.
TAX CONSEQUENCES TO NGC, NEWCO, AND NEW NGC. NGC, Newco, and New NGC
will not recognize gain or loss as a result of the Merger. New NGC's aggregate
adjusted tax basis in the assets received from NGC will be the same as NGC's
aggregate adjusted tax basis in such assets. The holding period of the assets
received by New NGC will include the period for which NGC held such assets.
Further, New NGC will not recognize gain as a result of the issuance of shares
of New NGC Common Stock, the payment of cash to Chevron or the assumption of
debt of Chevron in exchange for the Contributed Businesses. In addition, Newco
will treat the contribution of assets by Chevron to Newco for federal income tax
purposes as a transfer described in Section 351 of the Code. Consequently,
Newco's aggregate adjusted tax basis in the assets contributed will be the same
as Chevron's aggregate adjusted tax basis in such assets, increased by the
amount of gain, if any, recognized by Chevron on the transfer.
40
CERTAIN PROVISIONS OF THE COMBINATION AGREEMENT
GENERAL
The following is a brief summary of certain provisions of the
Combination Agreement. The full text of the Combination Agreement is attached
hereto as Appendix II and is incorporated herein by reference. NGC stockholders
are urged to read the Combination Agreement in its entirety.
CONSIDERATION DUE TO THE CONTRIBUTING PARTIES
The following provides a brief description of the consideration that
the Contributing Parties will receive for contributing the Contributed
Businesses to Newco (the "Consideration").
SHARES OF COMMON STOCK AND SERIES A PARTICIPATING PREFERRED STOCK. Upon
consummation of the Contribution, Newco will issue (i) 38,623,210 shares of
Newco Common Stock to Chevron and (ii) 7,815,363 shares of Newco Series A
Participating Preferred Stock to Chevron. Upon consummation of the Combination,
each share of issued and outstanding Newco Common Stock and Newco Series A
Participating Preferred Stock will be automatically converted, without any
action on the part of the holder thereof, into one share of New NGC Common Stock
or New NGC Series A Participating Preferred Stock, respectively.
NEWCO NOTE. Upon consummation of the Contribution, Newco will issue and
deliver the Newco Note to Chevron. Upon issuance, the Newco Note will have an
aggregate principal balance of $138.4 million. The principal balance of the
Newco Note shall be subject to adjustment at Closing in the manner described
under the caption "Consideration Adjustment." At the Effective Time, New NGC
will pay the entire outstanding principal balance of the Newco Note and Chevron
shall cancel such note and return it to New NGC.
ASSUMED INDEBTEDNESS. Upon consummation of the Contribution, Chevron
and Newco will enter into an assumption agreement (the "Note Assumption
Agreement"). Pursuant to the Note Assumption Agreement, Newco will assume
approximately $155.4 million (subject to certain adjustments) in outstanding
principal (as adjusted, the "Assumed Indebtedness") under that certain
promissory note (the "Chevron Capital Note") made payable on demand by Chevron
in favor of Chevron Capital U.S.A. Inc. ("Chevron Capital"). Under the terms of
the Note Assumption Agreement, interest shall accrue on the Assumed Indebtedness
at an annual rate of 7.95% commencing on the Closing Date and shall be due and
payable in equal semi-annual installments on August 14 and February 14 of each
year. Pursuant to the terms of the Note Assumption Agreement, New NGC (as
successor to Newco) shall be obligated to pay the Assumed Indebtedness, plus all
accrued and unpaid interest thereon, on demand by Chevron Capital made on or
after the second anniversary of the Closing Date or, if Chevron Capital does not
demand repayment earlier, on August 14, 2004.
ASSUMED LIABILITIES. Upon consummation of the Contribution, Newco shall
assume all liabilities, obligations or claims, contingent or otherwise and
whether known or unknown, relating to the Contributed Businesses, other than
liabilities associated with (i) the offsite disposal of Hazardous Materials from
the operation of the Contributed Businesses prior to the Contribution Time, (ii)
underpayment of royalties on the production of natural gas prior to the
Contribution Time and (iii) certain specified litigation. Such assumed claims,
liabilities and obligations shall include those relating to leases, easements,
permits, licenses, contracts, facilities and environmental matters. Newco shall
indemnify and hold Chevron harmless against any and all obligations,
liabilities, claims and losses that Chevron may suffer or otherwise incur as a
result of any of the liabilities, claims or obligations that Newco will assume
pursuant to the Contribution Agreement, subject to New NGC's right of
indemnification by Chevron pursuant to the Combination Agreement.
INABILITY TO CONTRIBUTE ASSETS
The Combination Agreement contains provisions to address circumstances
in which the Contributing Parties may not be able to transfer assets that are a
part of the Contributed Business to Newco at Closing, whether due to regulatory
approvals, third parties exercising preferential rights or otherwise. More
41
specifically, if either NGC or Chevron determines in good faith that a
Contributing Party is unable (or in the case of contracts, that it is
impractical) to transfer to Newco an asset or property included in the
Contributed Businesses or is unable to transfer to Newco such asset or property
without a significant loss of use thereof by New NGC, such party shall promptly
communicate such fact to the other party and consult with such party concerning
such impediment. If Chevron and NGC are unable to agree on a solution to
overcome such impediment fully (which could include alternative means of
transferring value effectively), the Contributing Party shall retain such asset
or property (whether one or more, a "Retained Asset") and the net value which
cannot be effectively transferred. In such case, Chevron and NGC shall endeavor
in good faith to determine the fair value of the Retained Asset for purposes of
the Estimated Consideration Adjustment (as defined hereinafter). If the parties
agree on such fair value (the "Agreed Value"), they shall document their
agreement in writing, which shall provide, among other things, the Agreed Value
the parties ascribed to the Retained Asset. The Agreed Value set forth in such
written agreement shall be final and binding on the parties. If Chevron and NGC
are unable to agree on the fair value of the Retained Asset, then not less than
five Business Days prior to the Closing Date, Chevron shall provide NGC with a
document providing a reasonable estimate of the fair value of the Retained Asset
(the "Minimum Value") and the basis for determining such value. The Minimum
Value shall be binding on the parties for the purpose of Closing, but shall be
subject to certain adjustments provided in the Combination Agreement after
Closing. The amount of the Minimum Value or Agreed Value shall result in a
reduction in the Consideration due to the Contributing Parties as set forth
under the caption " -- Consideration Adjustment" below.
During the period commencing on the Closing Date and continuing through
and including the first anniversary thereof (the "Interim Period"), Chevron
shall use its best efforts to transfer to New NGC any Retained Asset or
reasonably equivalent economic value therefor that is reasonably acceptable to
New NGC. In the event that Chevron is able to transfer the Retained Asset to New
NGC during the Interim Period, New NGC shall make a cash payment to Chevron
equal to (i) the sum of the Minimum Value or Agreed Value (as the case may be)
of the Retained Asset plus interest thereon at a rate of 6% per annum from the
Closing Date through and including the date on which the Retained Asset is
transferred to New NGC, less (ii) any net cash flow attributable to such
Retained Asset during such period.
If NGC and Chevron shall have disagreed as to the fair value of a
Retained Asset, and such asset was not transferred during the Interim Period or
the value of such asset was not resolved in the manner described above, then
within five Business Days after the first anniversary of the Closing Date, New
NGC shall refer the matter for resolution by an investment banking firm without
a conflict of interest (the "Independent Value Expert") to be selected by Lehman
Brothers and Goldman Sachs (the "Value Experts") by giving notice to Chevron and
each of the Value Experts of its election to do so. If New NGC fails to provide
Chevron with proper notice, then the Minimum Value shall be conclusively deemed
to be the fair value of the Retained Asset and shall be final and binding on the
parties.
Within ten Business Days after referring a matter to the Value Experts,
the Value Experts shall select the Independent Value Expert. Within five
Business Days thereafter, each party shall deliver to the other party and to the
Independent Value Expert a notice setting forth in reasonable detail the fair
value such party ascribes to each Retained Asset and the basis of such valuation
(the "Decision Notice"). Within five Business Days after receiving the Decision
Notice, the Independent Value Expert shall choose the fair value of the Retained
Asset as set forth in one party's Decision Notice and is not empowered to choose
a different value. The decision of the Independent Value Expert shall be in
writing and shall be final and binding upon the parties.
If the Minimum Value is less than the value attributed to the Retained
Asset by the Independent Expert (the "Definitive Value"), Chevron shall pay New
NGC the difference, together with interest thereon at a rate of 6% per annum
during the period commencing on the Closing Date and continuing through and
including the day preceding payment date. If the Minimum Value is greater than
the Definitive Value, New NGC shall pay Chevron the difference, together with
interest thereon at a rate of 6% per annum during the period commencing on the
Closing Date and continuing through and including the day preceding payment
date.
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CONSIDERATION ADJUSTMENT
The Consideration due to the Contributing Parties will be subject to
the adjustments set forth below (in the aggregate, the "Consideration
Adjustment").
PRE-CLOSING CONSIDERATION ADJUSTMENTS
Five calendar days prior to the Closing Date, Chevron will deliver to
NGC (after consultation with NGC) an estimate of the adjustments to be made to
the Consideration (the "Estimated Consideration Adjustment") based on the
information available at such time. Any increase to the Consideration shall
result in an increase in the principal amount of the Newco Note, and any
decrease in the Consideration shall result in a decrease in the principal
balance of the Newco Note, and if the Newco Note is cancelled as a result of any
Estimated Consideration Adjustment, then the remainder, if any, of the Estimated
Consideration Adjustment shall be applied to reduce principal balance of the
Assumed Indebtedness. The following provides a brief description of the
adjustments that shall be made to the Consideration on the Closing Date.
NGBU FIXED BOOK. The amount of the Newco Note includes a value for the
NGBU long-term fixed price position "book" (the "Fixed Book Value") of $12
million. The Fixed Book Value shall be recomputed as of Closing by marking it to
market pursuant to the terms of the Combination Agreement. The Consideration
will be (i) increased by any amount by which the Fixed Book Value as of the
Closing exceeds $12 million, or (ii) decreased by any amount by which $12
million exceeds the Fixed Book Value as of the Closing Date.
INVENTORY ADJUSTMENT. The amount of each product in the inventory of
Warren will be determined as of the Closing Date based on Chevron's accounting
records. The amounts of product derived from Chevron's accounting records shall
then be compared with the amount of such product that the parties have agreed
that Newco shall receive on the Closing Date pursuant to the Contribution. For
each product, if the amount of such product reflected in the accounting records
is greater (or less) than the amount of such product set forth in the
Combination Agreement, then the difference shall result in an increase (or
decrease) in the Consideration by the value of such amount. Such value shall be
calculated by multiplying the amount of such variance by the amount equal to the
average of the closing Oil Price Information Service ("OPIS") prices for such
product for the ten published days prior to the Closing Date.
DISPOSITION OF ASSETS. The Consideration will be reduced by an amount
equal to any cash or the value of other consideration received or to be received
by Chevron (unless such other consideration is included in the Contributed
Businesses) as a result of any dispositions of any of the properties or assets
that comprise the Contributed Businesses during the period commencing on May 22,
1996 and continuing through and including the Closing Date, except for (i) sales
of inventory, (ii) sales or other dispositions of any of the assets or
properties that comprise the Contributed Businesses to the extent subsequently
replaced with assets or properties of equivalent value prior to the Closing Date
and (iii) minor sales or dispositions of assets or properties comprising the
Contributed Businesses that do not exceed $25,000 individually or $500,000 in
the aggregate.
CASUALTY LOSS. The Consideration will be (i) reduced by the amount of
any Casualty Loss (as defined in the Glossary) that occurs with respect to the
Contributed Businesses after May 22, 1996 and prior to the Closing Date and (ii)
increased by the sum of the amount of any Casualty Loss with respect to the NGC
Facilities that occurs after May 22, 1996 and prior to the Closing Date
multiplied by a fraction, the numerator of which is 28 and the denominator of
which is 72.
RETAINED ASSETS. The Consideration will be reduced by the Minimum Value
or Agreed Value of any Retained Asset. See "-- Inability to Contribute Assets."
NGBU STORED GAS. The Consideration will be increased by the fair market
value of the aggregate amount of natural gas maintained by the NGBU in storage
as of the Closing Date as determined in accordance with the provisions of the
Combination Agreement.
NUG CONTRACT ADJUSTMENTS. The amount of the Newco Note was computed
based on an assumed value for the NUG Contracts (as defined in the Glossary) of
$38 million (the "NUG Value"), based on
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such contracts being marked to market employing fair market values as of April
26, 1996, in accordance with the provisions of the Combination Agreement. The
NUG Value will be recomputed as of the Closing Date, in accordance with the
methodology set forth in the Combination Agreement, and the Consideration shall
be increased by the amount by which the NUG Value as of the Closing Date exceeds
$38 million and decreased by the amount by which $38 million exceeds the NUG
Value as of the Closing Date.
POST JUNE 1ST ADDITIONAL ADJUSTMENTS. In the event that the Closing
Date occurs after June 1, 1996, the following additional adjustments to the
Consideration will be made. The Consideration will (i) be reduced by (A) the net
operating cash flow from the Contributed Warren Business during the period
commencing on June 1, 1996 and continuing through and including the Closing Date
(the "Adjustment Period"), adjusted to give effect to the Ancillary Agreements
relating to the Contributed Warren Business during the Adjustment Period, as if
each of such Ancillary Agreement was in effect as of June 1, 1996, plus the
amount of depreciation and amortization and any write-downs of assets for
accounting purposes, but only to the extent that such write-downs have an
earnings but not a cash effect; and (B) an amount equal to $952,865 per month to
reflect an agreed adjustment to the Consideration for the cash flow from the
Contributed Businesses (excluding the Contributed Warren Business) for the
Adjustment Period (proportionately reduced for each portion of a month if the
Closing does not occur on the first day of a month) and (ii) increased by (A)
any amount reflected in net income relating to (x) Casualty Loss (as defined in
the Combination Agreement) suffered by the contributed Warren Business or (y) a
disposition of assets (see "-- Disposition of Assets" above), (B) the amount of
capital expenditures on the Contributed Warren Business reasonably made by
Chevron during the Adjustment Period in accordance with the Combination
Agreement, (C) interest at 6% per annum during the Adjustment Period on the sum
of the Assumed Indebtedness and the Newco Note, as adjusted to take into account
the Estimated Consideration Adjustment, and (D) an amount equal to $580,482.16
times the number of record dates for the payment of dividends on NGC Stock after
June 1, 1996 through the Closing Date.
POST-CLOSING CONSIDERATION ADJUSTMENTS
As promptly as practicable but in no event later than 90 calendar days
following the Closing Date, Chevron shall deliver to New NGC (after consultation
with New NGC), a schedule (the "Preliminary Adjustment Schedule") setting forth
in reasonable detail the calculation of the actual Consideration Adjustment. The
Preliminary Adjustment Schedule shall be subject to review by New NGC. Within 30
calendar days after its receipt of the Preliminary Adjustment Schedule, New NGC
shall advise Chevron whether based on such review New NGC has any exceptions to
the Preliminary Adjustment Schedule. Unless New NGC shall deliver to Chevron
within such 30 calendar day period a letter specifying in reasonable detail any
such exceptions, the Preliminary Adjustment Schedule shall be conclusive and
binding on New NGC and Chevron. If New NGC shall submit a letter detailing any
exceptions to the Preliminary Adjustment Schedule, then Chevron and New NGC
shall mutually agree on which exceptions shall result in adjustments to the
Preliminary Consideration Adjustment (as adjusted, the "Definitive Consideration
Adjustment").
If the Definitive Consideration Adjustment is greater than the
Estimated Consideration Adjustment, Chevron shall pay New NGC the difference,
together with interest thereon at a rate of 6% per annum during the period
commencing on the Closing Date and continuing through and including the day
preceding payment date. If the Definitive Consideration Adjustment is less than
the Estimated Consideration Adjustment, New NGC shall pay Chevron the
difference, together with interest thereon at a rate of 6% per annum during the
period commencing on the Closing Date and continuing through and including the
day preceding payment date.
ADJUSTMENT REGARDING LONDON OPERATIONS
Chevron agreed, as a contingent reduction to the Consideration due to
Chevron under the Combination Agreement, that if the London Earnings (as defined
in the Glossary) for 1997, 1998 and 1999 (the "Operative Years"), shall equal at
least a total of $54 million as reflected in the calculations contained in a
notice sent by New NGC to Chevron, Chevron shall pay to New NGC, $33 million
plus an amount equal to
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interest on such sum from the Closing Date to the date of payment at a rate of
6% per annum, compounded semi-annually. If the London Earnings from the
Operative Years are more than $30 million but less than $54 million, Chevron
shall pay to New NGC an amount determined by multiplying $33 million by a
fraction, the numerator of which shall be the total net earnings for the
Operative Years in excess of $30 million, and the denominator of which shall be
54 million, plus an amount equal to interest on such sum from the Closing Date
to the date of payment at a rate of 6% per annum, compounded semi-annually.
EMPLOYEE MATTERS
In addition to making several representations, warranties and covenants
regarding their respective employee benefit plans and labor concerns, the
parties to the Combination Agreement have agreed that the NGC Group and the
Chevron Group shall jointly select the employees of the Chevron Group who
currently are associated with the Contributed Businesses who shall receive
offers of employment with New NGC and its Subsidiaries and the employees of the
NGC Group who shall remain employed by the Newco Group. Each of the NGC Group
and the Chevron Group have assumed certain obligations with respect to such
employees under the Combination Agreement. The Chevron Group shall be
responsible for, among other things, certain of such employees' relocation
costs, severance costs, unused or accrued vacation, and post-retirement medical,
dental and life insurance coverage. In addition, certain of Chevron's employee
benefit plans shall fully vest as of the Closing Date with respect to such
employees who are participants in such plans, and Chevron shall permit
distributions to such participants to the extent they are eligible therefor. NGC
and the Newco Group shall be responsible for, among other things, certain of
such employees' severance costs and shall permit such employees to participate
in Newco Group's medical and dental plans, supplemental life insurance coverage,
and employee benefit plans.
ENVIRONMENTAL MATTERS
Pursuant to the Combination Agreement, each party has agreed to
indemnify the other and its respective Subsidiaries and Affiliates for certain
environmental liabilities arising out of, among others things, a Release (as
defined in the Glossary) of a Hazardous Material (as defined in the Glossary) at
a Facility in violation of Environmental and Safety Laws (as defined in the
Glossary). Chevron's and NGC's respective obligations are limited to, among
other things, environmental remediation costs resulting from conditions or
Releases by NGC or Chevron (with respect to the Contributed Businesses) on or
prior to the Closing Date, in each case in violation of Environmental and Safety
Laws as such laws are in effect on the Closing Date. Furthermore, in the case of
an indemnifiable environmental remediation claim, the indemnitor shall only be
obligated for the cost of bringing the property in compliance with Environmental
and Safety Laws in effect on the Closing Date. The Combination Agreement also
includes provisions governing the mechanics of conducting remediation operations
that are covered by the indemnity. Such environmental indemnities shall survive
for a period commencing on the Closing Date and continuing through August 30,
2001, except in cases where a notice covering an environmental indemnity claim
is received by the indemnitor prior to August 30, 2001. In cases where a notice
is received on or prior to August 30, 2001, the indemnity shall survive with
respect to claims covered by such notice. In addition, New NGC will be obligated
to indemnify Chevron for certain losses, liabilities and other expenses relating
to the Contributed Businesses that are incurred by Chevron resulting from
conditions, Releases or violations of Environmental and Safety Laws that occur
after the Closing Date.
TAX MATTERS
Each of the parties to the Combination Agreement has agreed to be
responsible for its own taxes, including any costs incurred with the preparation
of tax returns and tax audits. In addition, New NGC has agreed to indemnify
Chevron (and its subsidiaries and affiliates) with respect to certain taxes of
NGC, and Chevron has agreed to indemnify New NGC with respect to certain taxes
of Chevron (and its subsidiaries and affiliates), and each of such parties has
agreed to indemnify the other for certain taxes that may be incurred as a result
of a breach or other violation of the tax provisions of the Combination
Agreement. Such indemnification obligations shall survive the Closing for a
period ending 90 days after the latest of (i) the lapse of the applicable period
for assessment, imposition or refund of taxes; (ii) receipt by one party of a
45
notice from the other party of any proposed tax adjustments to be borne pursuant
to a tax audit; (iii) the lapse of the applicable period for assessment,
imposition, or refund of taxes relating to the taxable year or period in which
the tax savings are actually realized; or (iv) the determination of the
arbitrator as described in the Combination Agreement.
REPRESENTATIONS AND WARRANTIES
The Combination Agreement contains representations and warranties
customary in transactions such as the Combination by each of NGC and Chevron
relating to, among other things, corporate status and authority, the
authorization and validity of the Combination Agreement, capitalization, the
business and operations of NGC and the Contributed Businesses and governmental
approvals.
CONDUCT OF BUSINESS PRIOR TO COMBINATION
Prior to the consummation of the Combination, NGC has agreed that (i)
it shall, and shall cause each of its Subsidiaries to, (a) carry on its
businesses in the usual, regular and ordinary course and consistent with past
practices, (b) use its commercially reasonable best efforts to preserve its
business organization, maintain its rights and franchises, and preserve its
relationships with customers, suppliers and others having business dealings with
it, except where the failure to so act would not result in a Material Adverse
Effect on NGC, and (c) use its commercially reasonable efforts to keep available
the services of sufficient officers and employees to carry on the business of
NGC; (ii) it shall not (a) except for its regularly scheduled quarterly
dividends of $0.0125 per share, declare or pay any dividend on or make any other
distribution in respect of any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of, its
capital stock, (c) repurchase, redeem or otherwise acquire any shares of its
capital stock, except from employees or their accounts under the Savings Plan
upon the termination of their employment, (d) issue, deliver, sell or authorize
the issuance, delivery or sale of any stock appreciation rights or of any shares
of its capital stock of any class or any securities convertible into, or rights,
warrants or options to acquire, any shares, except for issuances of equity
securities in the ordinary course of business or pursuant to exercises of
existing options and warrants, existing stock purchase plans or the savings
plans, or (e) sell or otherwise dispose of any securities of any Subsidiary, or
enter into any agreement or understanding with respect thereto, except to the
extent otherwise permitted under the Combination Agreement; (iii) it shall not
(a) amend its certificate of incorporation or bylaws, or (b) enter into, or
permit any Subsidiary to enter into, any agreement or incur any obligation, the
terms of which would be violated by the consummation of the transactions
contemplated by the Combination Agreement; (iv) without the consent of Chevron,
enter into agreements or conduct operations which under the NGC Certificate of
Incorporation and Bylaws require the affirmative vote of eight members of the
NGC Board of Directors or unanimous approval of the Executive Committee of NGC;
provided, however, that in making its determination of whether to approve such a
transaction, Chevron shall act in the same manner and with the same fiduciary
responsibilities to the stockholders of NGC as if it were a member of the Board
of Directors considering such matter, (v) except for sales of inventory in the
ordinary course of business and except for sales of other assets and properties
which NGC reasonably determines, after consultation with Chevron, are necessary
or advisable to obtain requisite regulatory approval, NGC shall not, and shall
not permit any Subsidiary of NGC to, sell, lease or otherwise dispose of any of
its assets having a market value in excess of $5 million in any one transaction
or in excess of $10 million in the aggregate; (vi) it will not and will not
permit any Subsidiary to enter into any new line of business; and (vii) it will
not change in any material respect its methods of accounting (a) in effect at
December 31, 1995, except as required by law, IRS regulation or changes in
generally accepted accounting principles with which its independent auditor
concurs, or (b) for income and deductions for federal income tax purposes from
those employed in the preparation of the consolidated federal income tax return
of NGC for the taxable year ending December 31, 1995, except as required by law
or IRS regulation, nor will NGC change its fiscal year.
Prior to the consummation of the Combination, Chevron has agreed that
(i) it shall, and shall cause each of its Subsidiaries and Affiliates to, (a)
carry on the business relating to the Contributed Businesses in
46
the usual, regular and ordinary course and consistent with past practices, (b)
use its commercially reasonable best efforts to preserve its business
organization, maintain its rights and franchises, and preserve its relationships
with customers, suppliers and others having business dealings with the
Contributed Businesses and (c) use its commercially reasonable efforts to keep
available the services of sufficient officers and employees to operate the
Contributed Businesses; (ii) it shall not, and shall not permit any of its
Subsidiaries or Affiliates to, enter into any agreement or incur any obligation,
the terms of which would be violated by the consummation of the transactions
contemplated by the Combination Agreement; (iii) except for sales of inventory
in the ordinary course of business or sales of other assets or properties which
Chevron reasonably determines, after consultation with NGC, are necessary or
advisable to obtain a requisite regulatory approval, Chevron shall not, and
shall not permit any Subsidiary or Affiliate of Chevron to, sell, lease or
otherwise dispose of any of the assets or properties that comprise the
Contributed Businesses having a market value in excess of $1 million in any one
transaction or in excess of $5 million in the aggregate; (iv) from May 22, 1996
until immediately prior to the Contribution, Newco shall be and remain a shell
company, with no assets (other than minimal organizational capital),
liabilities, business or operations, and prior to the Effective Time, Chevron
shall not permit Newco to hire new individuals or adopt, maintain or contribute
to any employee benefit plan, policy, program, agreement or arrangement; (v)
during the period commencing on May 22, 1996 and continuing through and
including the Effective Time, Newco shall not issue, deliver, sell or authorize
or otherwise agree to the issuance, delivery or sale of any stock appreciation
rights or of any shares of its capital stock or any class of securities
convertible into, or rights, warrants or options to acquire any shares of its
capital stock, except as contemplated by the Combination Agreement; and (vi)
during the Adjustment Period, neither Chevron nor its Subsidiaries or Affiliates
shall make any capital expenditures in respect of the Contributed Businesses in
an amount that exceeds $1 million for any single transaction or with respect to
any single asset or property comprising a part of the Contributed Businesses or
$5 million in the aggregate, except for capital expenditures for which Newco or
Chevron has received the prior written consent of NGC.
NGC and Chevron have agreed that during the period commencing on May
22, 1996 until the Termination Date, neither of them will nor will they
knowingly permit or authorize any officer, director or employee of, or any
investment banker, attorney, accountant or other representative retained by,
either party or its Subsidiary to solicit, initiate, or encourage the submission
of any communication or participate in any negotiations regarding:
(i) any possible or proposed transaction involving the
disposition of $100 million or more in value of interests in the assets
or properties of NGC or comprising the Contributed Businesses (a
"Significant Disposition"); or
(ii) any possible or proposed transaction in North America
substantially similar in nature and scope to the Combination or
involving the acquisition by NGC or Chevron of $250 million or more in
value of interests in (a) assets substantially similar to the assets
owned as of May 22, 1996 by NGC or (b) the Contributed Businesses (an
"Alternative Transaction").
CERTAIN PRE-CLOSING COVENANTS
Pursuant to the Combination Agreement, each of NGC and Chevron has
agreed that it will, among other things, (i) provide the other party or their
respective accountants, counsel or other representatives with reasonable access
to its personnel, properties, contracts, commitments, books and records
necessary to evaluate the Combination; (ii) consult with the other party prior
to making any press releases or other public disclosures regarding the
Combination Agreement or transactions contemplated thereby; (iii) promptly
inform the other party of the occurrence or non-occurrence of any event which
would be likely to cause any representation or warranty in the Combination
Agreement to be inaccurate, or any covenant, condition or agreement therein to
not be satisfied; and (iv) use reasonable efforts to take all actions, or cause
to be done all things, necessary to consummate the transactions contemplated by
the Combination Agreement as soon as practicable, including, among other things,
seeking or making all filings, orders, consents or authorizations required under
applicable law and obtaining consents from governmental bodies or parties to any
material contracts.
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CONDITIONS TO THE COMBINATION
Pursuant to the Combination Agreement, the obligations of NGC and
Chevron to effect the Combination are subject to, among other things, (i)
obtaining any requisite regulatory approvals, (ii) this Proxy
Statement/Prospectus having become effective under the Securities Act, and no
stop order suspending its effectiveness shall have been issued; (iii) the NYSE
confirming in writing that the New NGC Common Stock has been accepted for
listing on the NYSE and (iv) approval of the Combination Agreement from NGC
stockholders at the Special Meeting having been obtained. In addition, the
obligations of NGC and Chevron to effect the Combination are subject to there
being no injunction, order, decree, restraint, suit or other prohibition that
would prevent the consummation of the Combination and there being no action,
suit or proceeding by the Department of Justice or the FTC that would materially
and adversely affect the rights of certain current stockholders of NGC to
control New NGC upon consummation of the Combination or for New NGC and certain
of its Subsidiaries to own their respective assets or operate their respective
businesses. Such condition recognizes the authority of the FTC and the
Department of Justice to take action under the antitrust laws of the United
States, including the HSR Act, with respect to the Combination, including
seeking to enjoin the Combination or requiring the divestiture of certain assets
of NGC or the Contributed Businesses. See "Risk Factors -- Governmental and
Regulatory Approvals and Filings" and "The Combination -- Governmental and
Regulatory Filings and Approvals".
The obligation of NGC to effect the Combination is subject to, among
others, the following conditions, each of which may be waived by NGC in its sole
discretion: (i) the representations and warranties of Chevron contained in the
Combination Agreement having been true and correct on the date of the
Combination Agreement, other than such breaches of such representations and
warranties which in the aggregate would not reasonably be expected to have a
Material Adverse Effect on the Contributed Businesses of in excess of $25
million (including Casualty Losses suffered by Chevron, and the fair value of
any Retained Assets), (ii) Chevron shall have performed and complied in all
material respects with all agreements, obligations, and conditions required by
the Combination Agreement to be performed or complied with it on or prior to the
Closing Date, (iii) NGC shall have received an opinion of counsel from Pillsbury
Madison & Sutro LLP, counsel to Chevron, with respect to (A) the due
authorization, execution and delivery of the Combination Agreement by Chevron
and Newco and (B) the authorized, issued and outstanding capital stock of Newco,
(iv) Chevron and Newco shall have each executed and delivered the Contribution
and Assumption Agreement, (v) Chevron shall have received all of the material
consents from third parties set forth in the Combination Agreement, (vi) Chevron
shall have caused each officer of Newco to have resigned as of the Effective
Time, except for those officers that will continue serving as officers of New
NGC pursuant to the Combination Agreement, (vii) NGC shall have received certain
tax representations and affidavits from Chevron and (viii) each agreement
attached as an exhibit to the Combination Agreement which Chevron or any of its
Subsidiaries or Affiliates is a party shall have been executed and delivered by
Chevron and such Subsidiaries and Affiliates (as applicable) on or before the
Closing Date.
The obligation of Chevron to effect the Combination is subject to,
among others, the following conditions, each of which may be waived by Chevron
in its sole discretion: (i) the representations and warranties of NGC contained
in the Combination Agreement having been true and correct on the date of the
Combination Agreement, other than such breaches of such representations and
warranties which in the aggregate would not reasonably be expected to have a
Material Adverse Effect on NGC of in excess of $25 million (including Casualty
Losses suffered by NGC and any amounts to which Chevron is entitled under the
environmental indemnification provisions of the Combination Agreement), (ii) NGC
shall have performed and complied in all material respects with all agreements,
obligations, and conditions required by the Combination Agreement to be
performed or complied with it on or prior to the Closing Date, (iii) Chevron
shall have received an opinion of counsel from Akin, Gump, Strauss, Hauer &
Feld, L.L.P., counsel to NGC, with respect to (A) the due authorization,
execution and delivery of the Combination Agreement by NGC and (B) the
authorized, issued and outstanding shares of capital stock of NGC, (iv) Chevron
shall have received certain tax representations from BG Holding, NOVA Gas (U.S.)
and certain other individuals and (v) each agreement attached to the Combination
Agreement as an exhibit to which
48
NGC or any of its Subsidiaries or Affiliates is a party shall have been executed
and delivered by NGC and such Subsidiaries and Affiliates (as applicable) on or
before the Closing Date.
AMENDMENTS AND WAIVERS
The Combination Agreement may be amended to the extent permitted by law
(but only by written agreement) at any time prior to the Closing Date. Any
provision contained in the Combination Agreement may be waived in writing by the
party benefiting from such provision.
TERMINATION
REASONS FOR TERMINATION. The Combination Agreement may be terminated at
any time prior to the Effective Time (i) by mutual consent of the Board of
Directors of NGC and Chevron; (ii) by either NGC or Chevron if the Combination
has not occurred by the close of business on September 30, 1996, other than as a
result of a failure to fulfill any covenant under the Combination Agreement by
the terminating party (other than a breach of the covenant that the parties use
reasonable efforts to consummate the Combination); (iii) by NGC, upon a breach
of a representation, warranty or covenant on the part of Chevron set forth in
the Combination Agreement, or if any representation or warranty of Chevron shall
become untrue, that results in a Material Adverse Effect in excess of $25
million in the aggregate in respect of the Contributed Businesses; provided that
if such breach is cured by Chevron within 30 calendar days after notice thereof
through the continuous exercise of its reasonable best efforts, then NGC may not
terminate the Combination Agreement as a result of such breach, (iv) by Chevron,
upon a breach of a representation, warranty or covenant on the part of NGC set
forth in the Combination Agreement, or if any representation or warranty of NGC
shall become untrue, that results in a Material Adverse Effect in excess of $25
million in the aggregate in respect of NGC; provided that if such breach is
cured by NGC within 30 calendar days after notice thereof through the continuous
exercise of its reasonable best efforts, then Chevron may not terminate the
Combination Agreement as a result of such breach, (v) by either NGC or Chevron
if either Chevron or NGC, respectively, solicits, initiates or encourages the
submission or communication of an Alternative Transaction or Significant
Disposition; (vi) by either party in the event a governmental entity shall have
issued an order, decree or ruling or taken any other action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Combination.
TERMINATION FEE. In the event the Combination Agreement is terminated
by NGC or Chevron pursuant to clause (v) under "Reasons For Termination" above,
then the breaching party shall pay the other party the amount of $30 million by
wire transfer of immediately available funds as liquidated damages; provided,
however, that in no event shall a party be obligated to pay the other party $30
million in liquidated damages if the other party, at the time it terminated the
Combination Agreement, could not satisfy the applicable conditions to Closing.
If within six months following the Termination Date, either Chevron or
NGC (an "Acting Party") signs a definitive agreement concerning, or issues a
public announcement contemplating consummation of, an Alternative Transaction or
a Significant Disposition with any Person or Affiliate of such Person who, prior
to the Termination Date, has made or caused to be made a proposal to such Acting
Party communicating price terms for an Alternative Transaction or a Significant
Disposition, then the Acting Party shall pay to the other party, on the first
Business Day following such action, the amount of $30 million in liquidated
damages by wire transfer of immediately available funds to an account designated
by the other party; provided, however, that in no event shall the Acting Party
be obligated to pay $30 million in liquidated damages if the Combination
Agreement was terminated by the Acting Party as a result of a failure by the
other party to satisfy any of the applicable conditions to Closing.
The Combination Agreement provides that (i) in no event shall more than
$30 million in liquidated damages be paid thereunder and (ii) in the event that
either party pays or is obligated to pay $30 million in liquidated damages under
the Combination Agreement, each party thereto shall thereafter be free to effect
an Alternative Transaction or Significant Disposition at any time without
recourse by the other party.
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ADOPTION OF NEWCO CERTIFICATE OF INCORPORATION
The Combination Agreement provides that upon consummation of the
Combination, Newco will be the corporation legally surviving the Combination and
Newco's Certificate of Incorporation and Bylaws will become the certificate of
incorporation and bylaws of New NGC. Although the New NGC Certificate of
Incorporation will be similar in many respects to the NGC Certificate of
Incorporation, there will be some important differences. Namely, the New NGC
Certificate of Incorporation will contain a provision that restricts New NGC
from selling certain types of products in certain regions of the world without
the approval of stockholders that own 85% of the outstanding shares of New NGC
Common Stock, subject to certain exceptions. See "Risk Factors -- Prohibition
Against Conducting Certain Business Activities." In addition, the New NGC
Certificate of Incorporation will contain provisions setting forth the terms of
the New NGC Series A Participating Preferred Stock, all of which will be owned
by Chevron on the Closing Date. See "Risk Factors -- Control by British Gas,
NOVA and Chevron." For further information on the differences between the NGC
Certificate of Incorporation and the New NGC Certificate of Incorporation, see
"Comparison of Rights of Holders of NGC Common Stock and New NGC Common Stock."
EFFECT OF COMBINATION ON CERTAIN DEBT OF NGC
Pursuant to the Combination Agreement, New NGC will be required to take
any and all actions necessary to assume the Senior Notes of NGC and all
obligations under the NGC Credit Agreement, dated as of March 14, 1995 (the "NGC
Credit Agreement"), by and among NGC, The First National Bank of Chicago and
certain other institutions which are parties thereto. NGC believes that the
indenture governing the Senior Notes permits NGC to consummate the Combination,
provided that New NGC assumes the Senior Notes. NGC contemplates that New NGC
will assume the Senior Notes on the Closing Date (immediately following the
Closing). The NGC Credit Agreement will require NGC to receive a waiver prior to
consummating the Combination. NGC believes that it will obtain such a waiver
prior to the Closing Date.
STOCKHOLDER AGREEMENTS
The following is a brief summary of certain agreements which certain
stockholders of NGC and, in certain cases, Chevron entered into on May 22, 1996
or will enter into as of the Closing Date. Such agreements are exhibits to the
Registration Statement and are hereby incorporated herein by reference. NGC
stockholders are urged to read these agreements in their entirety.
VOTING AGREEMENTS
In connection with the execution of the Combination Agreement, Chevron
entered into Voting Agreements with each of BG Holding, NOVA Gas (U.S.), C.L.
Watson, Chairman of the Board, Chief Executive Officer and President of NGC,
Bruce M. Withers, Vice Chairman of NGC, Stephen W. Bergstrom, Senior Vice
President of NGC and President of Clearinghouse, H. Keith Kaelber, Senior Vice
President, Chief Financial Officer and President of the Financial Services
Division of NGC and Kenneth E. Randolph, Senior Vice President, General Counsel
and Secretary of NGC (collectively, the "Majority Stockholders"), which
collectively own approximately 80% of the outstanding shares of NGC Common Stock
as of the Record Date (collectively, the "Majority Stockholder Shares").
Pursuant to the terms of the Voting Agreements, the Majority Stockholders have
agreed to vote the Majority Stockholder Shares at any meeting or action by
written consent, and have agreed to execute a proxy in favor of Chevron to vote
the Majority Stockholder Shares (i) in favor of the Merger pursuant to the
Combination Agreement and the transactions contemplated thereby and (ii) against
any proposal (other than pursuant to the Combination Agreement) for the
amendment of the NGC Certificate of Incorporation or Bylaws or any merger,
consolidation, sale or purchase of assets, reorganization, recapitalization,
liquidation or winding up of or by NGC or sale of all or substantially all of
the stock or assets of a subsidiary of NGC, in any case, other than as permitted
or contemplated by the Combination Agreement. The obligation of the stockholders
under their respective Voting Agreements shall terminate on the earliest of (i)
the Effective Time of the Combination, (ii) the date of termination of the
Combination Agreement in accordance with Article 13 thereof or (iii)
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December 31, 1996. Any proxy granted to Chevron under any of the Voting
Agreements will be irrevocable for the term of the Voting Agreements and will be
coupled with an interest. Upon consummation of the Combination, the Majority
Stockholders will hold approximately 59.4% of the New NGC Common Stock.
NEW NGC STOCKHOLDERS AGREEMENT
GENERAL. In connection with the Trident Combination, Holding (as
predecessor in interest to NGC), BG Holding, NOVA Gas (U.S.) and certain other
parties entered into a Stockholders Agreement, effective as of March 14, 1995
(the "Clearinghouse Owners Stockholders Agreement"), which relates to certain
voting arrangements, transfer restrictions, corporate governance, preemptive
rights and other matters. Upon consummation of the Combination, the
Clearinghouse Owners Stockholders Agreement will be terminated. BG Holding, NOVA
Gas (U.S.) and Chevron have entered into the New NGC Stockholders Agreement,
which will become effective as of the Effective Time, which relates to certain
voting arrangements, transfer restrictions, corporate governance and other
matters. The following is a brief description of the New NGC Stockholders
Agreement.
BOARD OF DIRECTORS. The parties to the New NGC Stockholders Agreement
have agreed to vote their New NGC Common Stock, subject to certain conditions,
to cause the New NGC Board of Directors to consist of 13 directors to be
nominated as follows:
(i) each of the BG Group, NOVA Group and Chevron Group may
nominate (A) three directors as long as it remains a Class A Group (as
defined below); (B) two directors as long as it remains a Class B Group
(as defined below); and (C) one director as long as it remains a Class
C Group (as defined below);
(ii) two members shall be officers of New NGC, the nomination
of whom shall be as follows: (A) so long as his employment agreement so
provides, the Chief Executive Officer of New NGC (1) shall be a member
of the New NGC Board of Directors and (2) shall nominate another
officer of New NGC; (B) if the Chief Executive Officer is no longer
required to be a member of the New NGC Board of Directors pursuant to
his employment agreement, then two officers of New NGC shall be
nominated by the New NGC Board of Directors;
(iii) two members shall be independent directors, the
nomination of whom shall be as follows: (A) one member shall be a
nominee of HMTF to the extent required by the Trident Stockholders
Agreement and one member shall be nominated by the New NGC Board of
Directors; (B) at all other times, both such members shall be nominated
by the New NGC Board of Directors;
(iv) all other members, if any, shall be nominated and elected
in accordance with applicable law.
Pursuant to the New NGC Stockholders Agreement, (i) a "Class A Group"
is defined as a Group (as defined in the Glossary) that owns collectively at
least 34,760,890 shares of New NGC Common Stock; (ii) a "Class B Group" is
defined as a Group that owns collectively at least 23,173,926 shares of New NGC
Common Stock but less than 34,760,890 shares of New NGC Common Stock, and (iii)
a "Class C Group" is defined as a Group that owns collectively at least
11,586,963 shares of New NGC Common Stock but less than 23,173,926 shares of New
NGC Common Stock. Upon consummation of the Combination, the BG Group, the NOVA
Group and the Chevron Group will each own 38,623,211 shares of New NGC Common
Stock and, accordingly, will each be a Class A Group under the New NGC
Stockholders Agreement. Consequently, the BG Group, NOVA Group and Chevron Group
will each be entitled to designate three directors to serve on the New NGC Board
of Directors based their ownership of New NGC Common Stock upon consummation of
the Combination.
VOTING ARRANGEMENTS ON CERTAIN MATTERS. The parties to the New NGC
Stockholders Agreement have agreed not to vote in their capacity as stockholders
in favor of any of the following matters unless each party that is a Class A
Group informs each other Group that such Class A Group is in favor of such
action: (i) any amendment to the New NGC Certificate of Incorporation or Bylaws;
(ii) any sale of all or substantially all of the assets of New NGC, including
any amendment to the terms of such sale; (iii) any
51
merger or consolidation of New NGC with any person, or any liquidation or
dissolution of New NGC, including any amendment to the terms of such merger,
consolidation, liquidation or dissolution.
EXECUTIVE COMMITTEE. The New NGC Stockholders Agreement provides that
each of the BG Group, the NOVA Group and the Chevron Group, as long as any such
Group is a Class A Group or a Class B Group, may designate one director as a
member of the executive committee of the New NGC Board of Directors.
TRANSFER RESTRICTIONS. The New NGC Stockholders Agreement generally
prohibits transfers by the parties of shares of New NGC Common Stock prior to
January 1, 1997. On or after January 1, 1997, the parties may transfer shares
subject to certain preferential purchase rights in favor of the other Groups.
Certain indirect transfers of shares of New NGC Common Stock also give rise to
the preferential purchase rights. Transfers among members of a Group and certain
other specified transfers are exempt from the restrictions.
RESTRICTIONS ON CERTAIN PURCHASES AND AGREEMENTS. Subject to certain
exceptions, the parties to the New NGC Stockholders Agreement have agreed that
prior to January 1, 1997, no party will acquire ownership of any additional
shares of New NGC Common Stock. Any Group that is subject to the New NGC
Stockholders Agreement that is contemplating acquiring additional shares of New
NGC Common Stock must offer the other Groups the opportunity to participate in
such acquisition so that each Group may, if it chooses, stay at the same
ownership level as the other Groups. The parties to the New NGC Stockholders
Agreement have agreed, subject to certain exceptions, not to enter into any
voting trust or agreement or other stockholders agreement (other than the
Trident Stockholders Agreement) with respect to the acquisition, disposition or
voting of New NGC Common Stock.
TERM; TERMINATION; CERTAIN WAIVERS. The New NGC Stockholders Agreement
will have an initial term of ten years commencing at the Effective Time, which
may be extended up to three additional years by any Class A Group that provides
notice to each other Group prior to the date 90 days prior to the tenth
anniversary of the Effective Time. Upon expiration of the initial term (or any
extension thereof, if applicable), the New NGC Stockholders Agreement will
automatically renew on an annual basis for an additional year commencing on the
last day of the initial term or, if extended, the last day of the renewal term,
unless a party to the New NGC Stockholders Agreement objects not less than 90
days prior to the commencement of the renewal period or unless, in each case,
the agreement is terminated earlier in the manner set forth below. The New NGC
Stockholders Agreement shall terminate prior to the expiration of the initial
term or any renewal term on (i) the first date on which all Groups that have
rights under such agreement collectively own less than 30% of the New NGC Common
Stock, (ii) the date of the dissolution, liquidation or winding up of New NGC
without a successor corporation, (iii) ten business days following the date of
the delivery to the other parties of a written termination notice executed by a
Class A Group that then owns a number of shares of New NGC Common Stock in
excess of 50% of the New NGC Common Stock, which notice shall include copies of
a consent to such termination by each other Class A Group and (iv) ten business
days following the date of the delivery to the other parties of a written notice
executed by a Class A Group that owns 75% of the issued and outstanding shares
of New NGC Common Stock. In general, the New NGC Stockholders Agreement may only
be altered, supplemented, amended or waived by the written consent of each
party.
JOINT VENTURES. For a period of two years from the Effective Time, the
written consent of each Class A Group will be required for the formation of any
partnership or other business arrangement involving shared ownership between New
NGC and any member of a Class A Group, provided that such consent will not be
required for any such arrangement involving crude oil, or products refined from
crude oil or NGLs or LPGs involving Caltex directly or through one or more
members of the Chevron Group. Thereafter, no Group will, either directly or
indirectly, form any partnership or other business arrangement involving shared
ownership between New NGC and any member of such Group without prior
consultation with each Class A Group.
52
SCOPE OF BUSINESS AGREEMENT
Newco and ChevCorp have entered into a Scope of Business Agreement
relating to certain business opportunities and benefits that accrue to Chevron
under that certain Caltex Operating Agreement (the "Caltex Operating Agreement")
between Chevron and Texaco Inc. concerning Caltex. Upon consummation of the
Combination, New NGC will be subject to all of Newco's rights and obligations
under this agreement. Pursuant to the Scope of Business Agreement, one or more
members of the Chevron Group may provide New NGC from time to time with
information about Caltex or the Chevron Group to facilitate discussions of
Caltex-related commercial opportunities suitable for exploitation in whole or in
part by New NGC. Any confidential or proprietary information provided to New NGC
pursuant to such agreement may not be disclosed by New NGC to any third party,
except as otherwise required by law. Following an exchange of such information,
Chevron and New NGC will consult concerning the mutual desirability and
feasibility of New NGC, alone or in conjunction with members of the Chevron
Group, exploiting the Caltex-related commercial opportunities. After such
consultations, New NGC may conduct business with Caltex through one or more
members of the Chevron Group, or separately, as the case may be, but in each
case as mutually agreed between Chevron and New NGC.
The Scope of Business Agreement shall terminate, from and after the
Combination, if (a) members of the Chevron Group collectively own less than
11,586,983 shares of New NGC Common Stock, as adjusted to reflect any
reclassification, subdivision or combination of the outstanding shares of New
NGC Common Stock into a greater or lesser number of shares of Common Stock and
to give effect to any recapitalization, merger or consolidation in which all
outstanding shares of New NGC Common Stock are exchanged for capital stock of a
successor to New NGC, and (b) no nominee of the Chevron Group is represented on
the Board of Directors of New NGC or any corporate successor to New NGC. The
Scope of Business Agreement shall also terminate if no member of the Chevron
Group remains an owner of shares of Caltex or any successor thereto, or
otherwise as mutually agreed by the parties thereto. In the event that the Scope
of Business Agreement terminates, the charter provisions prohibiting New NGC
from engaging in certain types of business activities without stockholder
approval terminates as well. See "Description of Newco Certificate of
Incorporation and Bylaws -- Restrictions on Business Activities."
REGISTRATION RIGHTS AGREEMENT
NGC, BG Holding, NOVA Gas (U.S.) and Chevron will enter into a
Registration Rights Agreement, effective on the Closing Date, which grants,
subject to certain restrictions, each of BG Holding, NOVA Gas (U.S.) and Chevron
the right to demand on up to three occasions, the registration of their New NGC
Common Stock under the Securities Act. BG Holding, NOVA Gas (U.S.) and Chevron
may exercise their demand registration rights by providing New NGC a written
request, whereupon NGC as expeditiously as reasonably possible must prepare and
file a registration statement under the Securities Act to effect the offering of
stock held; provided, however, that if the registration request covers less than
5% of the then outstanding shares of New NGC Common Stock, then New NGC will not
be required to prepare such registration statement.
In addition, the Registration Rights Agreement will grant certain
"piggy back" registration rights to BG Holding, NOVA Gas (U.S.) and Chevron. All
expenses of any registrations under the Registration Rights Agreement will be
borne by New NGC, other than applicable underwriting fees, discounts or
commissions and certain out-of-pocket expenses of the selling stockholders. New
NGC will further agree to indemnify the selling stockholders against certain
securities law liabilities.
53
ANCILLARY AGREEMENTS
GENERAL
Pursuant to the Combination, NGC and Chevron, or affiliates thereof,
will enter into certain ancillary supply, sales and service agreements with
respect to natural gas, natural gas liquids and electricity. Under these
agreements, New NGC (as successor in interest to NGC or Newco, as the case may
be) will have the right to purchase and/or market substantially all natural gas
and natural gas liquids produced or controlled by Chevron in the United States
(except Alaska) and to supply natural gas and feedstock to Chevron refineries
and Chevron Chemical plants in the United States. In addition, under certain of
the ancillary agreements, New NGC will purchase NGLs and other products from
Chevron and Chevron Chemical. Under certain other ancillary agreements, New NGC
will have the right to participate in future opportunities to provide
electricity to United States facilities of Chevron and Chevron Chemical, as well
as to purchase or market excess electricity generated by such facilities.
Finally, certain ancillary agreements provide for New NGC and Chevron or their
affiliates to provide certain services to each other, both on an interim and a
long term basis.
The following is a summary description of the material ancillary
agreements, each of which will be entered into by the parties thereto on or
prior to the Closing Date, and each of which, unless stated otherwise, will
become effective as of the Effective Time. The material ancillary agreements
have been filed as exhibits to the Registration Statement and are incorporated
herein by reference. NGC stockholders are urged to read all of such agreements
in their entirety. Upon consummation of the Combination, New NGC or one of its
affiliates will assume all of the rights and responsibilities of NGC and Newco
under these agreements. Therefore, any reference to NGC or Newco in the
following description of the agreements shall be a reference to New NGC or its
affiliates after the Combination. Furthermore, all references to Warren LP in
the following discussion shall refer to Warren Petroleum Company, Limited
Partnership, which will be a wholly-owned subsidiary of New NGC. After
consummation of the Combination, New NGC will contribute the Contributed Warren
Business to Warren LP and the Contributed NGBU Business to Clearinghouse.
NATURAL GAS PURCHASE AND SALE AGREEMENT
Chevron and Clearinghouse will enter into a Natural Gas Purchase and
Sale Agreement, under which Chevron will agree to sell and Clearinghouse will
agree to purchase substantially all gas produced and owned or controlled by
Chevron in the United States (except Alaska), subject to certain conditions and
exceptions. The price paid by Clearinghouse to Chevron for the gas delivered to
Clearinghouse will be a market responsive price based on prevailing index prices
reported in commercial publications, will change each month, and will vary by
source of supply and delivery point. The Natural Gas Purchase and Sale Agreement
will provide for liquidated damages if either party fails to deliver or purchase
at least 95% of the quantity of gas designated for delivery by Chevron in a
given month. This agreement will remain in effect for an initial term of ten
years, and for additional five year terms thereafter unless terminated by either
party by giving written notice of termination no later than 60 days' prior to
the last day in the then effective term. In addition, a party may terminate this
agreement in the event the other party (i) materially breaches the agreement and
fails to cure after receipt of notice, (ii) dissolves, or (iii) becomes
insolvent or bankrupt.
Pursuant to the Natural Gas Purchase and Sale Agreement, Clearinghouse
will be required to provide Chevron one or more letters of credit from a bank or
banks acceptable to Chevron and in an aggregate amount determined monthly based
on estimated volumes of gas to be delivered by Chevron, applicable index prices
and Clearinghouse's open line of credit. In general, the higher the index prices
of gas and volumes delivered under the Natural Gas Purchase and Sale Agreement,
the higher the amount of the letter(s) of credit. Based on Clearinghouse's
initial estimate of the initial volumes of gas to be delivered by Chevron,
current index prices of natural gas and Clearinghouse's initial open line of
credit, NGC anticipates that Clearinghouse will be required to provide an
initial letter of credit in the amount of approximately $225 million pursuant to
the terms of the Natural Gas Purchase and Sale Agreement.
NGC is currently in the process of obtaining a new $300 million letter
of credit and reimbursement facility (the "LC Facility"), the express purpose of
which will be to provide (i) letters of credit in support
54
of New NGC's obligations under the Natural Gas Purchase and Sale Agreement and
(ii) loans to the extent of any unreimbursed drawings made by Chevron under such
letters of credit. NGC has received a proposal from Canadian Imperial Bank of
Commerce ("CIBC"), as the agent bank, to fully underwrite the LC Facility;
however, NGC has elected to syndicate the LC Facility on a "best efforts" basis.
As of the date of this filing, CIBC has committed $50 million to the LC Facility
and is in the process of syndicating the remaining portion of the LC Facility.
NGC's management believes that the syndication of the LC Facility will be
complete prior to the Effective Time. It is anticipated that the LC Facility
will mature 364 days after the date it becomes effective and will contain
certain financial and other covenants similar to those contained in the NGC
Credit Agreement. In addition, it is contemplated that the obligations of New
NGC under the LC Facility will be fully and unconditionally guaranteed on a
joint and several basis by certain of New NGC's subsidiaries.
MASTER ALLIANCE AGREEMENT
Chevron, Chevron Chemical, CPL, and other Chevron affiliates, NGC,
Clearinghouse, Warren LP, ECI and other NGC Affiliates will enter into a Master
Alliance Agreement. The purpose and intent of the Master Alliance Agreement is
to efficiently manage and optimize the economic benefits of any contract in
existence during the term of the Master Alliance Agreement between Chevron or
its affiliates and NGC or its affiliates ("Covered Contracts"), to ensure that
the Covered Contracts remain mutually beneficial, to facilitate new business
between Chevron or its affiliates and NGC or its affiliates with respect to
energy products or services, to minimize disputes arising from the Covered
Contracts, and to resolve quickly and efficiently any disputes which may arise
thereunder. In each case where Chevron or its affiliates and NGC or its
affiliates are parties to a Covered Contract, each party will appoint at least
one representative to serve on a team to help administer the relationship
between the parties The Master Alliance Agreement will be effective for a
primary term of ten years, and year to year thereafter until terminated by
either party at the end of the primary term, or at the end of any annual period
after the primary term, by giving not less than 180 days' prior written notice
of termination.
MASTER NATURAL GAS PROCESSING AGREEMENT
Chevron and Warren LP will enter into a Master Natural Gas Processing
Agreement establishing a long term, cooperative, commercial relationship whereby
substantially all of Chevron's processable United States natural gas production
will be processed by Warren LP in those geographic areas where Warren LP
currently has processing facilities and in other areas where it is economically
practical for Warren LP to acquire or install facilities to process Chevron's
gas, along with third party gas that may be available for processing in any such
facilities. The intent of the Master Gas Processing Agreement is to provide for
the processing of Chevron's gas in Warren LP's plants under terms that are fair
and equitable for both parties. In doing so, Chevron and Warren LP will enter
into natural gas processing agreements pursuant to which Chevron's interests
connected to Warren LP field plants will be committed for processing for the
life of the interests and Chevron's interests in the Gulf of Mexico will be
committed to Warren LP for a term coterminous with the Natural Gas Purchase and
Sale Agreement referenced above. The Master Natural Gas Processing Agreement
will be effective for a primary term of ten years, and year to year thereafter
until and unless terminated by either party at the end of the primary term, or
at the end of any annual period after the primary term by giving the other party
not less than 12 months prior written notice of termination. If the Master Gas
Sales Agreement terminates prior to the Master Gas Processing Agreement, the
Master Gas Processing Agreement will cease to apply to Chevron's gas produced
from the Gulf of Mexico area on the date the Master Gas Sale Agreement
terminates.
MASTER NATURAL GAS LIQUIDS PURCHASE AGREEMENT
Chevron and Warren LP will enter into a Master Natural Gas Liquids
Purchase Agreement, which will provide for the purchase and/or marketing by
Warren LP of NGLs processed and/or fractionated in Chevron's plants, third party
plants and Warren LP's plants (excluding such processed and/or fractionated NGLs
in Warren LP's Gulf Coast area straddle plants) under terms that are fair and
equitable for both parties. Under the Master Natural Gas Liquids Purchase
Agreement, Chevron agrees to sell to Warren LP
55
and Warren LP agrees to purchase from Chevron all of Chevron's right, title and
interest in the natural gas liquids produced at certain processing or
fractionation plants. Warren LP will pay Chevron for the natural gas liquids
purchased under this agreement a market responsive price based on prevailing
index prices as quoted by the OPIS for Mt. Belvieu, Texas or Conway, Kansas,
less applicable transportation and fractionation costs, or a net back price,
depending on the particular delivery point. Every five years, either party will
have the option to open this agreement solely for the purpose of renegotiating
the pricing provisions. The Master Natural Gas Liquids Purchase Agreement will
remain in effect for a period of 10 years and from year to year thereafter
unless terminated by either party upon at least 90 days advance written notice.
WEST TEXAS LPG PIPELINE AGREEMENTS
As part of the Contributed Businesses, New NGC will receive an
undivided 49% interest in the West Texas LPG Pipeline which will then be
contributed to the West Texas LPG Pipeline Partnership, a Delaware limited
partnership (the "West Texas Partnership") which will be established on the
Closing Date to own a common carrier pipeline system for the transportation of
LPGs from various points in New Mexico and Texas to Mont Belvieu, Texas. CPL or
an affiliate of CPL will contribute all of its interest in the West Texas
Pipeline and will own the remaining 51% interest in the West Texas Partnership.
The West Texas Partnership will be governed by the West Texas LPG Pipeline
Partnership Agreement. Pursuant to that agreement, certain specified matters
will require the consent of New NGC. Under a separate Operating Agreement, CPL
will operate the pipeline facilities for the West Texas Partnership. CPL will
also grant unto the West Texas Partnership a non-exclusive license for the use
of existing rights-of-way in connection with the use and operation of the West
Texas Pipeline.
OPERATING AGREEMENT (HOUSTON AREA PIPELINES)
Warren LP and CPL will enter into an Operating Agreement which relates
to the operation of certain petroleum products pipeline facilities, located in
the vicinity of Houston, Texas, that will be owned by Warren LP. Pursuant to the
Operating Agreement, CPL will operate, maintain and repair certain petroleum
products pipeline facilities, and make any modifications or improvements
thereof, and perform any duties as may be requested by Warren LP or that CPL
deems necessary or advisable. Warren LP will pay CPL full and complete
compensation sufficient to cover CPL's overhead in relation to its direct costs
as well as a management fee.
GAS SUPPLY AND SERVICE AGREEMENTS
Chevron Products Co. ("Chevron Products") or Chevron Chemical, as
applicable, and Clearinghouse will enter into certain Gas Supply and Service
Agreements with respect to Chevron Products' or Chevron Chemical's plants at Oak
Point, Louisiana, St. James Parish, Louisiana, Orange, Texas, Cedar Bayou,
Texas, Pascagoula, Mississippi, Salt Lake City, Utah, El Segundo, California,
Perth Amboy, New Jersey and Richmond, California. Pursuant to these agreements,
Chevron Products or Chevron Chemical, as applicable, will agree to purchase a
portion or all of the pertinent plant's natural gas requirements from
Clearinghouse at a market based price determined at the beginning of each month.
In some of the agreements, Clearinghouse also agrees to manage and utilize
certain existing gas purchase or transportation arrangements. At Chevron
Products' or Chevron Chemical's option, as applicable, such party can lock in
the price of all or a portion of the gas purchased under these contracts for a
one-year period based on the current applicable futures price. Some of these
agreements contain provisions that provide Clearinghouse with a management
incentive fee based on the price of the gas Clearinghouse delivers to the
purchaser as compared to a market index price.
MASTER POWER SERVICE AGREEMENTS
Chevron U.S.A. Production Co., Chevron Products and Chevron Chemical
will each enter into Master Power Service Agreements with ECI with respect to
the United States (except for Alaska) under which Chevron and Chevron Chemical
agree to provide ECI the right to participate in existing or future
opportunities to (i) purchase electric power from generating units or
contractual supply owned, controlled or
56
operated by one of the Chevron entities listed above (ii) supply electric power
to facilities owned, controlled or operated by one of the Chevron entities
listed above or to which one of the Chevron entities listed above is
contractually obligated to supply electric power, and (iii) otherwise
participate in any existing or future market opportunities in which one of the
Chevron entities listed above is involved and which pertains to the sale,
purchase, transmission, distribution and/or generation of electric power. These
agreements provide that if either party has an opportunity to provide electric
power to or purchase electric power from any of the above mentioned facilities,
the opportunity to satisfy such need on a mutually acceptable basis will be
provided to the other party for a specified time, after which the presenting
party may either satisfy such need on its own or enter an agreement with another
entity to satisfy such need.
FEEDSTOCK SALE AND REFINERY PRODUCT PURCHASE AGREEMENTS
Chevron will enter into Feedstock Sale and Refinery Product Purchase
Agreements (the "Feedstock Agreements") with Warren LP, with respect to
Chevron's refineries situated at El Paso, Texas, Pascagoula, Mississippi, Salt
Lake City, Utah, El Segundo, California, and Richmond, California; and a
Refinery Product Sale Agreement with respect to Chevron's refinery situated in
Hawaii. Pursuant to the Feedstock Agreements, Chevron will agree to purchase all
of the pertinent refinery's needs for feedstocks such as isobutane, normal
butane and mixed butane from Warren LP, in some instances at a market based
price and others at a price based on Warren LP's cost. In addition, Warren LP
will agree to purchase all of the pertinent refinery's (including the Hawaii
refinery's) production of certain refinery products such as propane, PP mix (as
defined in the Glossary), normal butane and mixed butane from Chevron, in some
instances at a market based price and others at a price based on the price on
which Warren LP resells the applicable refinery products.
FEEDSTOCK SALE AND REFINERY PRODUCT MASTER SERVICES AGREEMENT
Chevron will enter into a Feedstock Sale and Refinery Product Master
Services Agreement with Warren LP, with respect to the provision of services to
certain of Chevron refineries by Warren LP and the provision of certain rail car
transportation services by Chevron. Under this agreement Warren LP will provide
certain transportation, product storage, isomerization (a process connected to
the production of isobutane), and feedstock and refinery product transportation
services to Chevron. Chevron will provide certain rail transportation and
freight audit and payment services to Warren LP. Chevron and Warren LP will
charge each other fees based on negotiated rates for the services provided under
the agreement.
BARGE CO.
Effective as of the Closing Date, Chevron and NGC will establish a new
company ("Barge Co.") to own and operate 21 barges currently owned by Chevron.
Warren LP will own a 25% interest in Barge Co., with the remaining 75% interest
to be owned by Chevron. Barge Co. will enter into separate time charters with
Warren LP covering each barge. New NGC will have the right to purchase Chevron's
interest in Barge Co. for a period of two years after the Closing Date (the
"Call Period") at a predetermined price specified in the agreement. After the
expiration of the Call Period, Chevron will have the right to sell its interest
in Barge Co. to New NGC for a predetermined price specified in the agreement, or
alternatively, to a third party. New NGC will enter into a services agreement
with Chevron Chemical to provide certain barge transportation services which
will match the term of the time charters. See "Contributed Warren Business --
Business Description Transportation."
CCC PRODUCT SALE AND PURCHASE AGREEMENT
Chevron Chemical and Warren LP will enter into a Product Sale and
Purchase Agreement which relates to the purchase and sale between such parties
of EP Mix (as defined in the Glossary), propane, normal butane and natural
gasoline (collectively, the "Products"). Warren LP will agree to sell to Chevron
Chemical and Chevron Chemical will agree to purchase from Warren LP a specified
minimum daily volume of Products as nominated by Chevron Chemical. Warren LP
will use its best effort to sell and deliver to Chevron Chemical 100% of any
additional Products that are needed. Chevron Chemical will pay Warren LP for the
Products a market responsive price based on published OPIS prices for each
Product. For any
57
additional Products purchased above the specified number, Chevron Chemical will
pay a price mutually agreed upon by the parties. In addition to the foregoing,
Chevron Chemical will pay Warren LP a per barrel delivery fee for all Products.
Every five years after the Effective Time, the parties will have the option to
open this agreement solely for the purpose of renegotiating the pricing
provisions.
CHEVRON CHEMICAL/WARREN LP SERVICES AGREEMENT
Chevron Chemical and Warren LP will enter into a Services Agreement
under which Warren LP will provide certain motor transportation, ship
terminalling and gas terminalling services to Chevron Chemical, and Chevron
Chemical will provide access to export refrigeration equipment and gas
terminalling and feedstock pipeline services to Warren LP. Chevron Chemical and
Warren LP will charge each other fees based on negotiated rates for the services
provided under this agreement. This agreement has an initial ten-year term that
extends year-to-year until terminated by either party's giving notice two years
in advance.
GALENA PARK SERVICES AGREEMENT
Chevron Products Company and Warren LP will enter into a Galena Park
Services Agreement. After the Combination, Chevron will own and operate the
Galena Park Light Products Terminal, and Warren LP will own and operate the
Galena Park LPG Terminal. During the term of this agreement, Warren LP and
Chevron Products Company will provide services to each other and pay each other
fixed fees equal to the parties' best estimate of operating expenses actually
incurred with respect to the services provided. This agreement will terminate
upon the termination of all the services provided thereunder. The services will
continue until terminated by either mutual agreement, by a party giving 18
months' written notice of its intent to terminate, or by a party who is
receiving services giving 30 days' written notice.
VENICE OPERATING AGREEMENT
Chevron and Warren LP will enter into a Venice Operating Agreement
under which Warren LP, as an independent contractor, will perform for Chevron
the duties of operator of Chevron's Venice Complex. For the services rendered by
Warren LP, Chevron will pay a monthly fee to Warren LP. For any capital
expenditure projects provided and managed by Warren LP, Warren LP will receive
an overhead charge on each project depending on the amount of the capital
expenditure. Chevron will reimburse Warren LP for all authorized expenses.
PRODUCT STORAGE LEASE AND TERMINAL ACCESS AGREEMENT (VENICE)
Chevron and Warren LP will enter into a certain Product Storage Lease
and Terminal Access Agreement under which Chevron will lease the right to use
its Venice storage facility for storage of NGLs by Warren LP. Furthermore,
Chevron will grant Warren LP the right to use (1) the Venice barge terminal for
the loading and unloading of NGLs and (2) the pipeline delivery facilities that
are used in connection with the storage facility and barge terminal.
LONE STAR SWAP TRANSACTION CONFIRMATION (CUSA/NGC MASTER SWAP AGREEMENT)
Chevron, as fixed price payor, and NGC will enter into a certain
Confirmation, effective as of the Effective Time, which supplements, forms a
part of and is subject to the Master Agreement dated as of February 1, 1993
executed by NGC and Chevron. This confirmation relates to a commodity swap
whereby the fixed price is based on the price paid to Chevron pursuant to a Gas
Purchase Agreement dated July 27, 1955, between Chevron and Lone Star Gas
Company, and the floating price is based on a published index price, and the
notional quantity of gas is based on the quantity of gas delivered by Chevron
under the Lone Star contract.
APPRAISAL RIGHTS
If the Combination is consummated, holders of shares of NGC Common
Stock will not be entitled to appraisal rights.
58
CONTRIBUTED WARREN BUSINESS
Pursuant to the Combination, the Contributing Parties are contributing
a substantial portion of the business conducted by Warren (the "Contributed
Warren Business") and an undivided 49% interest in the West Texas LPG Pipeline
(the "Contributed West Texas LPG Pipeline Business") to Newco. The following is
a brief description of (i) Warren's business and operations and the assets and
properties that will comprise the Contributed Warren Business and (ii) the
Contributed West Texas LPG Pipeline Business.
BUSINESS DESCRIPTION
OVERVIEW
Warren, an unincorporated division of Chevron, engages in all aspects
of the NGLs business including gas gathering and processing, fractionating,
storing, transporting and marketing. Warren is responsible for virtually all of
Chevron's domestic NGL purchases and sales, its major gas processing operations
east of the Rocky Mountains and Chevron's international LPG activities. Warren
has been a part of Chevron since 1984, when Chevron merged with Gulf Oil, which
at the time owned Warren.
GAS GATHERING AND PROCESSING
The Contributed Warren Business will include approximately 4,600 miles
of gas gathering pipelines which deliver unprocessed natural gas from numerous
production locations to Warren' processing plants, and interests in 23 gas
processing plants in Oklahoma, Texas, Louisiana and New Mexico having a total
processing capacity of approximately 2.1 billion cubic feet of gas per day.
Warren currently uses a variety of processing designs tailored to
handle individual gas streams to extract NGLs. The designs typically employ
either an absorption or a cryogenic expander process. In the absorption process,
the raw natural gas stream passes through refrigerated absorption oil which,
when heated, yields the absorbed NGL components. In the cryogenic expander
process, the gas liquids are separated from the natural gas stream under very
low temperature conditions.
Following extraction of gas liquids, natural gas pipelines receive
merchantable dry gas for transmission and sale or delivery to end-users. Other
pipelines transport the raw NGLs to fractionators for further processing into
their marketable components. Warren's share of NGL production extracted from
Chevron and third-party natural gas streams in contributed plants was
approximately 54,000 barrels per day in 1995.
FRACTIONATION AND STORAGE
The Contributed Warren Business will also include Warren's
fractionation and storage facility in the Mont Belvieu complex near Houston
which has between 160,000 and 180,000 barrels per day of raw NGL fractionation
capacity and between 5,000 and 30,000 barrels per day of import mix capacity
(throughput capacity varies with product composition and ambient temperature).
In addition, the Contributed Warren Business will have a salt dome storage
capacity of over 31 million barrels of product.
TRANSPORTATION
Mont Belvieu serves as the hub of the nation's NGL distribution system,
with pipelines linking the terminal with most refineries and petrochemical
plants along the upper Texas Gulf Coast. Other pipelines deliver NGLs throughout
the eastern United States.
The Contributed Warren Business will include the Warrengas marine
terminal located on the Houston Ship Channel. Dedicated pipelines linked to the
Mont Belvieu complex allow Warren to off-load two products from one vessel or
one product from two vessels simultaneously. The marine terminal can handle
specialty products such as olefins, pentanes and hexanes in addition to the
traditional LPGs such as propane and butane.
Warren distributes product to its customers using barges, rail tank
cars and the industry's largest fleet of cryogenic transport trucks. Although
the rail cars will not be contributed to New NGC pursuant to the Combination,
New NGC will have the right to use such rail cars to provide transportation
services to third parties pursuant to the Feedstock Sale and Refinery Product
Master Services Agreement. See "Ancillary
59
Agreements -- Feedstock Sale and Refinery Product Master Services Agreement."
The fleet of cryogenic transport trucks will be a part of the Contributed Warren
Business. In connection with the Combination, the 21 barges owned by Chevron
will be contributed to Barge Co., a joint venture that will be 75% owned by
Chevron and 25% owned by New NGC. Barge Co. will enter into separate time
charters with New NGC covering each barge for a term of two years. New NGC will
have the right to purchase Chevron's interest in Barge Co. for a period of two
years after the Effective Date, which right is assignable to a third party. See
"Ancillary Agreements -- Barge Co."
MARKETING
In 1995, Warren marketed an average of approximately 283,000 barrels of
NGLs per day through approximately 250 supply points in 46 states. Petrochemical
manufacturers are the main purchasers of ethane. Residential and commercial
users, in addition to petrochemical producers, provide major markets for
propane. Both petrochemical producers and oil refiners provide the major markets
for butanes and natural gasolines. Warren's marketing operations will also be
included in the Contributed Warren Business.
COMPETITION
Upon consummation of the Combination, the Contributed Warren Business,
as a part of New NGC's consolidated operations, will be subject to the
competitive environment as described under the caption "Risk Factors -- Industry
Consolidation and Competition."
OPERATIONAL RISKS AND INSURANCE
Warren's operations are subject to the usual hazards incident to the
transmission, processing, storage and sale of natural gas and NGLs, such as
explosions, product spills, leaks and fires. These hazards can cause personal
injury and loss of life, severe damage to and destruction of property and
equipment, and pollution or other environmental damage, and may result in
curtailment or suspension of operations at the affected facility.
NGC anticipates that upon consummation of the Combination that New NGC
will maintain general public liability, property and business interruption
insurance in amounts, including deductibles, that it considers to be consistent
with industry standards. It is also likely that the insurance policies will not
provide coverage for losses or liabilities relating to pollution, except for
sudden and accidental occurrences, which is consistent with industry standards.
In connection with the Combination, Chevron has agreed to indemnify New
NGC for certain environmental and other liabilities relating to the facilities
comprising a part of the Warren Contributed Business. This indemnity continues
from the Closing Date through and including August 30, 2001 and will cover
certain environmental liabilities that relate to the period prior to the Closing
Date and is subject to certain limitations and thresholds. See "Certain
Provisions of the Combination Agreement -- Environmental Matters."
After consummation of the Combination, the occurrence of a significant
event not fully insured or indemnified against could materially and adversely
affect New NGC's operations and financial condition. Moreover, no assurance can
be given that New NGC will be able to maintain adequate insurance in the future
at rates it considers reasonable. See "Risk Factors -- Governmental Regulations
and Environmental Matters."
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Certain of the Contributing Businesses' pipeline activities and
facilities are involved in the intrastate transportation of natural gas and NGLs
and the interstate transportation of NGLs, and are subject to state and/or
federal regulation. The processing of natural gas for the removal of liquids
currently is not viewed by the FERC as an activity subject to its jurisdiction.
If a processing plant's primary function is extraction of NGLs and not natural
gas transportation, the FERC has traditionally maintained that the plant is not
a facility for transportation or sale for resale of natural gas in interstate
commerce and therefore is not subject to jurisdiction under the Natural Gas Act
of 1938, as amended (the "NGA"). Even though the FERC has
60
made no specific declaration as to the jurisdictional status of Warren's gas
processing operations or facilities, Chevron believes that because the
Contributed Businesses' gas processing plants are primarily involved in removing
NGLs, their processing activities are exempt from FERC jurisdiction.
The Contributed Warren Business will own pipeline gathering facilities
in conjunction with certain of its field plants. Under the NGA, facilities which
perform a gathering function are exempt from FERC jurisdiction. Interstate
transmission facilities, on the other hand, are subject to FERC jurisdiction.
The FERC distinguishes between these two types of activities on a fact-specific
basis, which may make it difficult to state with certainty the status of
Warren's pipeline gathering facilities. Although the FERC has not issued any
order or opinion declaring these facilities as gathering rather than
transmission facilities, Chevron management believes that these systems meet the
tests that the FERC currently uses to establish a pipeline's status as a
gatherer.
Supplies of natural gas available to Warren may be affected by state
regulations. In 1992, Oklahoma and Texas modified the rules governing wellhead
production allowables and the prorationing of gas production in order to more
accurately match available production to current market demand. Chevron believes
these recent modifications of the prorationing rules in effect in Oklahoma and
Texas have not had a material effect on Warren's operations. Louisiana has also
been considering the modification of its existing proration rules. Chevron
cannot predict whether other states will adopt new or similar regulations or
what effect, if any, any such regulations would have on its operations.
The West Texas LPG Pipeline is an interstate pipeline and is thus
subject to FERC rates and service jurisdiction under the Interstate Commerce
Act. CPL has made appropriate tariff filings with FERC respecting those
operations and services.
Except as specifically exempted, the Contributed Warren Business's
pipeline operations are subject to federal safety standards promulgated by the
Department of Transportation under applicable federal pipeline safety
legislation, as supplemented by various state safety statutes and regulations.
The Contributed Businesses' operations are subject to extensive
federal, state and local statutes, rules and regulations governing the discharge
of materials into the environment or otherwise relating to environmental
protection. Compliance with these statutes, rules and regulations requires
capital and operating expenditures including those related to monitoring and
permitting at various operating facilities and remediation obligations.
Chevron's environmental expenditures on the assets comprising the Contributed
Warren Business have not been prohibitive in the past, but NGC believes that
such expenditures may increase in the future with the trend toward stricter
standards, greater regulation and more extensive permitting requirements.
The vast majority of federal environmental remediation provisions are
contained in the Superfund laws the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Superfund Amendments and
Reauthorization Act ("SARA") and in the corrective action provisions of the
Federal Resource Conservation and Recovery Act ("RCRA"). Typically, the
Environmental Protection Agency ("EPA") acts pursuant to Superfund legislation
to remediate facilities that are abandoned or inactive or whose owners are
insolvent; however, the legislation may be applied to sites still in operation.
Superfund law imposes liability, regardless of fault or the legality of the
original conduct, on certain classes of persons that contributed to the release
of a "hazardous substance" into the environment. These persons include the
current or previous owner and operator of a site and companies that disposed, or
arranged for the disposal, of the hazardous substance found at a site. CERCLA
also authorized the EPA and, in certain instances, private parties to take
actions in response to threats to public heath or the environment and to seek
recovery from such responsible party. RCRA provisions apply to facilities that
have been used to manage or are currently managing hazardous waste and which are
either still in operation or have recently been closed. As amended, RCRA
requires facilities to remedy any releases of hazardous wastes or hazardous
waste constituents at waste treatment, storage or disposal facilities.
The Contributed Warren Business is subject to the environmental risks
normally incident to the operation of storage facilities, pipelines, plants and
other facilities for gathering, processing, treating,
61
storing and transporting natural gas and other products including, but not
limited to, uncontrollable flows of natural gas, fluids and other substances
into the environment, fires, pollution and other environmental and safety risks.
These activities are subject to environmental and safety regulation by federal
and state authorities, including, without limitation, the EPA, the New Mexico
Environmental Department, the Louisiana Department of Environmental Quality, the
Oklahoma Department of Environmental Quality, the Oklahoma State Department of
Health, the Oklahoma Water Resources Development Board, the Texas Railroad
Commission and Texas Natural Resources Conservation Commission. The design,
construction, operation and maintenance of the Contributed Business's pipeline
facilities are subject to the safety regulations established by the Secretary of
the Department of Transportation pursuant to the Natural Gas Pipeline Safety Act
("NGPSA"), or by the state regulations meeting the requirements of the NGPSA.
In 1990, the United States Congress enacted comprehensive amendments to
the federal Clean Air Act. Although some of the regulations promulgated pursuant
to such amendments have not yet been adopted, such regulations, when effective,
will likely require increased capital and operating costs for the operations of
the Contributed Warren Business.
To Chevron's knowledge, the Contributed Warren Business is in
substantial compliance with applicable environmental laws, regulations, orders
and rules. Further, to the best of Chevron's knowledge, there are no existing,
pending or threatened actions, suits, investigations, inquiries, proceedings or
clean-up obligations by any governmental authority or third party relating to
any violations of any environmental laws with respect to the assets which would
have a material adverse effect on New NGC's future operations and financial
condition.
LEGAL PROCEEDINGS
Warren is involved in certain legal proceedings that have arisen in the
ordinary course of business. To the extent that such legal proceedings relate to
the Warren Contributed Business, New NGC will be subject to any liabilities
resulting from such proceedings, unless Chevron has agreed to retain such legal
proceedings pursuant to the Contribution Agreement. Subject to certain
limitations, Chevron has agreed to indemnify New NGC for any losses, damages or
expenses that are incurred in connection with legal proceedings that relate to
the Contributed Warren Business that are filed after the Closing Date but are
based on events that occurred prior to the Closing Date.
EMPLOYEES
Chevron employs approximately 930 employees in its Warren division.
Approximately 330 of these are technical, marketing and administrative employees
while approximately 600 are field employees. Chevron management considers
relations with such employees to be good.
DESCRIPTION OF PROPERTIES
The following tables provide certain information, including operating
data for the year ended December 31, 1995, concerning the gas processing,
fractionation, isomerization, storage, terminal, pipeline and gathering
facilities which comprise a part of the Contributed Businesses' assets. Many of
these assets are strategically located within key industry centers in Texas,
Oklahoma, Florida, Mississippi and Louisiana. The gas processing plants and
fractionation facilities are located on tracts of land owned in fee or leased
from others.
GATHERING SYSTEMS AND PROCESSING FACILITIES
The Contributed Warren Business will include both operated and
non-operated field plants and straddle plants. Field plants aggregate volumes
from multiple producing wells into quantities that can be economically processed
to extract NGLs and to remove water vapor, solids and other contaminants.
Straddle plants are situated on third-party mainline natural gas pipelines and
serve to provide flexibility to changing market
62
conditions by allowing operators to extract NGLs from a natural gas stream when
the market value of NGLs separated from the natural gas stream is higher than
the market value of the same unprocessed natural gas. NGC estimates that
aggregate 1995 operating expenses associated with the gas gathering systems and
processing plants set forth below were approximately $55 million. The following
table provides certain other information on such facilities.
<TABLE>
<CAPTION>
LOCATION TOTAL PLANT
------------------------ ----------------------------- GROSS
GAS PROCESSING AND GATHERING COUNTY/ NOMINAL 1995 INLET GAS NGL
FACILITIES % OWNED PARISH STATE CAPACITY(1) THROUGHPUT PRODUCTION
------- --------------- ----- ----------- -------------- ----------
(MMCFD) (MMCFD) (MBPD)
<S> <C> <C> <C> <C> <C> <C>
FIELD PLANTS:
Eunice(2)(3)......................... 100.00 Lea NM 68 56 6.5
Monument(2)(3)....................... 100.00 Lea NM 80 75 7.2
Saunders/Vada/Bluitt(2)(3)........... 100.00 Lea NM 47 40 5.8
Canadian/Tonkawa(2)(3)............... 100.00 Hemphill TX 25 21 2.0
Leedey(2)(3)......................... 100.00 Roger Mills OK 50 40 3.3
Sherman(2)(3)........................ 100.00 Grayson TX 33 14 0.7
Moores Orchard(2).................... 100.00 Fort Bend TX 10 4 0.1
Monahans/Worsham(2)(3)............... 100.00 Ward TX 31 26 2.2
Fashing(2)........................... 44.66 Atascosa TX 45 43 1.0
Sand Hills(2)(3)..................... 100.00 Crane TX 255 105 11.9
Puckett(2)(3)........................ 100.00 Pecos TX 60 38 0.0
Maysville(3)......................... 21.00 Garvin OK 135 117 14.7
Indian Basin(3)...................... 14.19 Eddy NM 210 147 7.8
STRADDLE PLANTS:
Yscloskey(2)......................... 27.20 St. Bernard LA 1,850 1,652 25.4
Calumet.............................. 20.09 St. Mary's LA 1,400 1,160 20.4
Sea Robin............................ 19.07 Vermillion LA 1,000 669 16.0
Toca................................. 8.86 St. Bernard LA 1,050 611 12.9
Bluewater............................ 16.72 Acadia LA 950 555 13.1
Grand Chenier........................ 2.73 Cameron LA 1,000 145 5.7
Iowa................................. 9.92 Jefferson Davis LA 500 497 5.1
Laverne.............................. 0.86 Harper OK 200 77 3.1
North Terrebone...................... 1.83 Terrebone LA 1,450 863 28.9
Patterson............................ 1.09 St. Mary LA 600 388 9.8
</TABLE>
- ------------
(1) Estimated based on typical field gas composition and plant operation.
(2) Currently operated by Warren.
(3) Contains an associated gas gathering system.
Warren also owns a 3.69% interest in the Diamond M facility, which is
located in Scurry County, Texas. The processing plant relating to the Diamond M
facility is currently shut in. All gas produced into the gathering system
associated with the Diamond M facility is now processed at a third party
facility.
FRACTIONATION FACILITIES
NGLs removed from a natural gas stream at gas processing plants are in
the form of a commingled stream of liquid hydrocarbons. The commingled
hydrocarbons are separated at fractionation facilities into the component NGL
products ethane, propane, normal butane, isobutane and natural gasoline. The
isomerization plant further separates a stream of mixed butanes into its
component parts. NGC estimates that operating expenses for the following
fractionation facilities were approximately $23 million in 1995. The following
table provides certain information concerning the fractionation facility that
will be a part of the Contributed Warren Business.
<TABLE>
<CAPTION>
LOCATION TOTAL PLANT
----------------- --------------------------
COUNTY/ NOMINAL 1995
FRACTIONATION FACILITIES: % OWNED PARISH STATE CAPACITY(1) THROUGHPUT
------- --------- ----- ----------- ----------
(MBPD)
<S> <C> <C> <C> <C> <C>
Mont Belvieu Fractionator............ 100.00 Chambers TX 170 148
Mont Belvieu Isomerization Plant..... 100.00 Chambers TX 18(2) (3)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
63
- ------------
(1) Capacity data is at nominal recovery rates.
(2) Represents isobutane production capacity.
(3) The isomerization plant was not utilized by Chevron during 1995.
TERMINAL AND STORAGE FACILITIES
The following table provides information concerning terminal and
storage facilities that will be a part of the Contributed Warren Business:
<TABLE>
<CAPTION>
LOCATION
----------------------
TERMINAL AND STORAGE FACILITIES: % OWNED COUNTY STATE DESCRIPTION
- ------------------------------------- -------- ------------- ------ ------------------------------------
<S> <C> <C> <C> <C>
Mont Belvieu Terminal/Storage........ 100.00 Chambers TX Product storage and terminal
facility
Mont Belvieu Transport Terminal...... 100.00 Chambers TX Administrative offices and repair
shop
Warrengas Terminal................... 100.00 Harris TX LPG import/export terminal
Gladewater Terminal.................. 100.00 Gladewater TX Raw LPG transport terminal
Bridgeport Transport Terminal........ 65.00 Jack TX Raw LPG transport terminal
Hattiesburg Terminal................. 50.00 Forrest MS Propane terminal
Abilene Transport Terminal........... 100.00 Taylor TX Raw LPG transport terminal
Greenville Terminal.................. 100.00 Washington MS Propane terminal
Port Everglades Marine Terminal...... 100.00 Broward FL Propane terminal
Tampa Marine Terminal................ 100.00 Hillsborough FL Propane terminal
Lampton-Love Terminal................ 100.00 Forrest MS Idle product transport facility
Calvert City Terminal................ 100.00 Marshall KY Product transport terminal
GREEN FIELD TERMINAL SITE:
Louisville Land Terminal............. 100.00 Jefferson KY Ohio riverfront terminal property
</TABLE>
PIPELINES
The following table identifies pipeline and gathering system assets
that will comprise a part of the Contributed Businesses:
<TABLE>
<CAPTION>
1995
PIPELINE SYSTEMS: % OWNED THROUGHPUT STATE DESCRIPTION
-------- ----------- ------- -------------------------------------
(MBPD)
<S> <C> <C> <C> <C>
West Texas LPG Pipeline.............. 49.00(1) 135 TX/NM Interstate natural gas liquids
pipeline
Houston Gathering System............. 100.00 48 TX Natural gas liquids pipeline
servicing the Houston, TX area
facilities.
Texas City Pipeline.................. 100.00 8 TX Natural gas liquids pipeline
</TABLE>
- ------------
(1) Upon consummation of the Combination, CPL or an affiliate thereof will own
the remaining 51%.
OTHER ASSETS
In addition to the previously described assets, the Contributed Warren
Business will include various idle processing facilities, training and
maintenance facilities, sales office space, various transportation assets and
certain office and other equipment.
64
CONTRIBUTED NGBU BUSINESS
Pursuant to the Combination, Chevron will contribute substantially all
of NGBU's operations (the "Contributed NGBU Business") to Newco. The following
is a brief description of NGBU's business and operations.
OVERVIEW
NGBU markets Chevron's natural gas from the lower 48 states and
Chevron's Canadian production that is exported to the United States. NGBU is
also responsible for the delivery of natural gas to Chevron's major United
States facilities. When profitable opportunities are available, NGBU purchases
gas for resale and contracts for transportation or storage capacity.
HISTORY
During the mid-1980's, natural gas deregulation allowed many producers,
including Chevron, to market their natural gas in the developing spot market
instead of under long-term, dedicated contracts to pipelines. At that time,
Chevron decided to market its own gas by forming NGBU. Initially, Chevron
marketed mostly to LDC's and pipelines under long-term contracts and sold spot
gas to marketers and others. As gas deregulation continued, NGBU's marketing
strategies evolved to provide more services to a broader customer group. Today,
NGBU is a full service marketer providing risk management, volume flexibility,
energy management, and other services to a diverse group of customers.
GAS SUPPLY
During the fiscal year ended December 31, 1995, NGBU's gas supply
included approximately 1.9 Bcf per day from Chevron's domestic production,
approximately 100 MMcfd from Chevron's Canadian exports to the United States,
and approximately 150 MMcfd from Warren. In addition, in 1995, NGBU purchased
approximately 900 Mmcfd from third party producers. Approximately two-thirds of
this volume was purchased on the spot market with the balance purchased under
contracts that vary between a few months and two years. A majority of NGBU's gas
supply contracts contain pricing provisions that tie the price to be paid to an
index price published on a regular basis in one of several natural gas industry
publications. NGBU's purchasing activity has grown significantly during the past
two years and complements NGBU's objective to add value to Chevron's natural gas
and reduce gas costs to Chevron's corporate facilities.
GAS SALES
During the fiscal year ended December 31, 1995, NGBU marketed
approximately 2.7 Bcf of gas per day to over 400 third party customers in the
United States. Approximately one-half of this volume was sold in the spot market
under contracts with a term of 30 days or less. The other half was sold under
long term contracts that vary from a few months to 10 years (most of which have
a term of one year to three years). A majority of NGBU's gas sales contracts
contain pricing provisions which provide that the price to be paid is determined
monthly based on an index published in a natural gas industry publication. In
addition to the commodity rate charged, certain of the contracts contain a
reservation fee provision, which is typically expressed as a cents-per-MMBtu
charge. NGBU's customer groups include other marketers, local distribution
companies, electric power generators, industrial users, and some commercial
users. In addition to its third party sales, during 1995, NGBU delivered
approximately 350 MMfcd of gas to Chevron's facilities, primarily refineries and
a few chemical plants.
TRANSPORTATION AND STORAGE
NGBU has several long-term firm transportation contracts (one to ten
years) to assure that Chevron equity gas will flow to markets. However, most of
these long-term firm transportation agreements are not part of the Contributed
NGBU Business. In addition, NGBU contracts for short-term firm transportation
(less than 6 months) or interruptible transportation to move equity gas to
higher value markets, most of which are included in the Contributed NGBU
Business.
65
During 1995, NGBU contracted for storage capacity of approximately 15
Bcf. Most of this storage capacity is under short-term contracts (less than one
year) and the activity is driven by opportunities created by seasonal or
regional price differentials and volatility. NGBU has two storage contracts that
are longer than one year and total 2 Bcf in capacity. During the period from
January 1, 1996 through May 31, 1996, this storage activity has been lower
because natural gas prices during this period have been unseasonably high,
thereby making it more economical to sell the gas rather than incur the cost of
storing it.
RISK MANAGEMENT
Upon consummation of the Combination, the Contributed NGBU Business
will be integrated into New NGC's energy marketing segment and, accordingly,
will be subject to New NGC's risk management policies. NGC anticipates that New
NGC's risk management policies will be the same as NGC's current risk management
policies. See "Risk Factors -- Fluctuations in Commodity Prices; Risk Management
Activities."
COMPETITION
Upon consummation of the Combination, the Contributed NGBU Business, as
a part of New NGC's consolidated operations, will be subject to the competitive
environment as described under the caption "Risk Factors -- Industry
Consolidation and Competition."
LEGAL PROCEEDINGS
NGBU is involved in certain legal proceedings that have arisen in the
ordinary course of business. To the extent that such legal proceedings relate to
the Contributed NGBU Business, New NGC will be subject to any liabilities
resulting from such proceedings, unless Chevron has agreed to retain such legal
proceedings pursuant to the Contribution Agreement. Subject to certain
limitations, Chevron has agreed to indemnify New NGC for any losses, damages or
expenses that are incurred in connection with legal proceedings that relate to
the Contributed NGBU Business that arise in the future but are based on events
that occurred prior to the Closing Date.
EMPLOYEES
Chevron employs approximately 130 employees in NGBU. Chevron management
considers relations with such employees to be good.
SUMMARY BUSINESS STRATEGY AND OPERATIONS OF NEW NGC
The following discussion provides a brief description of the present
business strategy of NGC, the assets and operations of New NGC immediately after
consummation of the Combination and the basis for not including certain
financial information relating to the Contributed Businesses in this Proxy
Statement/Prospectus.
BUSINESS STRATEGY
GENERAL. Traditionally, gas gathering, processing and fractionation
operations were considered by integrated petroleum companies and others to be
solely a manufacturing process. Gas marketing activities have historically
focused on earning a margin on the spread between natural gas purchases and
sales by matching available gas supply with end user purchasers. In a vertically
integrated environment, these business activities typically functioned
independently and were treated as separate business units, each having
independent operational and financial goals.
NGC'S BUSINESS STRATEGY. NGC's business strategy, which it refers to as
the "Energy Store" concept, embraces a commercial approach to integrating
commodity marketing, risk management and production activities with the goal of
maximizing value through a unified operation. Acting in the role of a large
scale aggregator, processor, marketer and reliable supplier of multiple products
and services, NGC is able to customize or package products and services to meet
individual client specifications. NGC's management believes that this one-stop
resource for energy commodity needs allows NGC to be flexible in
66
meeting the changing demands of producers and end users of energy products while
remaining abreast of volatile market conditions. For example, NGC's marketers
manage the multiple energy commodities and risk management services provided by
NGC with the objective of taking advantage of volatile commodity markets and
providing purchasers with a customized package of energy products and services
to meet their energy needs, risk portfolio requirements and cost structure. The
marketing and production operations of NGC are designed to act in tandem to
deliver to the marketplace the product(s) which will satisfy the high
expectations of NGC's customers while focusing on maximizing NGC's consolidated
operational and financial results. In other words, instead of the traditional
"Buy-Make-Sell" business matrix which NGC management believes is used by the
majority of integrated energy businesses, NGC utilizes a market driven decision
matrix which emphasizes strategic operational decisions in terms of which
commodity (or package of commodities and services) will best benefit NGC's
consolidated operating results. Such strategic operational decisions are driven
by the ever changing commodity markets served by NGC. As a result, NGC is able
to offer customers a portfolio of energy products and services, balancing needs
and current supply, transportation and storage availability with seasonal
pricing information. NGC believes that the combination of reliable product
supply and delivery capabilities, multiple energy commodity products and a
sophisticated risk management service program provides NGC with flexibility in
the marketplace. To achieve its strategic goals, NGC is growing its business
horizontally across the midstream energy industry segment rather than employing
the vertical integration theory which NGC's management believes is predominantly
used by other major integrated energy companies. The horizontal expansion of
NGC's core businesses provides a strong base and concentration of supply,
expertise and services which allow for implementation and integration of the
Energy Store concept.
BUSINESS AND PROPERTIES OF NEW NGC
As a result of the combination of NGC with the Contributed Businesses'
gathering, processing and fractionation facilities, New NGC will be a leading
North American gatherer, processor, transporter and marketer of energy products
and services.
New NGC's integrated asset base will include, among other things,
interests in approximately 15,000 miles of natural gas gathering and
transmission pipelines, 57 gas processing plants, three NGL fractionation
facilities, 60 million barrels of NGL storage capacity, three NGL import/export
marine terminals, ten other NGL terminals and approximately 2,100 miles of NGL
pipelines.
NGC believes that New NGC's strategic alliances with Chevron, which
will include the right to market substantially all natural gas and natural gas
liquids produced or controlled by Chevron in the United States (except Alaska)
and to supply natural gas and feedstock to Chevron refineries and Chevron
Chemical plants in the United States, will further enhance New NGC's position as
a leading marketer of energy products and its business strategy of being an
"Energy Store" providing creative solutions for its customers. In addition, the
combination of NGC's and the Contributed Businesses' midstream assets and
marketing operations is expected to provide opportunities to reduce costs
through reduction or elimination of duplicative functions and through the
consolidation of certain facilities. Finally, after the Combination, NGC
believes that New NGC will have a stronger balance sheet than NGC based on a
comparison of NGC's debt-to-equity ratio immediately prior to the consummation
of the Combination with New NGC's expected debt-to-equity ratio immediately
after consummation of the Combination, thereby providing New NGC with greater
financial flexibility for growth through acquisitions and enhancements to
existing facilities.
NGC believes that New NGC will also be positioned to capitalize on
gathering, processing and marketing opportunities in Canada and on natural gas,
crude oil and electric power marketing opportunities in the United Kingdom and
potentially in Europe. In addition, NGC believes that New NGC will be positioned
to market electric power domestically through ECI as the deregulated electric
power market continues to evolve. Through an alliance with Chevron, New NGC will
have opportunities to provide electricity to Chevron's refineries, chemical
plants and other United States facilities and to market or purchase excess
electricity generated by such facilities.
67
INAPPLICABILITY OF CERTAIN FINANCIAL INFORMATION
As a major integrated oil company, Chevron historically operated the
Contributed Businesses as vertically integrated service and support functions
for its production, refining and marketing operations. A substantial portion of
the business activities engaged in by the Contributing Businesses, including
purchases and sales, have historically been of an intercompany nature. However,
upon consummation of the Combination, the Contributed Businesses will be
integrated into New NGC and operated using the "Energy Store" strategy discussed
in " -- Business Strategy" above. For these reasons, New NGC does not believe
that the historical operational results of the Contributed Businesses provide a
meaningful basis for evaluating the results of operations that the Contributing
Businesses would have realized had they been managed and operated with
independent operational and financial goals or the contribution to New NGC's
results of operations once integrated into NGC's "Energy Store" concept.
Therefore, no historical financial information on any of the Contributed
Businesses has been included in this Proxy Statement/Prospectus.
68
MARKET PRICE AND DIVIDENDS ON NGC COMMON STOCK
The NGC Common Stock is listed and traded on the NYSE under the ticker
symbol "NGL". The closing sale price of NGC Common Stock on January 19, 1996,
the last full trading day preceding the public announcement of the execution of
the Exclusivity Agreement, as reported on the NYSE Composite Tape, was $9.00 per
share. The closing sale price of the NGC Common Stock on May 21, 1996 (the last
full trading day prior to the public announcement of the execution of the
Combination Agreement), as reported on the NYSE Composite Tape was $15.375 per
share. The closing sale price of NGC Common Stock on July 31, 1996, the last
full trading day preceding the printing of this Proxy Statement / Prospectus was
$16.250 per share. See "Principal Stockholders" for certain information on the
change in the percentage of stock ownership owned by certain executive officers,
directors and 5% stockholders of NGC as a result of the Combination.
The following table sets forth, for the calendar periods indicated, the
high and low per share sale prices of NGC Common Stock as reported on the NYSE
Composite Tape and related dividends paid per share of NGC Common Stock during
such periods.
HIGH LOW DIVIDEND
------- ------ --------
1996
First Quarter........................ $12.750 $8.625 $ 0.0125
Second Quarter....................... 16.125 12.250 0.0125
Third Quarter (through July 31,
1996).............................. 17.000 15.250 0.0125(1)
1995(2)
First Quarter........................ $11.500 $9.000 $ 0.0125
Second Quarter....................... 10.375 8.750 0.0125
Third Quarter........................ 10.375 9.000 0.0125
Fourth Quarter....................... 9.625 8.375 0.0125
1994(3)
First Quarter........................ $11.875 $8.875 $ 0.0125
Second Quarter....................... 10.000 8.000 0.0125
Third Quarter........................ 12.250 9.375 0.0125
Fourth Quarter....................... 11.125 9.375 0.0125
- ------------
(1) On July 9, 1996, NGC declared its quarterly dividend payable on September 3,
1996 to stockholders of record on July 29, 1996.
(2) Stock price and per share dividend rate information relates to Holding for
the period commencing on January 1, 1995 and continuing through and
including March 13, 1995, the last trading day prior to the consummation of
the Trident Combination, and to NGC thereafter.
(3) Reflects the high and low price of Holding's common stock and the per share
dividend rate declared by Holding during the stated periods.
The holders of NGC Common Stock are entitled to receive dividends if,
when and as declared by the NGC Board of Directors out of funds legally
available therefor. NGC anticipates that New NGC will continue NGC's present
policy of paying quarterly dividends of $0.0125 per share of New NGC Common
Stock.
The NGC Credit Agreement (as defined in the Glossary) and NGC's Senior
Notes (as defined in the Glossary) do not contain any specific restrictions on
the ability of NGC or any of its subsidiaries to declare and pay dividends in
respect of its or their capital stock, although certain financial covenants
contained in such credit agreement and in the indenture covering the Senior
Notes may limit the ability of NGC to do so.
The indentures setting forth the terms and conditions of the 14% Senior
Subordinated Notes of Trident due 2001 and the 10.25% Subordinated Notes of
Trident due 2003 contain restrictions on Trident's ability to pay cash dividends
to NGC, which in turn may adversely affect NGC's ability to pay dividends to its
shareholders.
69
MANAGEMENT AND OPERATIONS AFTER THE COMBINATION
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to those individuals
who will serve as members of the New NGC Board of Directors and executive
officers of New NGC after the consummation of the Combination.
NAME AGE* POSITION(S)
- ----------------------------------- ---- -------------------------------------
C. L. Watson........................ 46 Chairman of the Board, Chief
Executive Officer, President and a
Director of New NGC
Stephen W. Bergstrom................ 38 Senior Vice President and a Director
of New NGC; President of
Clearinghouse
Stephen A. Furbacher................ 48 Senior Vice President of New NGC and
President of Warren Petroleum
Company, Limited Partnership
Mark L. Hazelwood................... 46 Senior Vice President of New NGC and
President of NGC Global Energy
Services, Inc.
H. Keith Kaelber.................... 48 Senior Vice President and Chief
Financial Officer of New NGC and
President of New NGC's Financial
Services Division
Kenneth E. Randolph................. 39 Senior Vice President, General
Counsel and Secretary of New NGC
Stephen J. Brandon.................. 48 Director
Roy Alan Gardner.................... 50 Director
David R. Varney..................... 50 Director
C. Kent Jespersen................... 50 Director
Jeffrey M. Lipton................... 53 Director
Albert Terence Poole................ 53 Director
Daniel L. Dienstbier................ 56 Director
J. Otis Winters..................... 63 Director
Darald W. Callahan.................. 53 Director
Donald L. Paul...................... 50 Director
Peter J. Robertson.................. 49 Director
- ------------
* As of June 1, 1996.
The directors of New NGC will hold office until the next annual meeting of
the stockholders of New NGC and until their successors are duly elected and
qualified. The executive officers named above will serve in such capacities
until the next annual meeting of the New NGC Board of Directors, or until their
respective successors have been duly elected and have been qualified, or until
their earlier death, resignation, disqualification or removal from office.
C. L. Watson will serve as Chairman of the Board, Chief Executive Officer,
President, and a Director of New NGC upon consummation of the Combination. He
has served as Chairman of the Board, Chief Executive Officer and a director of
NGC since March 1995. Mr. Watson served as Chairman and as a member of the
Clearinghouse Management Committee from May 1989 through March 1995, and as
Chief Executive Officer and President of Clearinghouse from September 1985
through March 1995. Prior to his employment with Clearinghouse, Mr. Watson
served as Director of Gas Sales for the Western United States for Conoco Inc.
Stephen W. Bergstrom will serve as Senior Vice President and a Director of
New NGC and as President of Clearinghouse upon consummation of the Combination.
He has served as Senior Vice President and a Director of NGC since March 1995.
Mr. Bergstrom served as Executive Vice President of Clearinghouse and a member
of the Clearinghouse Management Committee from May 1989 through March 1995. In
addition, Mr. Bergstrom served as Senior Vice President -- Gas Marketing and
Supply of Clearinghouse from May 1987 through May 1990 and as Vice President --
Gas Supply of Clearinghouse from July 1986 through May 1987. Prior to his
employment with Clearinghouse, Mr. Bergstrom served as Vice President -- Gas
Supply of Enron Gas Marketing, a subsidiary of Enron Corp.
70
Stephen A. Furbacher will serve as Senior Vice President of New NGC and as
President of Warren LP upon consummation of the Combination. He has served as a
Senior Vice President of NGC since May 1996. Prior thereto, he served as
President of Warren, an unincorporated division of Chevron, from September 1994
until May 1996. From September 1992 to August 1994, Mr. Furbacher served as a
Vice President of Chevron U.S.A. Production Company and General Manager of the
Natural Gas Business Unit of Chevron. From July 1989 until August 1992, he
served as Assistant General Manager of NGBU. Mr. Furbacher was employed by
Chevron from August 1973 to May 1996.
Mark L. Hazelwood will serve as Senior Vice President of New NGC and as
President of NGC Global Energy Services, Inc. ("Global Energy") upon
consummation of the Combination. He has served as Senior Vice President of NGC
and President of NGC Global Energy since April 1996. From February 1994 to April
1996, Mr. Hazelwood served as Senior Vice President -- Pipeline Operations of
ARCO Transportation Company. From March 1991 to February 1994, he served as
Senior Vice President -- Marketing of ARCO Oil and Gas Company. Prior to joining
NGC, Mr. Hazelwood had been employed by ARCO Oil & Gas Company and its
affiliates since 1979.
H. Keith Kaelber will serve as Senior Vice President, Chief Financial
Officer and President of the Financial Services Division of New NGC upon
consummation of the Combination. He has served as Senior Vice President and
Chief Financial Officer of NGC since March 1995 and as President of the
Financial Services Division of NGC since January 1996. Mr. Kaelber served as
Senior Vice President and Chief Financial Officer of Clearinghouse from August
1990 until March 1995. Mr. Kaelber was previously employed by NCNB, which has
since become NationsBank, from 1978 to 1990, serving as Executive Vice President
prior to joining Clearinghouse.
Kenneth E. Randolph will serve as Senior Vice President, General Counsel
and Secretary of New NGC upon consummation of the Combination. He has served as
Senior Vice President, General Counsel and Secretary of NGC since March 1995.
Mr. Randolph served as Senior Vice President and General Counsel of
Clearinghouse since July 1987. In addition, he served as a member of the
Clearinghouse Management Committee from May 1989 through February 1994 and
managed Clearinghouse's marketing operations in the Western and Northwestern
United States from July 1984 through July 1987. Prior to his employment with
Clearinghouse, Mr. Randolph was associated with the Washington, D.C. office of
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Stephen J. Brandon will serve as a Director of New NGC upon consummation of
the Combination. He has served as Executive Director (Commercial) of British Gas
since August 1995. From 1987 to July 1995, Mr. Brandon was employed by General
Electric Company where he served as Vice President responsible for Southeast
Asian operations from 1993 to July 1995.
Roy Alan Gardner will serve as a Director of New NGC upon consummation of
the Combination. He has served as a Director of NGC since June 1995. Mr. Gardner
has served as Executive Director, Finance of British Gas since November 1994
prior to which he had been Managing Director of GEC Marconi Limited since
December 1992, having rejoined GEC in September 1994 as Deputy Managing
Director. Mr. Gardner was appointed to the Board of Directors of GEC in July
1994 and remains a Non-executive Director of GEC plc. Mr. Gardner joined GEC
upon leaving Northern Telecom Europe Limited ("Northern Telecom") where he was
Chief Operating Officer following Northern Telecom's takeover of STC plc, which
he joined in 1986 as Finance Director.
David R. Varney will serve as a Director of New NGC upon consummation of
the Combination. He has served as Executive Director of British Gas since June
1996. From January 1996 to May 1996, Mr. Varney served as a Director of Shell
International Petroleum Company. From December 1991 to December 1995, he served
as Managing Director on the Board of Shell UK Ltd. During 1990 and until
December 1991, Mr. Varney served as Head of Marketing, Branding and Product
Development for Shell International Petroleum Company, Ltd.
C. Kent Jespersen will serve as a Director of New NGC upon consummation of
the Combination. He has served as a Director of NGC since March 1995. Mr.
Jespersen served as Vice Chairman of Clearinghouse and as a member of the
Clearinghouse Management Committee from January 1994 through March 1995. Mr.
Jespersen has served as Senior Vice President of NOVA since September 1993. From
June 1992
71
to September 1993, he served as Senior Vice President (Corporate Development) of
NOVA's predecessor, NOVA Corporation of Alberta ("NOVA Alberta"). From 1989 to
June 1992, Mr. Jespersen served as President of Foothills Pipe Lines Ltd.
("Foothills Pipe Lines").
Jeffrey M. Lipton will serve as a Director of New NGC upon consummation of
the Combination. He has served as a Director of NGC since March 1995. Mr. Lipton
served as a member of the Clearinghouse Management Committee from January 1994
through March 1995. Mr. Lipton has served as President of NOVA from September
1994 to the present, as Senior Vice President and Chief Financial Officer of
NOVA from February 1994 to September 1994 and as Senior Vice President of
Novacor Chemicals Inc., an indirect subsidiary of NOVA, from December 1993 to
February 1994. Prior to joining NOVA in December 1993, Mr. Lipton served as Vice
President (Corporate Plans) of E.I. du Pont de Nemours & Co. ("du Pont") from
January 1993 to December 1993, and Vice President (Corporate Marketing and
Continuous Improvement) of du Pont from October 1990 to January 1993.
Albert Terence Poole will serve as a Director of New NGC upon consummation
of the Combination. He has served as a Director of NGC since March 1996. Mr.
Poole has served as a Senior Vice President and Chief Financial Officer of NOVA
since September 1994. Mr. Poole served as Senior Vice President, Corporate
Development and Controller of NOVA from March 1994 through August 1994, and,
from September 1993 to March 1994, Mr. Poole held the same position at NOVA
Alberta. From 1988 to August 1993, Mr. Poole served as Vice President and
Controller of NOVA Alberta.
Darald W. Callahan will serve as a Director of New NGC upon consummation of
the Combination. He has served as a Director of Newco since July 1996. Mr.
Callahan has served as Senior Vice President of Chevron Chemical since October
1991 and served as President of Warren, an unincorporated division of Chevron,
from December 1987 through September 1991. Mr. Callahan has been employed by
Chevron Corporation and its affiliates since 1964.
Donald L. Paul will serve as a Director of New NGC upon consummation of the
Combination. He has served as a Director of Newco since May 1996. Mr. Paul has
served as President of Chevron Canada Resources Limited since November 1994 and
served as President of Chevron Petroleum Technology Co. from August 1992 through
October 1994. Prior thereto, he served as Vice President-Exploration Research
and Development of Chevron Oil Field Research Company from September 1990
through July 1992. Mr. Paul has been employed by Chevron Corporation and its
affiliates since 1975.
Peter J. Robertson will serve as a Director of New NGC upon consummation of
the Combination. He has served as a Director of Newco since July 1996. Mr.
Robertson has served as a Vice President of Chevron Corporation since September
1994, responsible for strategic planning and coordination of Chevron
Corporation's quality improvement activities. Mr. Robertson served as President
of Warren, an unincorporated division of Chevron, from October 1991 through
September 1994. Prior thereto, he served as Vice President-Finance of Chevron
from October 1989 through September 1991. Mr. Robertson has been employed by
Chevron Corporation and its affiliates since 1973.
Daniel L. Dienstbier will serve as a Director of New NGC upon consummation
of the Combination. He has served as a Director of NGC since March 1995. Mr.
Dienstbier has nearly 30 years of experience in the oil and gas industry. He
served as President and Chief Operating Officer of American Oil & Gas Corp. from
October 1993 through July 1994, President and Chief Operating Officer of Arkla,
Inc. from July 1992 through October 1993 and President of Jule, Inc., a private
company involved in energy consulting and joint venture investments in the
pipeline, gathering and exploration and production industries, from February
1991 through June 1992. Prior thereto, Mr. Dienstbier served as President and
Chief Executive Officer of Dyco Petroleum Corp. and Executive Vice President of
Diversified Energy from February 1989 through February 1991. In addition, he
served as President of the Gas Pipeline Group of Enron Corp. from July 1985
through July 1988. Presently, Mr. Dienstbier is pursuing private investments. In
the past, Mr. Dienstbier has served as a member on the board of directors of
several public companies, including American Oil & Gas Corp., Arkla, Inc., Enron
Corp. and Midwest Resources.
J. Otis Winters will serve as a Director of New NGC upon consummation of
the Combination. He has served as a Director of NGC and its predecessor,
Holding, since August 1995. Mr. Winters is the Chairman of Pate, Winters &
Stone, Inc., a consulting firm, and has served in such position since 1990. In
1989, Mr.
72
Winters was a Managing Director of Mason Best Company, a private investment
firm. From 1987 to 1988, he was President of Oriole Oil Company, an oil and gas
investment firm.
COMMITTEES OF THE NEW NGC BOARD OF DIRECTORS
Upon consummation of the Combination, New NGC will have the following
standing committees of the New NGC Board of Directors.
EXECUTIVE COMMITTEE. The Executive Committee will be delegated the
authority to approve any actions that the New NGC Board of Directors could
approve, except to the extent restricted by law, the New NGC Bylaws or the New
NGC Certificate of Incorporation. The Executive Committee will be comprised of
Messrs. Watson, Jespersen, Gardner and one of the Chevron designees.
AUDIT COMMITTEE. The Audit Committee will be responsible for meeting with
the auditors, internal auditors and senior executives of New NGC to review and
inquire into matters affecting the financial reporting of New NGC and
recommending to the New NGC Board of Directors the auditors to be recommended
for appointment at the annual stockholders meeting. The Audit Committee will be
comprised of Messrs. Dienstbier and Winters.
COMPENSATION, CORPORATE GOVERNANCE AND HUMAN RESOURCES COMMITTEE. The
Compensation, Corporate Governance and Human Resources Committee (the
"Compensation Committee") will review recommendations of the appointment of
persons to senior executive positions, determine terms of employment and
compensation and be responsible for the proper and orderly administration of New
NGC's retirement and savings plan (other than matters relating to the funding
and investment of the plan's trust funds). This committee will also be
responsible for the compensation and governance of the New NGC Board of
Directors and, subject to the rights of the parties to the New NGC Stockholders
Agreement and the Trident Stockholders Agreement, recommending to the New NGC
Board of Directors nominees for election or appointment to the New NGC Board of
Directors, as the case may be. In addition, this committee will be responsible
for maintaining an effective working relationship between the new NGC Board of
Directors and management of New NGC. The Compensation Committee will recommend
awards under the NGC Corporation Employee Equity Option Plan (the "NGC
Corporation EEP") and the NGC Corporation Amended and Restated 1991 Stock Option
Plan (the "Stock Option Plan"), and will recommend awards under any other
employee stock option plans adopted by New NGC. The Compensation Committee will
be comprised of Messrs. Dienstbier, Lipton, Winters and one of each of the
Chevron designees and British Gas designees.
FINANCE COMMITTEE. The Finance Committee will be responsible for reviewing
with management and reporting to the New NGC Board of Directors on an annual
basis, the financing plans and objectives of New NGC. The Finance Committee will
be comprised of Messrs. Dienstbier, Gardner, Poole, Watson, Winters and one of
the Chevron designees.
RISK AND ENVIRONMENT COMMITTEE. The Risk and Environment Committee will be
responsible for overseeing environmental and occupational health and safety
policies of New NGC and will be comprised of Messrs. Jespersen and Winters and
one of each of the Chevron designees and British Gas designees.
COMPENSATION OF DIRECTORS
For serving on the New NGC Board of Directors, each of the non-employee
directors will be paid an annual retainer of $22,000 plus $1,250 per board or
committee meeting attended. In addition, each such director will be entitled to
reimbursement for his reasonable out-of-pocket expenses incurred in connection
with travel to and from, and attendance at, meetings of the New NGC Board of
Directors or committees thereof. Each non-employee director of New NGC will also
have the option to receive shares of New NGC Common Stock, in lieu of cash, in
payment of his annual retainer and meeting fees pursuant to the terms of the NGC
Corporation Non-Employee Director Compensation Plan. Each New NGC Director,
other than Messrs. Watson and Bergstrom, will be a non-employee director for
purposes of such plan.
73
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation earned by the individual who served as NGC's Chief Executive
Officer and who will serve as New NGC's Chief Executive Officer and the four
most highly compensated persons of NGC at the end of 1995 (the "Named Executive
Officers") in combined salary and bonus earned in 1995 from NGC, Clearinghouse
and Trident, as the case may be, as well as amounts earned by or awarded to such
individuals for services rendered in all capacities to NGC, Clearinghouse or
Trident, as the case may be, during 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
---------------------------------------- UNDERLYING
FISCAL OTHER ANNUAL STOCK ALL OTHER
NAME AND POSITION(S) YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2) COMPENSATION(3)
- ------------------------------------- ------- --------- ----------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles L. Watson.................... 1995 $ 600,600 $ 1,993,600(4) -- -- $ 69,620
Chairman of the Board, 1994 $ 581,400 $ 1,993,600(4) -- -- $ 70,022
Chief Executive Officer and $ 1,076,000(5)
President of NGC 1993 $ 456,790 $ 1,478,210(4) -- -- $ 83,892
Stephen W. Bergstrom................. 1995 $ 300,312 $ 483,400(4) -- -- $ 31,763
Senior Vice President 1994 $ 288,850 $ 483,400(4) -- -- $ 33,484
of NGC and $ 253,000(5)
President of Clearinghouse 1993 $ 248,620 $ 336,380(4) -- -- $ 40,607
Bruce M. Withers, Jr................. 1995 $ 252,667 -- (5) -- -- $ 184,850
Vice Chairman of NGC 1994 $ 326,000 $ 182,000(6) -- -- $ 49,281
and Chairman and Chief 1993 $ 319,583 $ 130,000(6) -- 34,375 $ 48,253
Executive Officer of Trident
Kenneth E. Randolph.................. 1995 $ 227,100 $ 104,200(4) -- 26,620 $ 23,543
Senior Vice President, 1994 $ 209,478 $ 81,600(4) -- -- $ 23,670
General Counsel and $ 75,000(5)
Secretary of NGC 1993 $ 166,634 $ 133,366(4) -- -- $ 26,141
H. Keith Kaelber..................... 1995 $ 212,004 $ 118,000(4) -- 25,062 $ 25,140
Senior Vice President 1994 $ 194,065 $ 97,992(4) -- -- $ 27,292
Chief Financial Officer of $ 75,000(5)
NGC 1993 $ 153,471 $ 88,565(4) -- 289,875 $ 23,461
</TABLE>
- ------------
(1) No Named Executive Officer received perquisites that exceeded 10% of annual
salary and bonus, or $50,000.
(2) Messrs. Randolph and Kaelber received grants of 26,620 and 25,062 options,
respectively, in 1995 under the Stock Option Plan. Amounts reported for Mr.
Kaelber in 1993 represent the amounts granted under the Clearinghouse
Employee Equity Option Plan (the "EEP") as restated into options to purchase
NGC Common Stock under the NGC Corporation Employee Equity Option Plan (the
"NGC Corporation EEP"), and, as adjusted pursuant to the terms of such plan
to reflect the issuance of 5,461,538 shares of NGC Common Stock (the
"Contingent Shares") in March 1996 pursuant to the Trident Combination. In
connection with the Trident Combination, all equity options granted under
the EEP were amended and restated into options to purchase NGC Common Stock
under the NGC Corporation EEP. Amounts reported for 1993 consist of stock
purchase rights granted to and exercised by Mr. Withers of 34,375 shares of
Common Stock of Trident. No Clearinghouse equity option grants or stock
option grants were made to or exercised by Messrs. Watson or Bergstrom
during 1995, 1994 or 1993.
(3) During 1995, 1994 and 1993, respectively, Messrs. Watson, Bergstrom,
Withers, Randolph and Kaelber received company contributions to their
respective savings plan accounts of $20,490, $20,490, $15,600, $17,760 and
$20,490, respectively; $13,765, $18,542, $20,760, $15,945 and $20,953,
respectively; and $23,622, $26,898, $21,006, $17,809 and $19,425,
respectively. During 1995, 1994 and 1993 respectively, Messrs. Watson,
Bergstrom, Withers, Randolph and Kaelber received excess savings plan
payments of $33,795, $11,273, $8,250, $5,783 and $4,650, respectively.
During 1994 and 1993, respectively, Messrs. Watson, Bergstrom, Randolph and
Kaelber received service premiums of $8,972, $4,528, $3,646 and $3,034,
respectively, and $22,840, $12,431, $8,332 and $4,036, respectively. No
service premiums were paid in 1995. A life insurance premium of $15,335 was
paid by Clearinghouse, or NGC, as the case may be, on Mr. Watson's behalf in
each of 1995, 1994 and 1993. Mr. Withers received a payment of $161,000 in
August 1995 upon the expiration of the initial term of his employment
agreement. See " -- Employment Agreements."
(4) Bonuses shown for Messrs. Watson, Bergstrom, Randolph and Kaelber for 1995
were awarded and paid in 1995; bonuses for 1994 were awarded and paid in
1994; and bonuses for 1993 were awarded and paid in 1993. These bonus awards
were based on the provisions of NGC's Above Base Incentive Compensation Plan
(the "ABIC Plan") and were subject to guaranteed bonus provisions of each of
Messrs. Watson and Bergstrom's respective employment agreements. See "--
Employment Agreements" for a description of Messrs. Watson and Bergstrom's
employment agreements.
(5) Bonus awarded in 1994 to be paid in equal installments in 1995 and 1996.
(6) Mr. Withers bonuses for 1994 and 1993, respectively, were determined and
paid in 1995 and 1994, respectively, based on provisions of Trident's
Management Incentive Plan, subject to the guaranteed bonus provision of his
employment agreement. Mr. Withers did not receive a bonus in 1995. See
" -- Employment Agreements."
74
STOCK OPTION GRANTS
The following table sets forth certain information with respect to stock
option grants made to the Named Executive Officers during 1995 under the NGC
Corporation EEP or the Stock Option Plan. No stock option grants were made by
NGC to Messrs. Watson, Bergstrom or Withers during 1995.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL RELIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF STOCK
NUMBER OF % TOTAL PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL 1995 $/SHARE DATE 5% 10%
- ------------------------------------- ------------------ ------------ -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles L. Watson.................... -- -- -- -- -- --
Bruce M. Withers, Jr................. -- -- -- -- -- --
Stephen W. Bergstrom................. -- -- -- -- -- --
Kenneth E. Randolph.................. 26,620 1.6% $ 9.38 12/08/05 $ 157,034 $ 397,940
H. Keith Kaelber..................... 25,062 1.5% $ 9.38 12/08/05 $ 147,843 $ 374,649
</TABLE>
OPTION EXERCISES AND YEAR END VALUE TABLE
The following table sets forth for Messrs. Watson, Withers, Randolph and
Kaelber certain information regarding options held by them at December 31, 1995.
Mr. Bergstrom did not own any options to purchase NGC Common Stock at December
31, 1995. See " -- Stock Option Grants" and "Principal Stockholders."
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING EXERCISED UNEXERCISED
STOCK OPTIONS OR IN-THE-MONEY
EQUITY OPTIONS AT STOCK OPTIONS
SHARES ACQUIRED DECEMBER 31, 1995 DECEMBER 31, 1995
ON EXERCISE VALUE ---------------------------- ----------------------------
OF OPTIONS REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles L. Watson.................... -- -- -- 1,738,717(1) -- $11,901,517(2)
Bruce M. Withers, Jr................. 123,618 $ 661,356 200,797(1) -- $ 573,275(2) --
Stephen W. Bergstrom................. -- -- -- -- -- --
Kenneth E. Randolph.................. -- -- -- 26,620(3) -- (3)
H. Keith Kaelber..................... -- -- -- 289,875(1) -- $ 1,984,194(2)
-- -- -- 25,062(3) -- (3)
</TABLE>
- ------------
(1) Options granted to Messrs. Watson, Withers and Kaelber were outstanding on
March 14, 1995 and have been adjusted to reflect the allocation of the
Contingent Shares. See "-- Principal Stockholders" and "-- Stock Option
Plan."
(2) Value based on the closing price of $8.875 on the NYSE -- Composite Tape for
NGC Common Stock on December 29, 1995.
(3) The options granted during 1995 to Messrs. Randolph and Kaelber have an
exercise price of $9.38 per share. (Based on the December 29, 1995, $8.875
closing price, such options were out-of-the-money at December 31, 1995.)
EMPLOYMENT AGREEMENTS
C. L. WATSON EMPLOYMENT AGREEMENT. Clearinghouse entered into an
employment and non-competition agreement with C. L. Watson, dated as of May 19,
1992, pursuant to which Clearinghouse agreed to employ Mr. Watson as Chairman,
Chief Executive Officer and President of Clearinghouse. Mr. Watson is currently
employed as Chairman, Chief Executive Officer and President of NGC. Mr. Watson's
agreement provides for (i) a five year primary term expiring on May 19, 1997 and
(ii) a non-compete term of two years beyond the termination of the agreement
prohibiting Mr. Watson from engaging in any business in competition with
Clearinghouse. The agreement also places certain restrictions upon Mr. Watson's
ability to communicate confidential information concerning NGC to third parties.
Mr. Watson's employment agreement entitles him to receive a base salary of
$456,790, subject to increase as determined by the Compensation Committee. Mr.
Watson is also entitled to certain guaranteed bonus amounts under the ABIC Plan
based on the operating profits of NGC. In addition, Mr. Watson is entitled to
participate in the Deferred Compensation Plan and the NGC Corporation EEP. Mr.
Watson also
75
has certain rights to participate (up to 10%) in investment opportunities of NGC
on such terms as Mr. Watson and NGC shall agree upon. As of December 31, 1995,
Mr. Watson's annual base salary was $600,600. If Mr. Watson is terminated
without cause prior to May 19, 1997, he is entitled to receive 2.99 times the
average of his annual base salary and ABIC Plan bonus over the three calendar
years preceding the calendar year in which he is terminated.
STEPHEN W. BERGSTROM EMPLOYMENT AGREEMENT. Clearinghouse entered into an
employment and non-competition agreement with Stephen W. Bergstrom, dated as of
May 19, 1992, pursuant to which Clearinghouse agreed to employ Mr. Bergstrom as
Executive Vice President of Clearinghouse. Mr. Bergstrom is currently employed
as Senior Vice President of NGC and President of Clearinghose. Mr. Bergstrom's
employment agreement provides for (i) a five year primary term expiring on May
19, 1997 and (ii) a non-compete term of two years beyond the termination of the
agreement prohibiting Mr. Bergstrom from engaging in any business in competition
with NGC. The agreement also places certain restrictions upon Mr. Bergstrom's
ability to communicate confidential information concerning NGC to third parties.
Mr. Bergstrom's employment agreement entitles him to receive a base salary
of $248,620, subject to increase as determined by the Compensation Committee.
Mr. Bergstrom is also entitled to certain guaranteed bonus amounts under the
ABIC Plan based on the operating profits of NGC. In addition, Mr. Bergstrom is
entitled to participate in the Deferred Compensation Plan. As of December 31,
1995, Mr. Bergstrom's annual base salary was $300,312. If Mr. Bergstrom is
terminated without cause prior to May 19, 1997, he is entitled to receive 2.99
times the average of his annual base salary and ABIC Plan bonus over the three
calendar years preceding the calendar year in which he is terminated.
BRUCE M. WITHERS, JR. EMPLOYMENT AGREEMENT. Holding and Trident entered
into an employment agreement with Bruce M. Withers, Jr. dated as of July 9,
1991, pursuant to which each of Holding and Trident agreed to employ Mr. Withers
as Chairman of the Board and Chief Executive Officer and (subject to vote by the
stockholders) a director. Mr. Withers' employment agreement was amended in
certain respects as of April 28, 1994. As amended, the initial term of the
agreement ended on July 31, 1995. Mr. Withers has exercised an option granted
under his employment agreement to extend the agreement for an additional term of
one year commencing on August 1, 1995 and terminating on July 31, 1996. NGC and
Mr. Withers agreed to an additional amendment to Mr. Withers' employment
agreement, which provided that following the Trident Combination, Mr. Withers
would no longer be employed as Chairman of the Board, Chief Executive Officer
and a director of Holding. Instead, Mr. Withers is employed as Vice Chairman of
NGC.
During the initial term of his employment agreement, Mr. Withers was
entitled to a base salary of $300,000 per year, subject to increase by the
Trident Board of Directors, a guaranteed bonus of 40% of his base salary and a
performance bonus not to exceed 60% of his base salary, which was based on the
profitability of Trident. If, at the end of the initial term, Mr. Withers had
not been paid aggregate compensation of $2,000,000, NGC agreed to pay Mr.
Withers the difference between the aggregate compensation actually paid and
$2,000,000. In August 1995, following the end of the initial term, Mr. Withers
was paid $161,000 pursuant to the foregoing provision of his employment
agreement. During the additional term of his employment agreement, which
commenced August 1, 1995 and which will end July 31, 1996, Mr. Withers is paid
an annual salary of $150,000.
If Mr. Withers' employment is terminated by NGC, other than for cause,
during additional terms of his employment agreement, Mr. Withers will be
entitled to be paid $150,000, less the aggregate compensation paid during the
additional term to the date of termination, in equal monthly installments,
commencing the month following the month of termination and ending on July 31,
1996.
Pursuant to his employment agreement, Trident granted Mr. Withers a
ten-year option to purchase 312,500 shares of Trident Common Stock exercisable
at a price of $6.40 per share. The option is currently exercisable in full at
any time. In March 1995, Mr. Withers exercised 123,618 of his options. As of
March 28, 1996, as adjusted for the Contingent Share allocation, 200,797 of Mr.
Withers' options remained outstanding at an adjusted exercise price of $6.02 per
share.
76
STEPHEN A. FURBACHER EMPLOYMENT AGREEMENT. NGC entered into an employment
and non-competition agreement with Stephen A. Furbacher, dated as of April 2,
1996, but effective for all purposes as of May 22, 1996, (the date of signing of
the Combination Agreement). Pursuant to this agreement, NGC agreed to employ Mr.
Furbacher as a Senior Vice President of NGC, and, upon consummation of the
Combination, as President of Warren Petroleum. Mr. Furbacher is currently
employed as a Senior Vice President of NGC. Mr. Furbacher's agreement provides
for (i) a five year primary term expiring on May 22, 2001 and (ii) a non-compete
term of two years beyond the termination of the agreement prohibiting Mr.
Furbacher from engaging in any business in competition with NGC. The agreement
also places certain restrictions upon Mr. Furbacher's ability to communicate
confidential information concerning NGC to third parties.
Mr. Furbacher's employment agreement entitles him to receive a base salary
of $250,000, subject to increase as determined by the Compensation Committee.
Mr. Furbacher is also entitled to certain guaranteed bonus of $100,000 per annum
during the five year primary term of his employment agreement. Thereafter, Mr.
Furbacher is eligible to participate in the ABIC Plan, but there is no
guaranteed bonus amount. In addition, Mr. Furbacher is entitled to $1,500,000 as
additional compensation in the form of equity or cash during the term of the
agreement reduced by any base salary or bonus received in excess of the base
salary and guaranteed bonus under the ABIC Plan. Mr. Furbacher is also entitled
to participate in the Deferred Compensation Plan and the NGC Employee Equity
Option Plan. If Mr. Furbacher is terminated without cause prior to May 22, 2001,
he is entitled to receive his base salary and guaranteed bonus for the remainder
of the primary term or two years from the date of termination, whichever is
shorter.
Mr. Furbacher's employment agreement also provides that NGC pay Mr.
Furbacher the difference between the purchase price of his Houston home and the
net proceeds to him from the sale of his Tulsa home, with the amount of such
payment not to exceed $50,000. In addition, NGC has agreed to provide Mr.
Furbacher with a bridge loan of up to $100,000, to be repaid with interest
computed at 6% per annum on the earlier to occur of the sale of his Tulsa home
or March 31, 1997.
MARK L. HAZELWOOD EMPLOYMENT AGREEMENT. NGC entered into an employment and
non-competition agreement with Mark L. Hazelwood, dated as of March 15, 1996,
but effective for all purposes as of April 15, 1996. Pursuant to this agreement,
NGC agreed to employ Mr. Hazelwood as a Senior Vice President of NGC and
President of NGC Global Energy Services, Inc. Mr. Hazelwood is currently
employed as a Senior Vice President of NGC. Mr. Hazelwood's agreement provides
for (i) a five year primary term expiring on April 15, 2001 and (ii) a
non-compete term of two years beyond the termination of the agreement
prohibiting Mr. Hazelwood from engaging in any business in competition with NGC.
The agreement also places certain restrictions upon Mr. Hazelwood's ability to
communicate confidential information concerning NGC to third parties.
Mr. Hazelwood's employment agreement entitles him to receive a base salary
of $250,000, subject to increase as determined by the Compensation Committee.
Mr. Hazelwood is also entitled to certain guaranteed bonus of $100,000 per annum
during the five year primary term of his employment agreement. Thereafter, Mr.
Hazelwood is eligible to participate in the ABIC Plan, but there is no
guaranteed bonus amount. In addition, Mr. Hazelwood is entitled to $1,500,000 as
additional compensation in the form of equity or cash during the term of the
agreement reduced by any base salary or bonus received in excess of the base
salary and guaranteed bonus under the ABIC Plan. Mr. Hazelwood is also entitled
to participate in the Deferred Compensation Plan and the NGC Employee Equity
Option Plan. If Mr. Hazelwood is terminated without cause prior to April 15,
2001, he is entitled to receive his base salary and guaranteed bonus for the
remainder of the primary term or two years from the date of termination,
whichever is shorter.
Mr. Hazelwood's employment agreement also provides that NGC pay Mr.
Hazelwood the difference between the purchase price of his California home,
excluding improvements thereon, and the net proceeds to him from the sale of his
California home, with the amount of such payment not to exceed $100,000.
77
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS OF MANAGEMENT
In January 1994, Clearinghouse entered into an employment agreement with
James T. Hackett, formerly a Senior Vice President of NGC, pursuant to which
Clearinghouse agreed to hire Mr. Hackett as Executive Vice President of
Clearinghouse. In connection with Mr. Hackett's relocation from Chicago and
purchase of a home in Houston, Clearinghouse loaned Mr. Hackett $500,000, at
6.25% interest. The promissory note issued by Mr. Hackett in connection with the
loan is secured by a combination of the proceeds of his "puts" under the
Clearinghouse partnership agreement, which, in connection with the Trident
Combination, became the proceeds of the sale of certain shares of NGC Common
Stock under the Clearinghouse Owners Stockholders Agreement, and the proceeds
from the sale of his Chicago home. Mr. Hackett resigned as an officer of NGC in
December 1995. As of December 31, 1995, the outstanding balance of the loan,
including interest, was $280,638. The terms of the note require payment of
principal and accrued interest by July 1, 1998.
In 1993, Mr. Withers and other key executives of Trident were granted the
right to purchase shares of Common Stock of Trident for $8.64 cash per share.
Trident loaned such executives a portion of the purchase price of such shares.
Trident loaned Mr. Withers $148,500 to finance such purchase. The principal of
such loans was payable in three equal annual installments, the first of which
was paid May 17, 1994. Each such loan bore interest at 6% per annum. The
outstanding balance of each such loan was paid in full in March 1995. During
1995, Mr. Withers was indebted to Trident for $100,388 with respect to the 1993
stock purchase.
Other than Messrs. Hackett and Withers, no other director, executive
officer, nominee for election as a director or 5% stockholder was indebted to
NGC, Clearinghouse, or Trident, as the case may be, for an amount exceeding
$60,000 during 1995.
BUSINESS RELATIONSHIPS WITH NOVA; NOVA'S OTHER GAS SERVICES BUSINESSES
Various business relationships between NOVA and NGC, together with NOVA's
operations as a major natural gas services company, may present conflicts of
interest as NOVA and NGC each pursue business opportunities. These conflicts may
be resolved in favor of NOVA.
JOINT VENTURE
In February 1994, Clearinghouse, through its wholly owned subsidiary NGC
Canada, Inc. ("NGC Canada"), and NOVA Gas International Ltd. ("NGI") formed NCL
to market, exchange, gather, process, purchase, sell, transport and store
natural gas and NGLs in Canada. NCL's gas sales are approximately 3.0 Bcf per
day.
NGI owns an approximate 50.02% equity interest in NCL. NGI is a limited
partner of NCL, directly owning a 49% limited partnership interest, and also
owns 51% of the voting stock of NCL's general partner, Novagas Clearinghouse
Ltd. (the "NCL general partner"), which owns a 2% general partnership interest
in NCL and is responsible for the management and control of partnership
interests in NCL. NGC and NGI have equal control over the management of the NCL
general partner.
In June 1995, NCL acquired Pan-Alberta Gas which, in recent years, had been
a significant supplier of natural gas to NGC. NGC and Pan-Alberta Gas have
entered into an agreement pursuant to which NGC markets certain volumes of gas
sourced by Pan-Alberta Gas into West Coast markets. NGC shares in the proceeds
of such sales above certain benchmarks.
During the fiscal year ended December 31, 1995, NGC Canada and NGI each
invested approximately $18.8 million (Cdn.) (approximately $13.7 million (U.S.)
based on December 31, 1995 exchange rates) in cash or assets in NCL. Although
NGC and NGI have no legal commitments to provide future funding to NCL, NCL is
pursuing other investment opportunities, some of which may result in NGC and NGI
making additional contributions. For the year ended December 31, 1995, NCL
generated net income before taxes of approximately $9.1 million (Cdn.)
(approximately U.S. $7.3 million, net to NGC's equity interest).
78
NCL has entered into service agreements with each of NGC, NOVA and
subsidiaries of NOVA under which each will provide administrative services to
NCL on an arm's-length fee or on a cost recovery basis. NCL sells approximately
275,000 MMBtu of gas per day to NGC at market responsive prices.
During 1995, a subsidiary of NGC entered into an agreement with NCL
pursuant to which NGC provides risk management and gas trading assistance to
NCL. In 1995, NGC received a one-time fee of $5.25 million (Cdn.) (approximately
$3.85 million U.S.) payable out of NCL profits. In addition, NGC receives a fee
per MMBtu if certain benchmarks are met.
OTHER NOVA BUSINESSES
NOVA, through its subsidiaries, joint ventures and other affiliates, is a
major international gas services company that engages in the transmission,
gathering, processing, storage and marketing of natural gas, together with
related activities. NOVA's natural gas transportation operations currently
include its 13,300-mile Alberta pipeline system, which collects and transports
gas for use in Alberta and for delivery to connecting pipeline systems for
export to eastern Canada and the United States. In 1995, this system transported
4.3 trillion cubic feet of natural gas. NOVA also owns 50% of the Foothills
pipeline system which transports up to 2.6 million cubic feet per day of Western
Canadian natural gas to major markets in the United States. NOVA also produces
and markets various petrochemicals in Canada and the United States. NOVA
purchases large amounts of petroleum products, natural gas and NGL's as fuel or
feedstock for its petrochemical operations. Further, NOVA engages in NGL
extraction, transportation, storage, marketing and related activities.
These operations and NOVA's pursuit of additional gas services
opportunities will overlap with New NGC's operations and strategy. There are no
contractual limits on NOVA's ability to compete with New NGC. Under the terms of
the NGC Stockholders Agreement, BG Holding, NOVA Gas (U.S.) and Chevron agreed
that BG Holding, NOVA Gas (U.S.) and Chevron may have interests in other
business ventures that may be competitive with the activities of New NGC and
that, to the fullest extent permitted by law, nothing in the New NGC
Stockholders Agreement will limit the current or future business activities of
the parties thereto or their affiliates, whether or not such activities are
competitive with those of New NGC. Accordingly, conflicts of interest may arise
between NOVA and New NGC as they each pursue natural gas services business
opportunities. These conflicts may be resolved in favor of NOVA.
BUSINESS RELATIONSHIPS WITH BRITISH GAS; BRITISH GAS' OTHER GAS SERVICE
BUSINESSES
Various business relationships between British Gas and NGC, together with
British Gas' operations as a major natural gas services company, may present
conflicts of interest as British Gas and NGC each separately pursues business
opportunities. These conflicts may be resolved in favor of British Gas.
ACCORD ENERGY
British Gas owns 51% of Accord Energy and NGC owns 49%, although NGC has
equal control over the management of Accord Energy. Accord Energy's primary
focus is marketing gas in the short-term market (less than three years) in the
United Kingdom. Accord Energy currently purchases a portion of British Gas'
exploration and production division's equity crude oil. In the medium-to-longer
term, Accord Energy's business plan calls for it to be a competitive multi-fuel
entity, marketing and trading energy products, including natural gas, liquefied
natural gas, NGLs, crude oil, fuel oil, electricity and liquefied petroleum
gases, all supported through utilizing financial instruments.
As of December 31, 1995, NGC and British Gas had invested approximately
$3.8 million and $3.9 million, respectively, in Accord Energy. Although NGC and
British Gas have no legal commitments to provide future funding to Accord
Energy, Accord Energy is pursuing other investment opportunities some of which
may result in NGC and British Gas making additional contributions. For the year
ended December 31, 1995, Accord Energy generated net income (net to NGC's equity
interest) of approximately $11.8 million.
79
OTHER BRITISH GAS BUSINESSES
British Gas, through its subsidiaries and affiliates, is a major
international gas services company that engages in energy-related activities,
including the transmission, gathering, processing, storing and marketing of
natural gas and related activities. These operations and British Gas' pursuit of
additional opportunities will overlap with New NGC's operations and strategy.
There are no contractual limits on BG Holding's ability to compete with New NGC.
Under the terms of the New NGC Stockholders Agreement, BG Holding, NOVA Gas
(U.S.) and Chevron agreed that BG Holding, NOVA Gas (U.S.) and Chevron may have
interests in other business ventures that may be competitive with the activities
of NGC and that, to the fullest extent permitted by law, nothing in the New NGC
Stockholders Agreement shall limit the current or future business activities of
the parties thereto or their affiliates, whether or not such activities are
competitive with those of New NGC. Accordingly, conflicts of interest may arise
between British Gas and New NGC as they each pursue business opportunities.
These conflicts may be resolved in favor of British Gas.
CHANGE IN RELATIONSHIP WITH BRITISH GAS
British Gas plc has announced its intention, subject to shareholder
approval, to enter into a de-merger transaction, which will create two separate
publicly-traded companies: TransCo International and British Gas Energy. TransCo
International will continue to own the shares of New NGC Common Stock issued to
BG Holding. British Gas Energy will include British Gas plc's interests in the
Accord Energy joint venture with NGC.
BUSINESS RELATIONSHIPS WITH CHEVRON; CHEVRON'S OTHER BUSINESSES
Various business relationships between Chevron and NGC, together with
Chevron's operations as a major vertically integrated energy company, may
present conflicts of interest as Chevron and NGC each pursue business
opportunities. These conflicts may be resolved in favor of ChevCorp.
ANCILLARY AGREEMENTS AND STRATEGIC ALLIANCES CONTEMPLATED BY THE
COMBINATION
Pursuant to the Combination Agreement, NGC and Chevron, or affiliates
thereof, will enter into certain supply, sales and service agreements pursuant
to which, among other things, New NGC (as successor in interest to NGC and
Newco) will have the right to (i) purchase and/or market substantially all
natural gas and natural gas liquids produced or controlled by Chevron in the
United States (except Alaska) and to supply natural gas and feedstock to Chevron
refineries and Chevron Chemical plants in the United States and (ii) participate
in existing and future opportunities to provide electricity to United States
facilities of Chevron and Chevron Chemical, as well as to purchase or market
excess electricity generated by such facilities. See "Ancillary Agreements" for
further information on these agreements.
OTHER CHEVRON BUSINESS
ChevCorp is a major vertically integrated oil and gas company and is the
sixth largest oil and gas company (by revenues) in the world. ChevCorp, through
its subsidiaries, affiliates and joint ventures, is involved in exploration and
production of oil and gas, gas gathering, transportation, storage, refining and
distribution (wholesale and retail).
Accordingly, ChevCorp's present operation and its pursuit of additional gas
services opportunities overlap with NGC's operations and strategy. There are no
contractual limits on ChevCorp's ability to compete with New NGC. Under the
terms of the New NGC Stockholders Agreement, BG Holding, NOVA Gas (U.S.) and
Chevron will agree that each of them may have interests in other business
ventures that are or may be competitive with the activities of New NGC and that,
to the fullest extent permitted by law, nothing in the New NGC Stockholders
Agreement shall limit the current or future business activities of the parties
thereto or their affiliates, whether or not such activities are competitive with
those of New NGC. Accordingly, conflicts of interest may arise between ChevCorp
and its affiliates and New NGC as they each pursue natural gas services business
opportunities. These conflicts may be resolved in favor of ChevCorp.
80
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of NGC Common Stock as of July 19, 1996, by (i) each person who is
known by NGC to own beneficially 5% or more of NGC Common Stock, (ii) each
director of NGC, (iii) each executive officer of NGC named in the Summary
Compensation Table and (iv) all directors and executive officers of NGC as a
group. Share amounts and percentages shown for each individual or group in the
table are adjusted to give effect to the exercise of all options and warrants
exercisable by such individual or group within 60 days of July 19, 1996. In
addition, the table sets forth certain information, assuming consummation of the
Combination, regarding beneficial ownership of New NGC Common Stock by (i) each
person who NGC believes would beneficially own more than 5% of the outstanding
New NGC Common Stock at the Effective Time, (ii) each person who will serve on
the New NGC Board of Directors following the Effective Time, (iii) each
executive officer of New NGC named in the Summary Compensation Table under the
heading "Management and Operations After the Combination-Executive Compensation"
and (iv) all directors and officers of New NGC as a group following the
Effective Time.
<TABLE>
<CAPTION>
NGC COMMON NEW NGC COMMON
STOCK(1)(2) STOCK(1)(2)
------------------------ ------------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES OF CLASS SHARES OF CLASS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BG Holdings, Inc.(2)(3).............. 38,623,211 34.8 38,623,211 25.8
1100 Louisiana
Suite 2500
Houston, Texas 77002
British Gas plc(2)(3)(4)............. 38,623,211 34.8 38,623,211 25.8
The Adelphi
1-11 John Adams Street
London WC2N 6HT
NOVA Gas Services (U.S.) Inc.(2)..... 38,623.211 34.8 38,623,211 25.8
690 Mechanic Street
Leominster, Massachusetts 01453
NOVA Corporation(2)(5)............... 38,623,211 34.8 38,623,211 25.8
801 Seventh Avenue S.W.
Calgary, Alberta T2P 2N6
Chevron U.S.A. Inc.(2)(6)............ -- -- 38,623,211 25.8
1301 McKinney
Houston, Texas 77010
Chevron Corporation(2)(6)(7)......... -- -- 38,623,211 25.8
575 Market Street
San Francisco, CA 94104
C.L. Watson(2)(8).................... 7,393,855 6.7 7,393,855 4.9
13430 Northwest Freeway
Houston, Texas 77040
Stephen W. Bergstrom(2)(9)........... 2,425,229 2.2 2,425,229 1.6
Bruce M. Withers, Jr.(10)............ 206,112 * 206,112 *
Kenneth E. Randolph(2)(11)........... 1,157,227 1.0 1,157,227 *
H. Keith Kaelber(2)(11).............. 692,190 * 692,190 *
Stephen J. Brandon................... -- -- -- --
Roy Alan Gardner..................... -- -- -- --
David R. Varney...................... -- -- -- --
C. Kent Jespersen.................... 2,553 * 2,553 *
Jeffrey M. Lipton.................... 4,533 * 4,533 *
Albert Terence Poole................. 450 * 450 *
J. Otis Winters(12).................. 12,606 * 12,606 *
81
Daniel L. Dienstbier................. 4,179 * 4,179 *
Darald W. Callahan................... -- -- -- --
Donald L. Paul....................... -- -- -- --
Peter J. Robertson................... -- -- -- --
Executive Officers and
Directors of NGC and New NGC,
respectively,
as a Group (13 and 17 persons,
respectively)(8)(9)(10(11)(12)..... 11,898,934 10.7 11,898,934 7.9
</TABLE>
- ------------
* Less than 1%, respectively.
(1) Unless otherwise noted, each of the persons has sole voting and investment
power with respect to the shares reported.
(2) BG Holdings, NOVA Gas (U.S.), Mr. Watson and certain other persons are
parties to the Clearinghouse Owners Stockholders Agreement, which provides
that, among other things, the parties thereto will vote their NGC Common
Stock, subject to certain conditions, to elect as the ten directors of NGC
three designees of the BG Group, three designees of NOVA Group, two
officers of NGC designated by the former owners of equity interests in
Clearinghouse, other than BG Holding and NOVA Gas (the "PEP Group") and two
independent directors, one of whom may be designated by HMTF pursuant to
the New Trident Stockholders Agreement. Approximately 85.0%, or 94,093,700
shares of NGC Common Stock are subject to the Clearinghouse Owners
Stockholders Agreement. Upon consummation of the Combination, the
Clearinghouse Owners Stockholders Agreement will be terminated and BG
Holding, NOVA Gas (U.S.) and Chevron will enter into the New NGC
Stockholders Agreement, pursuant to which each of the BG Group, NOVA Group
and Chevron Group will agree, among other things, that they will vote their
stock, subject to certain conditions, to elect as the 13 directors of New
NGC, three designees of the BG Group, three designees of the NOVA Group,
three designees of the Chevron Group, Mr. C.L. Watson, another member of
New NGC's senior management selected by Mr. Watson and two independent
directors, one of which shall be a designee of HMTF to the extent provided
in the New Trident Stockholders Agreement. For further information, see
"Stockholder Agreements -- New NGC Stockholders Agreement."
(3) British Gas plc has announced its intention, subject to shareholder
approval, to enter into a de-merger transaction, which will create two
separate publicly-traded companies: TransCo International and British Gas
Energy. TransCo International will continue to own the shares of New NGC
Common Stock issued to BG Holding. British Gas Energy will include British
Gas plc's interests in the Accord Energy joint venture with NGC.
(4) British Gas, through subsidiaries, indirectly owns 100% of the capital
stock of BG Holding. Consequently, British Gas may be deemed to
beneficially own all of the shares of NGC Common Stock or New NGC Common
Stock (as applicable) owned of record by BG Holding.
(5) NOVA, through subsidiaries, indirectly owns 100% of the capital stock of
NOVA Gas (U.S.). Consequently, NOVA may be deemed to beneficially own all
of the shares of NGC Common Stock or New NGC Common Stock (as applicable)
owned of record by NOVA Gas (U.S.).
(6) Excludes 7,815,363 shares of New NGC Series A Participating Preferred Stock
that Chevron will own of record upon consummation of the Combination. Each
share of New NGC Series A Participating Preferred Stock may be converted
into one share of New NGC Common Stock at the option of Chevron upon the
occurrence of certain events or automatically upon the sale by Chevron to a
non-affiliate. See "Description of Newco Certificate of Incorporation and
Bylaws Newco Preferred Stock" for further information on the New NGC Series
A Participating Preferred Stock.
(7) ChevCorp beneficially owns 100% of the capital stock of Chevron.
Consequently, Chevron may be deemed to beneficially own all of the shares
of New NGC Common Stock and New NGC Series A Participating Preferred Stock
owned of record by Chevron.
(8) Includes 3,179,360 shares of NGC Common Stock that is owned by trusts
established by Mr. Watson. Mr. Watson is the sole trustee of these trusts.
Mr. Watson may be deemed to beneficially own all of the shares of NGC
Common Stock owned of record by such trusts. The number of shares does not
include approximately 682 shares of NGC Common Stock held by the Trustee of
the NGC Corporation Profit Sharing/401(k) Savings Plan (the "401(k)
Plan") as of December 31, 1995, for the account of Mr. Watson.
Participants in the 401(k) Plan have no voting or investment power with
respect to such shares until their distribution to such participants upon
termination of employment.
(9) Includes 630,561 shares of NGC Common Stock that is owned by trusts
established by Mr. Bergstrom. The trusts are irrevocable and Mr.
Bergstrom's brother is the trustee of the Trusts. Mr. Bergstrom disclaims
beneficial ownership of such securities. The number of shares does not
include approximately 967 shares of NGC Common Stock held by the Trustee of
the 401(k) Plan as of December 31, 1995, for he account of Mr. Bergstrom.
Participants in the 401(k) Plan have no voting or investment power with
respect to such shares until their distribution to such Participants upon
termination of employment.
(10) Includes 5,315 shares of NGC Common Stock held directly by Mr. Withers and
200,797 shares of NGC Common Stock issuable upon the exercise of currently
exercisable stock options held by Mr. Withers. The number of shares does
not include approximately 4,385 shares of NGC Common Stock held by the
Trustee of the 401(k) Plan as of December 31, 1995, for the account of Mr.
Withers. Participants in the 401(k) Plan have no voting or investment power
with respect to such shares until their distribution to such participants
upon termination of employment.
(11) The number of shares does not include approximately 815, and 1,139 shares
respectively, of NGC Common Stock held by the Trustee of the 401(k) Plan as
of December 31, 1995, for the accounts of Messrs. Randolph and Kaelber,
respectively. Participants in the 401(k) Plan have no voting or investment
power with respect to such shares until their distribution to such
participants upon termination of employment.
(12) Includes 6,378 shares held by Mr. Winters and 6,228 shares issuable to Mr.
Winters upon exercise of an immediately exercisable warrant.
82
DESCRIPTION OF NEWCO CERTIFICATE OF INCORPORATION AND BYLAWS
GENERAL
Newco's authorized capital stock currently consists of 450,000,000 shares,
of which 50,000,000 shares, par value $0.01 per share, are designated Newco
Preferred Stock and 400,000,000 shares, par value $0.01 per share, are
designated Newco Common Stock. As of July 19, 1996, there are 111,073,380 shares
of Newco Common Stock outstanding and no shares of Newco Preferred Stock
outstanding. Newco will be the corporation legally surviving the Combination,
and Newco's Certificate of Incorporation will become the certificate of
incorporation and bylaws of New NGC at the Effective Time.
NEWCO COMMON STOCK
Except as otherwise required by law, and subject to any special voting
rights which may be granted any series of Newco Preferred Stock, each holder of
Newco Common Stock is entitled to one vote for each share of Newco Common Stock
standing in such other holder's name on the records of Newco on each matter
submitted to a vote of the stockholders.
Subject to the rights of the holders of the Newco Preferred Stock, the
holders of the Newco Common Stock are entitled to receive when, as, and if
declared by the Newco Board of Directors, out of funds legally available
therefor, dividends payable in cash, stock, or otherwise.
Upon any liquidation, dissolution, or winding up of Newco, whether
voluntarily or involuntarily, and after the holders of the Newco Preferred Stock
and the holders of any bonds, debentures, or other obligations of Newco shall
have been paid in full the amounts to which they shall be entitled (if any), or
a sum sufficient for such payment in full shall have been set aside, the
remaining net assets of Newco shall be distributed pro rata to the holders of
the Newco Common Stock and the holders of Newco Series A Participating Preferred
Stock in accordance with their respective rights and interest, to the exclusion
of the holders of any other series of the Newco Preferred Stock and any bonds,
debentures, or other obligations of Newco.
NEWCO PREFERRED STOCK
Newco Preferred Stock may be issued from time to time in one or more
series, the shares of each series to have such designations and powers,
preferences, and rights, and qualifications, limitations and restrictions
thereof as described in the Newco Certificate of Incorporation.
The Newco Certificate of Incorporation authorizes the issuance of 8,000,000
shares of Newco Preferred Stock to be designated as Series A Participating
Preferred Stock (the "Newco Series A Participating Preferred Stock").
Except as provided by law, holders of Newco Series A Participating
Preferred Stock shall have no voting rights on any matter and such shares are
not redeemable.
Subject to certain anti-dilutive adjustments in the event of
reclassification of Newco Common Stock, the holders of the Newco Series A
Participating Preferred Stock shall be entitled to receive dividends or
distributions equal per share in amount and kind to any dividend or distribution
payable on shares of Newco Common Stock, when and as the same are declared by
the Newco Board of Directors out of any funds legally available therefor and
paid to the holders of Newco Common Stock, and no dividend may be declared and
paid on Newco Common Stock unless an identical dividend or distribution is
declared and paid concurrently on Newco Series A Participating Preferred Stock.
In the event of any liquidation, dissolution or winding up of Newco,
whether voluntary or involuntary, no distribution shall be made to the holders
of Newco Common Stock or any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Newco Series A Participating
Preferred Stock unless, prior thereto, the holders of the Newco Series A
Preferred Stock shall have received $1.00 per share.
At the option of the holder, each share of Newco Series A Participating
Preferred Stock may be converted, subject to certain adjustments, into one share
of Newco Common Stock (i) (a) in order to avoid
83
dilution of the holder's percentage ownership of the issued Newco Common Stock,
provided that, with respect to dilution resulting from the issuance of
additional compensatory options as approved by a supermajority of the Newco
Board of Directors (provided Chevron designees sit on the New NGC Board of
Directors), the holder would have no such conversion right so long as its
ownership of Newco Common Stock would still be greater than 20% of the Newco
Common Stock, or (b) to maintain a percentage ownership of the issued Newco
Common Stock at least equal to that of the then largest other stockholder of
Newco; (ii) if any entity other than the holder or an affiliate of the holder
makes a tender offer for Newco Common Stock and the holder tenders the shares of
the Newco Series A Participating Preferred Stock in the same proportion as it
tenders Newco Common Stock; (iii) upon approval by the stockholders of any
merger or recapitalization proposal in which the Newco Series A Participating
Preferred Stock would be treated differently than Newco Common Stock, and (iv)
upon approval by the Newco stockholders of any (a) sale of all or substantially
all of the assets of Newco or (b) liquidation, dissolution or winding up of
Newco.
RESTRICTIONS ON BUSINESS ACTIVITIES
Under the New NGC Certificate of Incorporation, stockholders must generally
give their consent before New NGC can effect a sale of petroleum products (other
than natural gas) intended for consumption or resale in certain parts of Africa,
most of Asia, Australia and other areas of the Pacific west of the International
Date Line. The vote required to give such consent is 85% of the outstanding
shares of New NGC Common Stock. However, New NGC will be permitted to conduct
such activities without a stockholder vote to the extent permitted by a Scope of
Business Agreement between Newco and ChevCorp, the corporate parent company of
Chevron. In addition, this restriction on business activity will terminate when
and if the Scope of Business Agreement terminates. See "Stockholder Agreements
- -- Scope of Business Agreement."
The Scope of Business Agreement contemplates an exchange of information
between ChevCorp and New NGC relating to the potential development of commercial
opportunities in which New NGC could participate, involving Caltex, which is
owned fifty percent by ChevCorp and fifty percent by Texaco Inc. Caltex is a
leading refiner and marketer of petroleum products in Asia and South and East
Africa. However, no specific business ventures involving Caltex have yet been
discussed between NGC and ChevCorp, and ChevCorp is not obligated to bring
specific opportunities to NGC. The Scope of Business Agreement would terminate
if ChevCorp ceased to be an owner of Caltex or if Chevron ceased to own,
directly or indirectly, more than 11,586,983 shares of New NGC Common Stock and
ceased to have a representative on the Board of Directors of New NGC.
The effect of the foregoing charter and contractual provisions is to give
ChevCorp substantial control over any business New NGC may conduct with
ChevCorp's Caltex affiliate or in competition therewith. As the owner of
Chevron, ChevCorp will be able to cause Chevron not to give its approval to
activities requiring stockholder approval under the charter. At present,
Chevron's vote alone is sufficient to prevent the requisite stockholder consent
from being obtained. Accordingly, New NGC could be effectively precluded from
engaging in certain business activities which would otherwise be supported by
the Board of Directors and management of New NGC and a majority of the
outstanding shares of New NGC. This in turn would have an adverse effect on the
further development of New NGC's business. See "Risk Factors -- Prohibition
Against Conducting Certain Business Activities."
TAKEOVER STATUTE AND RELATED PROVISIONS
Certain provisions of the Newco Certificate of Incorporation, the Newco
Bylaws and the DGCL may impede an unsolicited takeover attempt or otherwise have
an anti-takeover effect. In particular, these provisions may discourage
potential acquirors from making bids or frustrate the ability of acquirors to
consummated an acquisition of Newco, even when the acquiror is offering
stockholders a substantial premium to the then current market price of their
stock or is making an offer that is favored by a substantial majority of
stockholders. Each of the Newco Certificate of Incorporation and Newco Bylaws
have been filed as an exhibit to this Registration Statement and stockholders
are encouraged to read the Newco Certificate of Incorporation and Bylaws in
their entirety.
84
The following is a summary of the provisions of the Newco Certificate of
Incorporation, Newco Bylaws and DGCL that might impede an unsolicited material
takeover attempt or otherwise have an antitakeover effect.
LIMITATIONS ON DIRECTORS' LIABILITY. The Newco Certificate of Incorporation
provides that, to the fullest extent permitted by Delaware law, no director
shall be liable to Newco or its stockholders for monetary damages for breach of
fiduciary duty as director. By virtue of these provisions, a director of Newco
is not personally liable for monetary damages for breach of such director's
fiduciary duty except for liability for (i) breach of duty of loyalty to Newco
or its stockholders, (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) dividends or stock
repurchases or redemptions that are unlawful under the DGCL and (iv) any
transaction from which such director receives an improper personal benefit. In
addition, Newco Certificate of Incorporation provides that if the DGCL is
amended to authorize the further elimination or limitation of the liability of a
director, then the liability of the directors will be eliminated or limited to
the fullest extent permitted by the DGCL, as amended. However, insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors of Newco pursuant to the Newco Certificate of
Incorporation or otherwise, NGC has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
PREFERRED STOCK. The Newco Certificate of Incorporation authorizes a total
of 50,000,000 shares of preferred stock which the Newco Board of Directors may,
without further action by Newco's stockholders, from time to time, issue in
series and may, at the time of issuance, determine the powers, rights,
preferences and limitations of any such series. The issuance of shares of Newco
Preferred Stock, or the issuance of rights to purchase such shares, could be
used to discourage an unsolicited acquisition proposal. In addition, under
certain circumstances, the issuance of Newco Preferred Stock could adversely
affect or dilute the voting power of the holders of Newco Common Stock. Of the
50,000,000 shares of preferred stock available for issuance, the Newco
Certificate of Incorporation authorizes the issuance of 8,000,000 shares of
Newco Series A Participating Preferred Stock. See "-- Newco Preferred Stock."
Upon consummation of the Contribution, Newco will issue approximately 7.8
million shares of Newco Series A Participating Preferred Stock to Chevron.
SECTION 203 OF THE DGCL. Newco is subject to Section 203 of the DGCL
("Section 203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or an affiliate, or associate of such person, who is an "interested
stockholder" for a period of three years after the date such person became an
interested stockholder, unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the board of directors of the corporation before the person becomes an
interested stockholder, (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes such person an interested stockholder (excluding shares owned by the
persons who are both officers and directors of the corporation, and shares held
by certain employee stock ownership plans) or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding the shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation who was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three-year period
immediately prior to the date on which it is sought to be determined whether
such person is an interested stockholder.
By restricting the ability of Newco to engage in business combinations with
an interested person, the application of Section 203 to Newco may provide a
barrier to hostile or unwanted takeovers. Newco has not opted out of Section
203.
85
COMPARISON OF RIGHTS OF HOLDERS OF NGC COMMON STOCK AND NEW NGC COMMON STOCK
In connection with the Combination, the Newco Certificate of Incorporation
and Newco Bylaws will be amended and, as amended, will serve as the New NGC
Certificate of Incorporation and New NGC Bylaws, respectively. The principal
amendments to be effected to the Newco Certificate of Incorporation and Bylaws
in connection with the Combination will be as follows: (i) changing Newco's
corporate name to "NGC Corporation", (ii) increasing the number of directors
constituting the Board of Directors from three to 13 and certain other changes
in connection therewith (E.G., number of directors required for a quorum at a
board meeting) and (iii) requiring a supermajority vote by the Board of
Directors to approve certain corporate actions. See "-- Bylaws -- Vote Required
for Certain Director Approval."
In the event that the Combination is consummated, the stockholders of NGC
immediately prior to the consummation of the Combination will become
stockholders of New NGC. Accordingly, the rights of such stockholders will be
governed by the New NGC Certificate of Incorporation and New NGC Bylaws and will
continue to be governed by Delaware law. Although the NGC Certificate of
Incorporation and Bylaws and the New NGC Certificate of Incorporation and Bylaws
will be similar in many respects, there will be some important differences.
The following provides a summary description of the material differences in
rights of NGC stockholders under the NGC Certificate of Incorporation and the
NGC Bylaws as compared with the rights of New NGC stockholders under the New NGC
Certificate of Incorporation and the New NGC Bylaws. The governing documents of
NGC and the proposed governing documents of New NGC are attached hereto as
appendices or filed as exhibits to this Registration Statement and are
incorporated by reference herein in their entirety. See (i) Exhibit 3.1 to NGC's
Annual Report on Form 10-K for the year ended December 31, 1994 for the NGC
Certificate of Incorporation, (ii) Exhibit 3.2 to NGC's Annual Report on Form
10-K/A for the year ended December 31, 1995 for the NGC Bylaws, (iii) Appendix
IV to this Proxy Statement/Prospectus for a form of the New NGC Certificate of
Incorporation, and (iv) Exhibit 3.6 to this Registration Statement for a form of
New NGC Bylaws. NGC stockholders are urged to read each such document in its
entirety.
CERTIFICATE OF INCORPORATION
AUTHORIZED CAPITAL STOCK. The NGC Certificate of Incorporation authorizes
the NGC Board of Directors to issue up to 300,000,000 shares of NGC Common
Stock, up to 50,000,000 shares of NGC Preferred Stock in one or more series and
with such voting powers and designations, preferences, limitations and relative
rights as may be designated by the Trident Board of Directors. As of the July
19, 1996, there were 111,073,380 shares of NGC Common Stock and no shares of
Preferred Stock issued and outstanding.
The New NGC Certificate of Incorporation will authorize the New NGC Board
of Directors to issue up to 400,000,000 shares of New NGC Common Stock and up to
50,000,000 shares of New NGC Preferred Stock. Further, the New NGC Certificate
of Incorporation will provide the terms of the Series A Participating Preferred
Stock. See "Description of Newco Certificate of Incorporation and Bylaws --
Newco Preferred Stock."
Assuming the consummation of the Combination, immediately following the
Effective Time approximately 149,696,591 and 7,815,363 shares of New NGC Common
Stock and New NGC Series A Participating Preferred Stock, respectively, will be
issued and outstanding.
RESTRICTIONS ON BUSINESS ACTIVITIES. Under the New NGC Certificate of
Incorporation, stockholders must generally give their consent before New NGC can
effect a sale of petroleum products (other than natural gas) intended for
consumption or resale in certain parts of Africa, most of Asia, Australia and
other areas of the Pacific west of the International Date Line. The vote
required to give such consent is 85% of the outstanding shares of New NGC Common
Stock; provided, however, that New NGC may conduct such activities if permitted
under the terms of the Scope of Business Agreement. See "Description of Newco's
86
Certificate of Incorporation and Bylaws -- Restrictions on Business Activities."
Under NGC's certificate of incorporation, NGC may engage in any type of business
that is permitted under Delaware law.
BYLAWS
NUMBER OF DIRECTORS. The NGC Certificate of Incorporation provides, and the
New NGC Certificate of Incorporation will provide, that the number of directors
serving on the board of directors shall be fixed by, or in the manner provided
in, the bylaws of NGC or New NGC, as the case may. The NGC Bylaws provide that
the number of directors comprising the NGC Board of Directors is ten.
Furthermore, the Clearinghouse Owners Stockholders Agreement provides that the
Clearinghouse Owners will cause the NGC Board of Directors at all times to
consist of ten directors and contains agreements of the Clearinghouse Owners
with respect to the election and removal of eight of the ten directors. In
addition, the New Trident Stockholders Agreement requires BG Holding and NOVA
Gas (U.S.), if the Stockholders Agreement is terminated, to vote in favor of an
HMTF designee for director for a period of two years following the Effective
Time.
The New NGC Bylaws will provide that the number of directors comprising the
New NGC Board of Directors shall be 13. Furthermore, upon consummation of the
Combination, the Clearinghouse Owners Stockholders Agreement will be terminated
and the New NGC Stockholders Agreement will become effective. This agreement
will contain agreements of BG Holding, NOVA Gas (U.S.) and Chevron with respect
to the election and removal of the 13 directors. See "Stockholder Agreements --
New NGC Stockholders Agreement."
VOTE REQUIRED FOR CERTAIN BOARD OF DIRECTOR APPROVAL. The NGC Bylaws
provide that NGC shall not take (or permit to be taken in its capacity as a
shareholder or partner or otherwise permit any of its subsidiaries to take)
certain specified actions unless approved by the affirmative vote of at least
eight directors. These actions include, among other things, (i) any merger,
consolidation or liquidation of NGC or any subsidiary or any purchase or other
acquisition of any NGC Common Stock; (ii) any sale of all or substantially all
of the assets of NGC; (iii) approving any amendment to the NGC Certificate of
Incorporation; (iv) NGC or any subsidiary entering into any line of business
that neither the NGC nor any subsidiary is engaged in at the Effective Time; (v)
NGC or any subsidiary paying any dividend or otherwise making any distribution
to any person; (vi) NGC or any subsidiary issuing any stock or other security or
ownership interests to any person; and (vii) NGC or any subsidiary (A) making,
or committing to make, any payment in excess of $5.0 million per transaction or
contract (or series of related transactions or contracts), whether as or in
connection with a capital expenditure, asset purchase, investment, rental,
settlement, equity contribution, loan, guaranty or otherwise, (B) borrowing any
amount in excess of $5.0 million per transaction or contract (or series of
related transactions or contracts), (C) disposing of or otherwise transferring
any assets (or related assets) whose fair market value exceeds $5.0 million or
(D) entering into any contract or transaction (or series of contracts or
transactions) pursuant to which NGC or any of its subsidiaries will receive more
than $5.0 million. Notwithstanding the foregoing, if one or more directors give
written notice that they intend to abstain or recuse from a vote on a matter
that is subject to such super-majority board approval because such director
believes that he may have an interest in such matter, then such action may be
approved by the affirmative vote of such number of directors equal to eight less
that number of directors that have given such notice. In addition, with respect
to matters involving more than $5.0 million but less than $20 million, other
than the issuance of stock or other ownership interests and the payment of
dividends or other distributions, such actions need not be approved by the NGC
Board of Directors if approved by the unanimous vote of the Executive Committee.
The New NGC Bylaws will contain a parallel provision that will almost be
identical to the one in the NGC Bylaws, with the following exceptions: (i) the
actions enumerated above must be approved by 11 instead of eight directors and
(ii) the thresholds have been increased from $5 million and $20 million to $10
million and $25 million, respectively.
87
TRANSFER AGENT
The transfer agent and registrar of the New NGC Common Stock will be
ChaseMellon Shareholder Services L.L.C.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby have been
passed upon for Newco by Pillsbury Madison & Sutro LLP. Certain tax matters have
been passed upon for NGC by Akin, Gump, Strauss, Hauer & Feld, L.L.P. Certain
matters with respect to the Newco Series A Participating Preferred Stock have
been passed for Newco upon by Richards, Layton & Finger.
EXPERTS
The audited consolidated financial statements and schedule of NGC
Corporation and subsidiaries, incorporated by reference in this Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made to such report
which includes an explanatory paragraph with respect to the change in its method
of accounting for fixed price natural gas transactions to the mark-to-market
method of accounting.
The financial statements of Accord Energy Limited as of December 31, 1995
and 1994 and for the year ended December 31, 1995 and the period from December
2, 1993 to December 31, 1994, incorporated in this Prospectus by reference to
the 1995 Form 10-K of NGC Corporation, have been so incorporated in reliance on
the report of Price Waterhouse, Chartered Accountants and Registered Auditors,
given on the authority of said firm as experts in auditing and accounting.
STOCKHOLDER PROPOSALS
If the Combination is not consummated, NGC currently anticipates that it
will hold its 1997 Annual Meeting of Stockholders in May, 1997. NGC Stockholders
who intend to submit proposals for inclusion in NGC's 1996 proxy statement and
proxy for stockholder action at the 1997 Annual Meeting must do so by sending
the proposal and supporting statements, if any, to NGC at its principal
executive office no later than November 30, 1996.
88
APPENDIX I
GLOSSARY
Set forth below are definitions of certain capitalized terms, abbreviations
and oil and gas industry terms used in this Proxy Statement/Prospectus.
AFFILIATE OR AFFILIATE: any Person that is an "affiliate" within the
meaning of the regulations promulgated under the Securities Act, as such
regulations and Securities Act are in effect on the date of this Agreement.
ALTERNATIVE TRANSACTION: as to any Person, any possible or proposed
transaction in North America substantially similar in nature and scope to the
Combination or involving the acquisition by NGC or Chevron of $250 million or
more in value of interests in (a) assets substantially similar to the assets
owned as of the date of the Combination Agreement by NGC or (b) the Contributed
Businesses.
BARREL OR BBL: barrel, a standard measure of volume for oil, condensate and
natural gas liquids which equals 42 U.S. gallons.
BCF: billion cubic feet (or thousand MMcf).
BCFD: billion cubic feet per day.
BG GROUP: means a Group in which British Gas plc (or any successor thereto)
is the Ultimate Parent Entity (as defined in this Glossary). As of the
consummation of the Combination, such Group shall include BG Holdings, Inc.
BPD: barrels per day.
BTU: British Thermal Unit, a unit of heat measurement being the amount of
heat needed to raise the temperature of one pound of water one degree
Fahrenheit.
BUSINESS DAY: any day, other than a Saturday, Sunday or legal holiday under
the federal laws of the United States.
CASUALTY LOSS: any facility comprising a part of the Contributed Businesses
or NGC shall have been affected by fire, explosion or other casualty such that
the losses resulting therefrom, as adjusted by any insurance proceeds which
Newco will receive and after taking into account the current effect of any
repairs thereto or replacements thereof, are reasonably expected to exceed $10
million.
CHEVRON GROUP: means a Group in which Chevron Corporation (or any successor
thereto) is the Ultimate Parent Entity (as defined in this Glossary). As of the
consummation of the Combination, such Group shall include Chevron U.S.A. Inc.
CLOSING DATE: subsequent to the satisfaction or waiver of all conditions to
the Combination as set forth in Article 12 of the Combination Agreement and the
termination or expiration of the applicable waiting period required under the
HSR Act, (A) the date on which NGC stockholder approval of the Combination is
obtained or as soon thereafter as practicable or (B) at such other date or time
as the parties to the Combination Agreement shall mutually agree in writing.
COMMITTED GAS: with respect to a gas sales agreement, all gas produced,
owned and/or controlled by the seller during the term of such agreement, and
which the seller has agreed to sell under such agreement.
COMPRESSION: a process, typically performed by a compression station, by
which the pressure of gas is raised for transmission through a pipeline.
CONDENSATE: a hydrocarbon mixture that becomes liquid and separates,
similar to crude oil, from natural gas when it is produced.
CRUDE OIL: liquid petroleum in its natural state (i.e., petroleum that has
not been refined).
DGCL: the Delaware General Corporation Law, as amended.
EBITDA: earnings before interest, taxes, depreciation and amortization.
G-1
EBDAIT: earnings before depreciation, amortization, interest and taxes.
EFFECTIVE TIME: the time at which the merger of NGC Corporation with and
into Midstream Combination Corp. becomes effective as specified in the
certificate of merger filed by Midstream Combination Corp. with the Secretary of
State of Delaware with respect to the Combination.
ENVIRONMENTAL AND SAFETY LAWS: any applicable and valid law, statute, code,
ordinance, rule or regulation or other requirement of any foreign country, the
United States or any regional, state or local government, pertaining to human
health and safety and/or the environment and affecting the facilities comprising
a part of the Contributed Businesses and NGC (as applicable), as of the date
hereof and as of the Closing Date (as applicable), including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980; the Resource Conservation and Recovery Act; the Clean
Water Act; the Toxic Substances Control Act; the Clean Air Act; the Hazardous
Liquid Pipeline Safety Act; the Occupational Safety and Health Act; and the
Natural Gas Pipeline Safety Act, as such laws and regulations have been amended
and as such laws and regulations have been qualified and interpreted by publicly
available, written guidelines, in each case as of the date hereof and as of the
Closing Date (as applicable).
EPA: the Environmental Protection Agency.
EP MIX: a liquid hydrocarbon stream containing a mixture of ethane and
propane in the proportions of 80% ethane and 20% propane and other associated
compounds which meets certain specifications set forth in the CCC Product Sale
and Purchase Agreement.
FIELD PLANT: a gas processing plant that aggregates volumes from multiple
producing wells into quantities that can be economically processed to extract
NGLs and to remove water vapor, solids and other contaminants.
FIRM SERVICE CONTRACT: a gas supply contract under which buyer and seller
are contractually bound to perform without interruption or curtailment except in
the event of force majeure or other limited designated situations.
FIRM STORAGE: an agreement under which a party has an absolute right to
store up to a specified quantity of gas at a particular storage facility.
FIRM TRANSPORTATION AGREEMENT: an agreement under which a pipeline is
obligated to transport up to a specified maximum quantity of gas without
interruption, except upon the occurrence of a force majeure event. Firm
customers usually pay a two-part rate, a demand charge and a commodity charge.
The demand charge is payable monthly based on the maximum quantity of gas that a
shipper may transport on a pipeline during a given month, without regard to the
quantity actually transported during such month. The commodity charge is payable
monthly based on the amount of gas actually transported.
FRACTIONATION: a process that separates a commingled stream of NGLs into
the component products ethane, propane, normal butane, isobutane and natural
gasoline.
GAS MARKETING: the process of aggregating gas supplies from producing
basins, arranging transportation of such gas through pipelines from points of
purchase to points of sale and reselling such gas to customers under a variety
of standardized and customized arrangements.
GAS PROCESSING: the process by which raw gas, or gas in its natural state,
is processed into residue gas and NGLS.
GATHERING PIPELINES: lines used to transport gas from the lease to the main
pipeline in the area. Gathering lines are typically not subject to the FERC's
jurisdiction.
GROUP: means one or more Persons, at least one of which is a party to the
New NGC Stockholders Agreement, including only one Ultimate Parent Entity (as
defined in this Glossary) and any direct or indirect wholly owned Subsidiaries
of the Ultimate Parent Entity.
HAZARDOUS MATERIAL: any petroleum or petroleum products, any chemical,
material or substance which is now defined as or as of the Closing Date is
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "toxic substances," "pollutants," "contaminants" or words
G-2
of similar import, under any Environmental and Safety Laws, and any other
chemical, material, substance or waste produced, generated or transported by the
facilities that are a part of the Contributed Businesses or that are or were
formerly owned by NGC which is now prohibited, limited, or regulated under any
Environmental and Safety Law.
INTERRUPTIBLE TRANSPORTATION AGREEMENT: an agreement obligating a pipeline
to transport up to a specified maximum quantity of gas for a shipper, subject to
availability of capacity.
INTERRUPTIBLE STORAGE: an agreement under which a party has a conditional
right to store up to a specified quantity of gas at a particular storage
facility, subject to the availability of storage capacity.
IRS: the Internal Revenue Service.
LDCS: local distribution companies.
LIQUIDS: the natural gas liquids ethane, propane, normal butane, isobutane
and natural gasoline typically contained in a natural gas production stream and
used principally as feedstocks for the petrochemical and the petroleum refining
industries, and as heating and engine fuel.
LONDON EARNINGS: the amounts contributed to NGC's net income from the
London Operations (defined below) determined on a basis consistent with
generally accepted accounting principles (including reductions for the effect of
any appropriate income taxes); provided however that such earnings shall exclude
all earnings (a) derived from or attributable to the presently existing
contracts comprising a part of the Contributed Warren Business, (b) attributable
to any interest in Accord in addition to NGC's present 49% interest therein, (c)
attributable to contributions made by NGC to Accord or NGC International (other
than return of earnings distributed after the Closing by Accord or NGC
International to NGC plus an amount equal to interest thereon at 6% per annum
from the time of such distribution to the time of such return) and (d) derived
from or attributable to any project, whether an acquisition of properties or a
project requiring capital expenditures, which is financed with funds other than
internal cash of Accord, NGC International and their respective Subsidiaries (i)
to the extent the amount so financed exceeds 50% of the total cost of such
project (in which case, London Earnings shall be adjusted by decreasing the
earnings derived from such project by multiplying such earnings by a fraction,
the numerator of which shall be 50 and the denominator of which shall be the
percentage to which such project has been financed), or (ii) if there are
guarantees given or collateral supplied in connection with such financing by
parties other than Accord Energy, Ltd., NGC International and their respective
subsidiaries. In addition, earnings from acquisitions or capital investments
shall constitute London Earnings only to the extent such expenditures are made
to facilitate the application and leverage of NGC's core competencies and
sources of competitive advantage related to marketing and trading energy
commodity products and services.
LONDON OPERATIONS: the operations and businesses conducted by Accord
Energy, Ltd., NGC International and their respective Subsidiaries, in each case
from their respective London offices, wholly related to areas in, on islands
offshore of, or in waters offshore of and adjacent to, lands (i) located in
eastern or western Europe, (ii) which were formerly a part of the Soviet Union,
(iii) located in Africa, and (iv) located in the Middle East (including, without
limitation, the present nations of Turkey, Syria, Lebanon, Israel, Jordan, Iraq,
Iran, Saudia Arabia, Oman, Dubai, Qatar, United Arab Emirates, North and South
Yemen and Kuwait).
MARKET HUBS OR MARKETING HUBS: combined gas storage, transportation and
interchange facilities located in the vicinity of an interconnection of two or
more pipelines that provide gas marketing services for producers, gas purchasers
and gas marketers.
MATERIAL ADVERSE EFFECT: with respect to the business, assets, financial
condition or results of operations of the Contributed Businesses or NGC (as
applicable), a loss and/or cost thereto greater than $10 million. With respect
to a loss or cost suffered by NGC, New NGC or any Person in which NGC owns in
excess of a 20% equity interest shall be deemed to have suffered such loss or
cost thereof in proportion to NGC's or New NGC's equity ownership in such Equity
Affiliate.
MBBL: thousand barrels.
G-3
MBD: thousand barrels per day.
MCF: thousand cubic feet.
MCFD: thousand cubic feet per day.
MGALS: thousands of gallons.
MMBBLS: million barrels.
MMBTU: million British Thermal Units.
MMCF: million cubic feet.
MMCFD: million cubic feet per day.
MMGALS: millions of gallons.
NET NGL (LIQUIDS) PRODUCTION: gross NGL production less volumes
taken-in-kind.
NGC CREDIT AGREEMENT: means that certain Credit Agreement dated as of March
14, 1995, among NGC Corporation and The First National Bank of Chicago,
individually and as agent, The Chase Manhattan Bank National Association and
NationsBank of Texas N.A., individually and as co-agent, and certain other
lenders named therein.
NGL(S) OR LIQUIDS: the natural gas liquids (including ethane, propane,
normal butane, isobutane, natural gasoline and pentane plus or any mixture or
combination thereof) field or plant gas condensate, sulphur, helium and other
products extracted or delivered in connection with processing activities.
NOVA GROUP: means a Group in which NOVA Corporation (or any successor
thereto) is the Ultimate Parent Entity (as defined in this Glossary). As of the
consummation of the Combination, such Group shall include NOVA Gas Services
(U.S.) Inc.
NUG CONTRACTS: certain contracts involving the sale of natural gas to
non-utility power generators and which are included as a part of the Contributed
Businesses.
PEP INDIVIDUALS: C.L. Watson, Charles L. Watson Grantor Retained Annuity
Trust, Kim R. Watson Grantor Retained Annuity Trust, Keri M. Watson Trust, Brian
J. Watson Trust, Carly R. Watson Trust, Stephen W. Bergstrom, Jeffrey Stephen
Bergstrom Trust, Rebecca Jean Bergstrom Trust, Gilbert Burciaga, Renee Eve
Burciaga Trust, Christina Ann Burciaga Trust, Gregory Gilbert Burciaga Trust,
A.R. Cipriani, Jr., Jason Cipriani Trust, Emily Cipriani Trust, David C.
Feldman, Inc., James T. Hackett, H. Keith Kaelber, Kenneth E. Randolph, Donald
R. Sinclair, Jacob S. Ulrich, Jacob Shields Ulrich, III Trust and Courtney
Warren Ulrich Trust, collectively.
PERSON OR PERSON: any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, or other organization, whether or not a legal entity, and any government
or agency or political subdivision thereof.
PP MIX: a liquid hydrocarbon stream which meets certain specifications set
forth in the Feedstock Sale and Refinery Product Purchase Agreement.
RELEASE: any release, spill, emission, leading, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the atmosphere, or
on, into, under or from the soil, surface water, ground water or property.
RESIDUE GAS: the natural gas stream remaining after a natural gas
production stream has been processed to extract the entrained natural gas
liquids.
RULE 144: Rule 144 promulgated under the Securities Act.
SENIOR NOTES: the 6 3/4% Senior Notes of NGC due December 15, 2005.
SHUT-IN: an interruption or temporary cessation of the wellhead production
of natural gas as a result of financial or operational considerations.
G-4
SIGNIFICANT DISPOSITION: as to any Person, any possible or proposed
transaction involving the disposition of $100 million or more in value of
interests in the (i) NGC's assets or (ii) the Contributed Businesses.
SPOT CONTRACTS: are generally one-month or less contracts and are
negotiated at the end of each month for service to commence at the beginning of
the next month.
STRADDLE PLANT OR PROCESSING FACILITY: a gas processing plant situated on
third-party mainline natural gas pipelines where, except for gas processing and
marketing services, the gathering, compression and other services provided at
field plants are typically not required and which extracts NGLs from the natural
gas stream when the market value of NGLs separated from the natural gas stream
is higher than the market value of the same unprocessed NGLs sold as natural gas
and which usually operates at higher volumes with lower unit margins.
SUBSIDIARY OR SUBSIDIARIES: with respect to any person (the "parent"), any
corporation, association, joint venture, partnership or other business entity of
which securities or other ownership interests representing more than 50% of the
ordinary voting power or beneficial interest are, at the time as of which any
determination is being made, owned directly or indirectly by the parent or one
of more subsidiaries of the parent (PROVIDED, HOWEVER, that the term
"Subsidiary" shall not include joint operation agreements).
SWAP: a financial transaction where the first party agrees to pay the
second party a fixed price for a quantity of gas at the settlement date while
the second party agrees to pay the first party the spot price for the same
quantity of gas at the settlement date. At the settlement date, if the spot
price is higher than the fixed price, the second party pays the first party the
difference between the spot price and the fixed price and vice versa.
SWING PERFORMANCE OBLIGATION: is generally a feature in a gas supply
contract permitting the buyer to vary its purchases of natural gas from
day-to-day within designated volume parameters.
TCF: trillion cubic feet.
TERMINALLING: the loading of products into, and the unloading of products
from, ships, barges, railway tank cars, or trucks for further distribution to
points of consumption or sale.
TREATING: the process of removing objectionable substances, such as water
vapor, solids and other contaminants, from gases and liquids so the gases and
liquids are suitable for commercial transportation or use.
ULTIMATE PARENT ENTITY: shall have the meaning set forth under Rule
801.1(a)(3) promulgated under the HSR Act.
In this Proxy Statement/Prospectus, natural gas volumes are stated at legal
pressure base of the state or are in which the reserves are located and at 60
degrees Fahrenheit.
G-5
APPENDIX II
COMBINATION AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
NGC CORPORATION,
CHEVRON U.S.A. INC.
AND
MIDSTREAM COMBINATION CORP.
------------------------
DATED AS OF MAY 22, 1996
COMBINATION AGREEMENT
AND
PLAN OF MERGER
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS ............................................ 1
1.1 SPECIFIC DEFINITIONS ................................... 1
1.2 OTHER TERMS ............................................ 9
1.3 OTHER DEFINITIONAL PROVISIONS .......................... 9
1.4 "KNOWLEDGE" ............................................ 9
ARTICLE 2
THE CONTRIBUTIONS ...................................... 9
2.1 CONTRIBUTION OF ASSETS AND ASSUMPTION
OF LIABILITIES ......................................... 9
2.2 THE MERGER AND PAYMENT OF THE NEWCO
NOTE ................................................... 9
2.3 CONSIDERATION ADJUSTMENT ............................... 10
2.4 ADJUSTMENTS FOR RETAINED ASSETS ........................ 12
ARTICLE 3
THE CLOSING ............................................ 13
3.1 CLOSING DATE ........................................... 13
3.2 DELIVERIES OF ANCILLARY DOCUMENTS AT
CLOSING ................................................ 13
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
NGC .................................................... 15
4.1 CORPORATE STATUS ....................................... 15
4.2 CAPITALIZATION ......................................... 15
4.3 OTHER SUBSIDIARIES ..................................... 16
4.4 NO GOVERNMENTAL APPROVALS .............................. 16
4.5 AUTHORITY .............................................. 16
4.6 NO CONFLICTS ........................................... 17
4.7 SEC DOCUMENTS .......................................... 17
4.8 LITIGATION ............................................. 17
4.9 COMPLIANCE WITH LAWS ................................... 18
4.10 MATERIAL AGREEMENTS .................................... 18
4.11 NO UNDISCLOSED MATERIAL
LIABILITIES ............................................ 18
4.12 PUBLIC UTILITY ......................................... 18
4.13 BROKERS OR FINDERS ..................................... 18
4.14 FULL DISCLOSURE ........................................ 19
4.15 TITLE TO PERSONAL PROPERTY ASSETS ...................... 19
4.16 NGC FACILITIES -- TITLE AND OTHER
MATTERS ................................................ 19
4.17 MAJOR CUSTOMERS AND SUPPLIERS .......................... 20
4.18 BUILDINGS, VEHICLES, MACHINERY,
EQUIPMENT, ETC ......................................... 20
4.19 INVENTORY .............................................. 20
4.20 PREFERENTIAL RIGHTS .................................... 20
i
PAGE
----
4.21 INTELLECTUAL PROPERTY, ETC ............................. 20
4.22 JOA RELATED AGREEMENTS ................................. 20
4.23 INSURANCE .............................................. 21
4.24 ABSENCE OF CHANGES OR EVENTS ........................... 21
4.25 ACQUISITIONS; CAPITAL EXPENDITURES ..................... 21
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
CHEVRON ................................................ 22
5.1 CORPORATE STATUS ....................................... 22
5.2 NEWCO STATUS AND CAPITALIZATION ........................ 22
5.3 NO GOVERNMENTAL APPROVALS .............................. 22
5.4 AUTHORITY .............................................. 22
5.5 NO CONFLICTS ........................................... 22
5.6 FINANCIAL STATEMENTS ................................... 23
5.7 FINANCIAL INFORMATION; INTERNAL
CONTROL REPORTS ........................................ 23
5.8 LITIGATION ............................................. 24
5.9 COMPLIANCE WITH LAWS ................................... 24
5.10 INTENTIONALLY OMITTED .................................. 24
5.11 SUFFICIENCY OF ASSETS .................................. 24
5.12 MATERIAL AGREEMENTS .................................... 25
5.13 NO UNDISCLOSED MATERIAL
LIABILITIES ............................................ 25
5.14 PUBLIC UTILITY ......................................... 25
5.15 BROKERS OR FINDERS ..................................... 25
5.16 FULL DISCLOSURE ........................................ 25
5.17 TITLE TO PERSONAL PROPERTY ASSETS ...................... 25
5.18 CHEVRON FACILITIES -- TITLE AND OTHER
MATTERS ................................................ 26
5.19 MAJOR CUSTOMERS AND SUPPLIERS .......................... 26
5.20 BUILDINGS, VEHICLES, MACHINERY,
EQUIPMENT, ETC ......................................... 26
5.21 INVENTORY .............................................. 27
5.22 PREFERENTIAL RIGHTS .................................... 27
5.23 INTELLECTUAL PROPERTY, ETC ............................. 27
5.24 JOA RELATED AGREEMENTS ................................. 27
5.25 ABSENCE OF CHANGES OR EVENTS ........................... 27
ARTICLE 6
ENVIRONMENTAL MATTERS .................................. 28
6.1 CHEVRON'S ENVIRONMENTAL INDEMNITY ...................... 28
6.2 SURVIVING CORPORATION'S ENVIRONMENTAL
INDEMNITY .............................................. 29
6.3 FURTHER LIMITATION ON RECOVERY FOR
LOSSES ................................................. 30
6.4 PREVIOUSLY GRANTED INDEMNITIES ......................... 30
6.5 SURVIVAL ............................................... 30
ARTICLE 7
TAXES .................................................. 30
7.1 TAX FILINGS AND REPRESENTATIONS ........................ 30
7.2 TAX RESPONSIBILITIES ................................... 30
ii
PAGE
----
7.3 RECORDS AND ASSISTANCE ................................ 32
7.4 TAX SHARING AGREEMENTS ................................ 32
7.5 TAX AUDITS ............................................ 32
7.6 TAX INDEMNITY ......................................... 33
7.7 SURVIVAL .............................................. 35
7.8 INDEMNITY FOR NGC TAX LOSSES .......................... 35
ARTICLE 8
EMPLOYEES AND BENEFITS MATTERS ........................ 37
8.1 REPRESENTATIONS AND WARRANTIES OF
NGC ................................................... 37
8.2 REPRESENTATIONS AND WARRANTIES OF
CHEVRON ............................................... 39
8.3 CONDUCT OF NGC PRIOR TO CLOSING
RELATING TO EMPLOYEE BENEFIT PLANS .................... 39
8.4 OFFERS OF EMPLOYMENT .................................. 40
8.5 DEFINED BENEFIT PENSION PLANS ......................... 40
8.6 QUALIFIED DEFINED CONTRIBUTION
PLANS ................................................. 41
8.7 SEVERANCE PLANS ....................................... 41
8.8 VACATION PAY .......................................... 41
8.9 MEDICAL AND DENTAL PLANS .............................. 42
8.10 POST-RETIREMENT WELFARE BENEFITS ...................... 42
8.11 THE NEWCO GROUP'S LIFE INSURANCE
COVERAGE .............................................. 42
8.12 THE NEWCO GROUP'S OTHER EMPLOYEE
BENEFITS; SERVICE RECOGNITION ......................... 42
8.13 GENERAL EMPLOYEE PROVISIONS ........................... 43
8.14 WARN ACT COMPLIANCE ................................... 43
8.15 SURVIVAL .............................................. 43
ARTICLE 9
CERTAIN COVENANTS OF NGC, CHEVRON AND
NEWCO ................................................. 43
9.1 ACCESS TO INFORMATION ................................. 43
9.2 PREPARATION OF THE PRELIMINARY PROXY
STATEMENT AND THE DEFINITIVE PROXY
STATEMENT/PROSPECTUS .................................. 43
9.3 TAKING OF NECESSARY ACTION ............................ 44
9.4 EXPENSES .............................................. 44
9.5 NOTICE OF CERTAIN CHANGES ............................. 44
9.6 PRESS RELEASES ........................................ 45
9.7 OPERATION OF CHEVRON FACILITIES ....................... 45
9.8 INFORMATION SUPPLIED BY NGC ........................... 45
9.9 INFORMATION SUPPLIED BY CHEVRON ....................... 45
ARTICLE 10
CONDUCT OF THE BUSINESS BY CHEVRON .................... 45
10.1 ORDINARY COURSE ....................................... 45
10.2 INCONSISTENT AGREEMENTS ............................... 45
10.3 NO OTHER BIDS ......................................... 45
10.4 PROHIBITED DISPOSITIONS ............................... 46
10.5 NEWCO ................................................. 46
iii
PAGE
----
10.6 ISSUANCE AND SALE OF NEWCO
SECURITIES ............................................. 46
10.7 CAPITAL EXPENDITURES ................................... 46
ARTICLE 11
CONDUCT OF BUSINESS BY NGC ............................. 46
11.1 ORDINARY COURSE ........................................ 46
11.2 DIVIDENDS AND ISSUANCE AND SALE OF
SECURITIES ............................................. 46
11.3 GOVERNING DOCUMENTS; INCONSISTENT
AGREEMENTS ............................................. 47
11.4 SUBSTANTIVE ACTIONS; CHEVRON
DIRECTORS .............................................. 47
11.5 PROHIBITED DISPOSITIONS ................................ 47
11.6 LINES OF BUSINESS ...................................... 47
11.7 ACCOUNTING METHODS ..................................... 47
11.8 NO OTHER BIDS .......................................... 47
ARTICLE 12
CONDITIONS ............................................. 48
12.1 CONDITIONS TO ALL PARTIES'
OBLIGATIONS REGARDING THE MERGER ....................... 48
12.2 CONDITIONS TO THE OBLIGATIONS OF
CHEVRON REGARDING THE COMBINATION ...................... 48
12.3 CONDITIONS TO THE OBLIGATIONS OF NGC
REGARDING THE COMBINATION .............................. 49
ARTICLE 13
TERMINATION ............................................ 50
13.1 TERMINATION ............................................ 50
13.2 TERMINATION DUE TO TITLE MATTERS ....................... 50
13.3 EFFECT OF TERMINATION .................................. 51
ARTICLE 14
INDEMNIFICATION ........................................ 52
14.1 GENERAL PROVISIONS ..................................... 52
14.2 INDEMNIFICATION BY CHEVRON ............................. 53
14.3 INDEMNIFICATION BY NGC ................................. 54
14.4 LIMITATION OF LIABILITY ................................ 54
14.5 INDEMNIFICATION PROCEDURES: THIRD
PARTY CLAIMS ........................................... 55
14.6 INDEMNIFICATION PROCEDURES:
ENVIRONMENTAL REMEDIATION CLAIMS ....................... 56
14.7 INDEMNIFICATION PROCEDURES: ABSENCE,
LOSS OR IMPAIRMENT OF USE OF
PROPERTY ............................................... 58
ARTICLE 15
POST-CLOSING MATTERS ................................... 59
15.1 CORPORATE NAMES ........................................ 59
15.2 OPTIONS ................................................ 59
15.3 DEFINITIVE CONSIDERATION
ADJUSTMENT ............................................. 59
15.4 TRANSFERS OF RETAINED ASSETS DURING
THE INTERIM PERIOD ..................................... 60
15.5 FINAL ADJUSTMENT FOR RETAINED
ASSETS ................................................. 60
15.6 ADJUSTMENT REGARDING LONDON
OPERATIONS ............................................. 61
15.7 INSURANCE .............................................. 62
15.8 INDEMNIFICATION PRINCIPLES ............................. 63
iv
PAGE
----
15.9 ASSUMPTION OF SENIOR NOTES .......................... 63
15.10 REGISTRATION OF CERTAIN SECURITIES .................. 63
ARTICLE 16
GENERAL PROVISIONS .................................. 64
16.1 EFFECT OF DUE DILIGENCE ............................. 64
16.2 SUCCESSORS AND ASSIGNS .............................. 65
16.3 NOTICES ............................................. 65
16.4 COUNTERPARTS ........................................ 65
16.5 MISCELLANEOUS ....................................... 65
16.6 GOVERNING LAW ....................................... 65
16.7 NO RECOURSE ......................................... 65
16.8 BULK SALES LAWS ..................................... 65
16.9 NO REMEDY IN CERTAIN CIRCUMSTANCES .................. 65
16.10 RECORDING FEES AND SIMILAR COSTS .................... 65
16.11 AMENDMENT ........................................... 65
16.12 WAIVER .............................................. 65
16.13 NO THIRD PARTY BENEFICIARIES ........................ 65
16.14 REAL PROPERTY DISCLOSURES ........................... 65
16.15 WAIVER OF CONSUMER RIGHTS ........................... 66
v
SCHEDULES
SCHEDULE
- -----------------
1.4 -- Persons with Actual Knowledge
2.1(C) -- Adjustments to Newco Note
2.2(e) -- Initial Executive Officers of Newco
2.3(a) -- NGBU Fixed Book
2.3(b) -- Inventory Adjustment
2.3(f) -- NGBU Stored Gas
2.3(g) -- NUG Contract Adjustments
4.2 -- Options
4.3 -- NGC Other Subsidiaries
4.6 -- NGC No Conflicts
4.8 -- NGC Litigation
4.9 -- NGC Compliance with Laws
4.10 -- NGC Material Agreements
4.15 -- NGC Personal Property and Title Matters
4.16(a)(1) -- NGC NGL Fee Properties
4.16(a)(2) -- NGC Permitted Exceptions
4.16(b) -- NGC NGL Leased Properties
4.16(c) -- NGC Pipeline Properties
4.16(d) -- NGC NGL and Pipeline Facility Data
4.17 -- NGC Major Customers and Suppliers
4.18 -- NGC Buildings, Vehicles, Machinery, Equipment
4.20 -- NGC Preferential Rights
4.21 -- NGC Intellectual Property
4.22 -- NGC JOA Related Agreements
4.24 -- NGC Absence of Changes or Events
4.25 -- NGC Acquisitions, Capital Expenditures
5.3 -- Chevron Governmental Approvals
5.5 -- Chevron No Conflicts
5.6 -- Chevron Changes to Financial Statements
5.8 -- Chevron Litigation
5.9 -- Chevron Compliance with Laws
5.12 -- Chevron Material Agreements
5.18(a)(1) -- Chevron NGL Fee Properties
5.18(a)(2) -- Chevron Permitted Exceptions
5.18(b) -- Chevron Leased Properties
5.18(c) -- Chevron Pipeline Facilities
5.18(d) -- Chevron NGL Facility Data
5.19 -- Chevron Major Customers and Suppliers
5.20 -- Chevron Buildings, Vehicles and Major Equipment
5.22 -- Chevron Preferential Rights
5.23 -- Chevron Intellectual Property
5.24 -- Chevron JOA Related Agreements
5.25 -- Chevron Absence of Changes or Events
8.1(a) -- NGC Current Benefit Pension and Welfare Plans
8.1(b) -- NGC ERISA Violations, Non-Terminable Plans, Post-Retiremen
Health Plans, Withdrawals From Plans
8.1(c) -- NGC Union Contracts, Pending or Threatened Work Stoppages
or Labor Matters
0.7 -- Chevron Capital Expenditures
2.3(e) -- Chevron Material Consents
4.4 -- Description of Assets with Environmental Accruals
vi
EXHIBITS
EXHIBIT
- -------------------
2.1 -- Form of Contribution and Assumption Agreement
2.1(C) -- Form of Newco Note
2.2(a) -- Form of Certificate of Merger
2.2(d)(i) -- Form of Certificate of Incorporation
2.2(d)(ii) -- Form of Bylaws of Newco
3.2(b) -- Form of Stockholders Agreement
3.2(c) -- Form of Registration Rights Agreement
3.2(d) -- Master Alliance Agreement
3.2(e) -- Form of Natural Gas Purchase and Sale Agreement
3.2(f) -- Form of Gas Supply and Purchase Agreement (St. James)
3.2(g) -- Form of Gas Supply and Service Agreement (Oak Point Plant)
3.2(h) -- Form of Gas Supply and Service Agreement (Orange Plant)
3.2(i) -- Form of Gas Supply and Service Agreement
(Cedar Bayou Plant)
3.2(j) -- Form of Gas Supply and Service Agreement
(Pascagoula Refinery)
3.2(k) -- Form of Gas Supply and Service Agreement
(Salt Lake City Refinery)
3.2(l) -- Form of Gas Supply and Service Agreement
(El Segundo Refinery)
3.2(m) -- Form of Gas Supply and Service Agreement
(Perth Amboy Refinery)
3.2(n) -- Form of Gas Supply and Service Agreement
(Richmond Refinery)
3.2(o) -- Form of Master Natural Gas Processing Agreement
3.2(p) -- Form of Master Natural Gas Liquids Purchase Agreement
3.2(q) -- Form of Feedstock Sale and Refinery Product Purchase
Agreement (El Paso)
3.2(r) -- Form of Feedstock Sale and Refinery Product Purchase
Agreement (El Segundo)
3.2(s) -- Form of Refinery Product Sale Agreement (Hawaii)
3.2(t) -- Form of Feedstock Sale and Refinery Product Purchase
Agreement (Pascagoula)
3.2(u) -- Form of Feedstock Sale and Refinery Product Purchase
Agreement (Richmond)
3.2(v) -- Form of Feedstock Sale and Refinery Product Purchase
Agreement (Salt Lake City)
3.2(w) -- Form of Feedstock and Refinery Product Master Services
Agreement
3.2(x) -- Form of CCC Product Sale and Purchase Agreement
3.2(y) -- Form of CCC/WPC Services Agreement
3.2(z) -- Form of Operating Agreement between Newco and Chevron Pipe
Line Company (Mt. Belvieu Pipelines)
3.2(aa) -- Form of LPG System Loss/Gain Settlement Agreement
3.2(bb) -- Form of Transition Services Agreement
3.2(cc) -- Form of Master Power Agreement
(Chevron U.S.A. Production Company)
3.2(dd) -- Form of Master Power Service Agreement
(Chevron Chemical Company)
3.2(ee) -- Form of Master Power Service Agreement
(Chevron U.S.A. Products Company)
3.2(ff) -- Form of Galena Park Services Agreement
3.2(gg) -- Form of Venice Operating Agreement
3.2(hh) -- Form of Product Storage Lease and Terminal Access Agreement
(Venice)
3.2(ii) -- Form of Term Sheet regarding Fractionation Agreement
(Venice)
vii
EXHIBIT
- -------------------
3.2(jj) -- Form of Technical Services Agreement
3.2(kk) -- Form of Miscellaneous Master Services Agreement
3.2(ll) -- Form of Bargeco Term Sheet
3.2(mm) -- Form of Natural Gas Purchase and Sale Agreement
(Canadian -- version #1)
3.2(nn) -- Form of Natural Gas Purchase and Sale Agreement
(Canadian -- version #2)
3.2(oo) -- Form of Agency Agreement for Administration of Natural Gas
Purchase and Sale Contracts
3.2(pp) -- Form of Lone Star Swap Transaction Confirmation
(CUSA/NGC Master Swap Agreement)
3.2(qq) -- Form of Transportation Assignment and Valuation Agreement
3.2(rr) -- Form of Interstate Pipeline Capacity Release Agreement
3.2(ss) -- Form of West Texas LPG Pipeline Partnership Agreement
3.2(tt) -- Form of West Texas LPG Pipeline Operating Agreement
3.2(uu) -- Form of West Texas LPG Pipeline License Agreement
9.6 -- Form of Joint Press Release
12.2(c) -- Form of Akin Gump Opinion of Counsel
12.2(d) -- Form of NGC Stockholder Tax Representations
12.3(c) -- Form of Pillsbury Madison Opinion of Counsel
12.3(g)(i) -- Form of Chevron Tax Representations
12.3(g)(ii) -- Code Section 1445 Affidavit
16.14 -- Real Property Disclosures
viii
COMBINATION AGREEMENT
AND
PLAN OF MERGER
This COMBINATION AGREEMENT AND PLAN OF MERGER, dated as of May 22, 1996, is
by and among NGC Corporation, a Delaware corporation ("NGC"), Chevron U.S.A.
Inc. ("CHEVRON"), a Pennsylvania corporation, and Midstream Combination Corp.,
a Delaware corporation ("NEWCO").
RECITALS:
A. The Boards of Directors of NGC, Chevron and Newco have approved, and
deem it advisable and in the best interests of their respective companies and
stockholders to consummate, the transactions provided for herein pursuant to
which, among other things: (i) the Contributing Parties (as defined herein) will
contribute to Newco their right, title and interest in the Contributed
Businesses (as defined herein) and the Contributed West Texas LPG Pipeline
Business (as defined herein) in exchange for Newco's assumption of related
liabilities and obligations (including certain indebtedness), the issuance of
Newco stock to Chevron, and the issuance of the Newco Note (as defined herein)
to the Contributing Parties; (ii) Newco will acquire all of the assets and
liabilities of NGC through a merger of NGC with and into Newco; and (iii) Newco
and Chevron, or affiliates thereof, will enter into certain supply, sales and
service agreements with respect to natural gas, natural gas liquids and
electricity.
B. NGC, Chevron and Newco desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"ACCORD" shall mean Accord Energy Ltd. and its Subsidiaries, if any.
"ACTING PARTY" shall have the meaning set forth in SECTION 13.3(D).
"ADJUSTMENT PERIOD" shall have the meaning set forth in SECTION 2.3(H).
"AFFECTED EMPLOYEES" shall have the meaning set forth in SECTION 8.4(B).
"AFFILIATE" shall mean any Person that is an "affiliate" within the
meaning of the regulations promulgated under the Securities Act, as such
regulations and Securities Act are in effect on the date of this Agreement. Each
Contributing Party (other than Chevron) is an Affiliate of Chevron. Newco shall,
with respect to all periods of time prior to and immediately before the Closing,
be deemed to be an Affiliate and a Subsidiary of Chevron.
"AGREED VALUE" shall have the meaning set forth in SECTION 2.4.
"AGREEMENT" shall mean this Combination Agreement and Plan of Merger, as
it may from time to time be amended, modified or supplemented by the parties
hereto.
"ALTERNATIVE TRANSACTION" means, as to any Person, any possible or
proposed transaction in North America substantially similar in nature and scope
to the Combination or involving the acquisition by NGC or Chevron of $250
million or more in value of interests in (a) assets substantially similar to the
assets owned as of the date hereof by NGC or (b) the Contributed Businesses.
"ANCILLARY AGREEMENTS" shall have the meaning set forth in SECTION 3.2.
"ARBITRATOR" shall have the meaning set forth in SECTION 7.6(D).
"ASSUMED INDEBTEDNESS" shall have the meaning set forth in the Contribution
and Assumption Agreement.
"ASSUMED LIABILITIES" shall have the meaning set forth in the Contribution
and Assumption Agreement.
"AUDIT ISSUES" shall have the meaning set forth in SECTION 7.5(D).
"BRITISH GAS" shall mean BG Holdings, Inc., a Delaware corporation.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or legal
holiday under the federal laws of the United States.
"CASUALTY LOSS" shall mean that a Chevron Facility, the Contributed West
Texas LPG Pipeline Business or an NGC Facility shall have been affected by fire,
explosion or other casualty such that the Losses resulting therefrom, as
adjusted by any insurance proceeds which Surviving Corporation will receive and
after taking into account the current effect of any repairs thereto or
replacements thereof, are reasonably expected to exceed $10 million.
"CERTIFICATE OF MERGER" shall have the meaning set forth in SECTION 2.2(A).
"CHEVRON" shall mean Chevron U.S.A. Inc., a Pennsylvania corporation.
"CHEVRON CASUALTY LOSS RATIO" shall have the meaning set forth in SECTION
2.3(D).
"CHEVRON CORPORATION POLICIES" shall have the meaning set forth in SECTION
15.7(A).
"CHEVRON FACILITIES" shall have the meaning set forth in SECTION 5.18(C).
"CHEVRON GROUP" shall mean Chevron Corporation, a Delaware corporation, and
its Subsidiaries that are part of an affiliated group of corporations (as
defined in Section 1504(a) of the Code) as of the date hereof.
"CHEVRON NGL FACILITIES" shall have the meaning set forth in SECTION
5.18(B).
"CHEVRON PENSION PLAN" shall have the meaning set forth in SECTION 8.5.
"CHEVRON PERMITTED EXCEPTIONS" shall have the meaning set forth in SECTION
5.18(A).
"CHEVRON PIPELINE FACILITIES" shall have the meaning set forth in SECTION
5.18(C).
"CHEVRON RETURNS" shall have the meaning set forth in SECTION 7.2(E).
"CHEVRON TAX" or "TAXES" shall have the meaning set forth in SECTION
7.2(A).
"CLEARINGHOUSE" shall mean Natural Gas Clearinghouse, a general partnership
organized under the laws of the State of Colorado.
"CLEARINGHOUSE OWNERS" shall mean the former beneficial owners of
Clearinghouse that received NGC Corporation Stock in exchange for their
beneficial ownership interests in Clearinghouse.
"CLOSING" shall have the meaning set forth in SECTION 3.1.
"CLOSING DATE" shall have the meaning set forth in SECTION 3.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMBINATION" shall mean (i) the contribution by the Contributing Parties
to Newco of the Contributed Businesses and the Contributed West Texas LPG
Pipeline Business, (ii) the Merger, (iii) the execution and delivery of the
Ancillary Agreements and (iv) the consummation of the other transactions
contemplated hereby.
"COMMONLY CONTROLLED ENTITY" shall have the meaning set forth in SECTION
8.2(A).
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement dated as of November 21, 1995 by and between NGC and Chevron, as
modified by that certain Exclusivity Agreement dated January 21, 1996 between
NGC and Chevron, and as further amended by a letter agreement dated February 16,
1996.
"CONSIDERATION" shall have the meaning set forth in SECTION 2.1.
"CONSIDERATION ADJUSTMENT" shall have the meaning set forth in SECTION 2.3.
2
"CONTRACTS" shall mean any contract, agreement, commitment, arrangement or
instrument of any type whatsoever, whether oral or written, express or implied,
including, without limitation, any mortgages, security agreements, deeds of
trust, notes, warranties, guaranties, leases, pledge agreements, license
agreements, non-competition agreements, conditional sales agreements or purchase
and sales orders to which the Person referred to is a party or by which any of
its properties or assets may be bound.
"CONTRIBUTED BUSINESSES" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"CONTRIBUTED NGBU BUSINESS" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"CONTRIBUTED WARREN BUSINESS" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"CONTRIBUTED WEST TEXAS LPG PIPELINE BUSINESS" shall mean the undivided 49%
interest in those assets which constitute the West Texas LPG Pipeline to be
contributed to Newco pursuant to the Contribution and Assumption Agreement, as
more particularly set forth therein.
"CONTRIBUTING PARTIES" shall mean Chevron, Chevron Pipe Line Company, a
Delaware corporation, and Chevron Chemical Company, a Delaware corporation.
"CONTRIBUTION AND ASSUMPTION AGREEMENT" shall mean the Contribution and
Assumption Agreement attached hereto as EXHIBIT 2.1.
"DEFECT" shall mean any single defect to title in any of the (i) Chevron
Facilities that results in Chevron breaching any of its representations and
warranties set forth in SECTION 5.18, or (ii) NGC Facilities that results in NGC
breaching any of its representations and warranties set forth in SECTION 4.16,
but in each such case, only to the extent that such a title defect would cause a
diminution in value or potential loss of use of the applicable Facility in an
amount greater than $200,000.
"DEFECT SCHEDULE" shall have the meaning set forth in SECTION 13.2(A).
"DEFINITIVE CONSIDERATION ADJUSTMENT" shall have the meaning set forth in
SECTION 15.3(B).
"DEFINITIVE PROXY STATEMENT/PROSPECTUS" shall mean depending on whether the
following referenced registration statement is filed, either (i) the definitive
proxy statement relating to the transactions contemplated hereby required to be
filed with the SEC under Regulation 14A of the Exchange Act or (ii) the combined
proxy statement and prospectus relating to the transactions contemplated hereby
constituting a part of a registration statement on Form S-4, at the time such
registration statement is declared effective by the SEC.
"DISCRETE CLAIM" shall have the meaning set forth in SECTION 14.1(E).
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"EASEMENTS" shall mean any easements, rights of way, servitudes or other
property rights on which any of the NGC Pipeline Facilities or the Chevron
Pipeline Facilities, as applicable, are located.
"EFFECTIVE TIME" shall have the meaning set forth in SECTION 2.2.(A).
"ELIGIBLE AFFECTED EMPLOYEES" shall have the meaning set forth in SECTION
8.10.
"EMPLOYMENT DATE" shall have the meaning set forth in SECTION 8.4(B).
"ENVIRONMENTAL AND SAFETY LAWS" shall mean any applicable and valid law,
statute, code, ordinance, rule or regulation or other requirement of any foreign
country, the United States or any regional, state or local government,
pertaining to human health and safety and/or the environment and affecting the
Chevron Facilities or the NGC Facilities and Former NGC Facilities (as
applicable), as of the date hereof and as of the Closing Date (as applicable),
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. 9601 ET SEQ. ("CERCLA"); the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 ET SEQ. ("RCRA"); the
Clean Water Act, 33 U.S.C. 1251 ET SEQ.; the Toxic Substances Control Act, 15
U.S.C. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C.
3
7401 ET SEQ.; the Hazardous Liquid Pipeline Safety Act, 49 U.S.C. 60101 ET
SEQ.; the Occupational Safety and Health Act, 29 U.S.C. 651 ET SEQ.; and the
Natural Gas Pipeline Safety Act, 49 U.S.C. 60101 ET SEQ., as such laws and
regulations have been amended and as such laws and regulations have been
qualified and interpreted by publicly available, written guidelines, in each
case as of the date hereof and as of the Closing Date (as applicable).
"ENVIRONMENTAL PERMITS" shall mean any permits, licenses, registrations,
notices or approvals required by Environmental and Safety Laws to operate the
Chevron Facilities or NGC Facilities, as applicable.
"ENVIRONMENTAL REMEDIATION CLAIM" shall have the meaning set forth in
SECTION 14.6.
"ESTIMATED CONSIDERATION ADJUSTMENT" shall have the meaning set forth in
SECTION 2.3.
"EQUITY AFFILIATE" shall mean, with respect to any Person, any interest in
excess of 20% in the voting power, beneficial interest or earnings of any
corporation, association, joint venture, partnership or other similar business
entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EU MERGER REGULATION" shall mean Regulation 4064/89 of the Counsel of the
European Communities on the control of concentrations between undertakings, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXON-FLORIO AMENDMENT" shall mean Section 721 of Title VII of the Defense
Production Act of 1950, as amended.
"FACILITIES" shall have the meaning set forth in SECTION 13.2(A).
"FINAL DETERMINATION" shall have the meaning set forth in SECTION 7.8(D).
"FINAL DETERMINATION NOTICE" shall have the meaning set forth in SECTION
7.8(E).
"FINANCIAL STATEMENTS" shall have the meaning set forth in SECTION 5.6.
"FIXED BOOK VALUE" shall have the meaning set forth in SECTION 2.3(A).
"FORMER NGC FACILITIES" shall have the meaning set forth in SECTION
4.16(C).
"GOVERNMENTAL ENTITY" shall mean any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign.
"GROSS TAX LOSS" shall have the meaning set forth in SECTION 7.8(C).
"HAZARDOUS MATERIAL" shall mean (a) any petroleum or petroleum products,
any chemical, material or substance which is, as of the date hereof or the
Closing Date (as applicable), defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "toxic
substances," "pollutants," "contaminants" or words of similar import, under any
Environmental and Safety Law and (b) any other chemical material, substance or
waste produced, generated or transported by the Chevron Facilities or the NGC
Facilities and the Former NGC Facilities which is now prohibited, limited, or
regulated under any Environmental and Safety Law.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INCLUDED NUG CONTRACTS" shall mean the Contracts involving the sale of gas
to a non-utility power generator described in SCHEDULE 2.3(G).
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 14.5.
"INDEMNITY STATEMENT" shall have the meaning set forth in SECTION 7.6(C).
"INDEPENDENT VALUE EXPERT" shall have the meaning set forth in SECTION
15.5.
"INDUSTRY" shall mean the business of owning and operating facilities for
the purchase, sale, exchange, gathering, transporting, processing or
fractionating of natural gas or NGLs.
4
"INTELLECTUAL PROPERTY" shall mean patents, trademarks, tradenames, service
marks, service names, copyrights, applications therefor, or licenses or other
rights in respect thereof.
"INTERIM PERIOD" shall have the meaning set forth in SECTION 15.4.
"IRS" shall mean the United States Internal Revenue Service.
"JOA RELATED AGREEMENTS" shall mean the agreements entered into by and in
the name of the operator(s) by or on behalf of Chevron or NGC, as applicable, as
an owner, and the other owners of facilities covered by a Joint Operating
Agreement, relating to the purchase, sale, exchange, transportation, processing
or fractionating of natural gas or NGLs.
"JOINT OPERATING AGREEMENTS" shall mean the agreements governing the
construction, operation and/or relative ownership rights of any of the Chevron
Facilities or NGC Facilities, in each case which are less than wholly-owned, and
all other Contracts between or among Chevron or NGC (or their respective
Affiliates) (as applicable), on the one hand, and any of the parties to such
agreements with respect to the operation or ownership of any Joint Operation, on
the other hand.
"JOINT OPERATION" shall mean arrangements or agreements involving a sharing
of ownership or expenses of any of the Chevron Facilities or NGC Facilities, as
applicable.
"LIEN" shall mean any lien, mechanic's lien, materialman's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, Preferential Right,
right of third Person to prohibit assignment without such Person's consent,
claim, title imperfection, restrictive covenant, encroachment or other survey
defect, pledge, restriction, security interest or other adverse claim, whether
arising by Contract or under law or otherwise.
"LONDON OPERATIONS" shall mean the operations and businesses conducted by
Accord, NGC International and their respective Subsidiaries, in each case from
their respective London offices, wholly related to areas in, on islands offshore
of, or in waters offshore of and adjacent to, lands (i) located in eastern or
western Europe, (ii) which were formerly a part of the Soviet Union, (iii)
located in Africa, and (iv) located in the Middle East (including, without
limitation, the present nations of Turkey, Syria, Lebanon, Israel, Jordan, Iraq,
Iran, Saudia Arabia, Oman, Dubai, Qatar, United Arab Emirates, North and South
Yemen and Kuwait).
"LONDON NOTICE" shall have the meaning set forth in SECTION 15.6.
"LOSS" shall have the meaning set forth in SECTION 14.1(C).
"MATERIAL ADVERSE EFFECT" shall mean, in respect of the business, assets,
financial condition or results of operations of the Contributed Businesses or
NGC (as applicable), a loss and/or cost thereto of greater than $10 million.
With respect to a loss or cost suffered by an Equity Affiliate, NGC or the
Surviving Corporation shall be deemed to have suffered such loss or cost thereof
in proportion to NGC's or the Surviving Corporation's equity ownership in such
Equity Affiliate.
"MERGER" shall have the meaning set forth in SECTION 2.2.
"MINIMUM VALUE" shall have the meaning set forth in SECTION 2.4.
"NCL" shall mean Novagas Clearinghouse Limited Partnership and its
Subsidiaries, if any.
"NET LOSSES" shall have the meaning set forth in SECTION 14.1(D).
"NET OPERATING CASH FLOW" shall have the meaning set forth in SECTION
2.3(H).
"NEWCO" shall mean Midstream Combination Corp., a Delaware corporation.
"NEWCO COMMON STOCK" shall have the meaning set forth in SECTION 5.2.
"NEWCO GROUP" shall have the meaning set forth in SECTION 8.4(A).
"NEWCO NOTE" shall have the meaning set forth in SECTION 2.1.
"NGBU" shall mean the Natural Gas Business Unit of the Chevron U.S.A.
Production Company division.
5
"NGC" shall mean NGC Corporation, a Delaware corporation and successor in
interest to Trident Holding.
"NGC ASSETS" shall mean all assets and liabilities of NGC and its
Subsidiaries.
"NGC 1995 10-K" shall mean the Annual Report on Form 10-K of NGC for the
fiscal year ended December 31, 1995.
"NGC CORPORATION EEP" shall mean the NGC Corporation Amended and Restated
Employee Equity Option Plan, as the same may be amended from time to time.
"NGC CORPORATION STOCK" shall mean the common stock, $0.01 par value, of
NGC.
"NGC FACILITIES" shall have the meaning set forth in SECTION 4.16(C).
"NGC GROUP" shall mean NGC and its Subsidiaries that are part of an
affiliated group of corporations (as defined in Section 1504(a) of the Code) as
of the date hereof.
"NGC INTERNATIONAL" shall mean NGC International, Inc., a Delaware
corporation.
"NGC NGL FACILITIES" shall have the meaning set forth in SECTION 4.16(B).
"NGC OPTION PLAN" shall mean the NGC Corporation Amended and Restated
1991 Stock Option Plan, as the same may be amended from time to time.
"NGC PERMITTED EXCEPTIONS" shall have the meaning set forth in SECTION
4.16(A).
"NGC PIPELINE FACILITIES" shall have the meaning set forth in SECTION
4.16(C).
"NGC PLANS" shall mean the NGC Corporation EEP and the NGC Option Plan,
collectively.
"NGC SEC DOCUMENTS" shall mean each report, schedule, registration
statement, definitive proxy statement and all other documents filed by Trident
Holding and NGC with the SEC during the period commencing on January 1, 1995,
and continuing through and including the date hereof and the Closing Date (as
applicable) including, without limitation, the Definitive Proxy
Statement/Prospectus and any documents incorporated by reference in any thereof.
"NGC STOCKHOLDER APPROVAL" shall mean the affirmative vote in favor of
this Agreement and the transactions contemplated hereby by the holders of at
least a majority of the outstanding shares of NGC Corporation Stock (in person
or in proxy) at a special meeting of the holders of NGC Corporation Stock to be
called and held in accordance with the DGCL.
"NGC STOCKHOLDERS" shall have the meaning set forth in SECTION 7.2(C).
"NGC STOCKHOLDER TAX" or "TAXES" shall have the meaning set forth in
SECTION 7.2(C).
"NGC TAX LOSS" shall have the meaning set forth in SECTION 7.8(A).
"NGC TAX LOSS PAYMENT" shall have the meaning set forth in SECTION 7.8(A).
"NGC TAXES" shall have the meaning set forth in SECTION 7.2(B).
"NGLS" shall mean natural gas liquids (including ethane, propane,
isobutane, normal butane, natural gasoline and pentane plus or any mixture or
combination thereof), field or plant gas condensate, sulphur, helium and other
products extracted or derived in connection with processing activities.
"NOVA" shall mean NOVA Gas Services (U.S.) Inc., a Delaware corporation.
"NON WARREN BUSINESSES" shall mean the Contributed NGBU Business and the
Contributed West Texas LPG Pipeline Business.
"NYSE" shall mean the New York Stock Exchange.
"OPTIONS" shall mean those options to purchase shares of NGC Corporation
Stock granted pursuant to the NGC Corporation EEP or the NGC Option Plan.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
6
"PEP INDIVIDUALS" shall mean C. L. Watson, Charles L. Watson Grantor
Retained Annuity Trust, Kim R. Watson Grantor Retained Annuity Trust, Keri M.
Watson Trust, Brian J. Watson Trust, Carly R. Watson Trust, Stephen W.
Bergstrom, Jeffrey Stephen Bergstrom Trust, Rebecca Jean Bergstrom Trust,
Gilbert Burciaga, Renee Eve Burciaga Trust, Christina Ann Burciaga Trust,
Gregory Gilbert Burciaga Trust, A. R. Cipriani, Jr., Jason Cipriani Trust, Emily
Cipriani Trust, David C. Feldman, Inc., James T. Hackett, H. Keith Kaelber,
Kenneth E. Randolph, Donald R. Sinclair, Jacob S. Ulrich, Jacob Shields Ulrich,
III Trust and Courtney Warren Ulrich Trust, collectively.
"PERMISSIBLE BURDEN" shall mean (1) Liens for current realty and personal
property taxes not yet due and payable; (2) Preferential Rights, requirements
for consent to assignment and other encumbrances of a similar nature which are
part of Contracts customarily used in the Industry; (3) provisions contained in
Contracts (not presently invoked) containing the obligation to make volumetric
adjustments (or pay in lieu thereof) to another party for any share of prior
overproduction, over taking, claims by purchasers for delivery of prepaid NGL or
natural gas or liability for refunds, or other similar contingent liabilities
relating to volumetric adjustments, in each case customary in the Industry; (4)
statutory liens of warehousemen, mechanics and materialmen and other like
statutory liens arising in the ordinary course of business for obligations not
yet due and payable; and (5) imperfections of title, easements, rights-of-way,
servitudes, permits, surface leases and other rights in respect to surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like; conditions, covenants or other restrictions; easements for streets,
alleys, highways, pipelines, power lines, telephone lines and railways, and
other assessments and rights-of-way, charges, orders, declarations, operating
agreements, instruments, defects, irregularities and encumbrances of a similar
character and all other Liens (including operator's liens), in each case listed
in this subsection (5) that (A) do not arise in connection with or secure
indebtedness for money borrowed or owed or the extension of credit, and (B) do
not materially detract from the value of the Contributed Businesses or the NGC
Assets (as applicable) subject thereto or affected thereby or otherwise
materially impair the Contributed Businesses or the NGC Assets (as applicable)
or operations being conducted on or with the assets and properties that comprise
the Contributed Businesses or the NGC Assets (as applicable), so a reasonably
prudent operator engaged in the Industry with knowledge of the facts and
circumstances and the legal effect thereon would accept title to such
Contributed Businesses or the NGC Assets (as applicable) subject to such
detractions, interferences or impairments.
"PERSON" shall mean an individual, corporation, limited liability
company, partnership, joint venture, trust or unincorporated organization, or a
Governmental Entity.
"PREFERENTIAL RIGHTS" shall mean any preferential purchase rights,
including, without limitation, rights of first refusal, right to bid or other
similar preferential rights that a third party may exercise with respect to any
of the assets or properties comprising the Contributed Businesses, the
Contributed West Texas LPG Pipeline Business or the NGC Assets (as applicable)
as a result of the transactions contemplated by this Agreement or by the
Ancillary Agreements.
"PRELIMINARY PROXY STATEMENT" shall mean the preliminary proxy statement
relating to the transactions contemplated hereby required to be filed with the
SEC under Regulation 14A under the Exchange Act.
"PROSPECTIVE EMPLOYEES" shall have the meaning set forth in SECTION 8.4(A).
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended.
"PURCHASE PLANS" shall mean the NGC Corporation Director and Key Employee
Stock Purchase Plan and the NGC Corporation Non-Employee Director Compensation
Plan, collectively.
"REFUND PAYMENT" shall have the meaning set forth in SECTION 7.8(I).
"REFUND PAYMENT NOTICE" shall have the meaning set forth in SECTION 7.8(I).
"RELEASE" shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, or on, into, under or from the soil, surface water, ground water or
property.
"RELEVANT NGC TAXES" shall have the meaning set forth in SECTION 7.8(B).
7
"REMAINING EMPLOYEES" shall have the meaning set forth in SECTION 8.4(B).
"REQUISITE REGULATORY APPROVALS" shall mean all permits, approvals,
filings, consents and waivers required to be obtained or made by NGC or any of
its Affiliates or Chevron or any of its Affiliates, and the expiration of all
waiting periods required to expire, before the consummation of the Combination
or any other transaction contemplated by this Agreement or the Ancillary
Agreements, as applicable, under applicable laws of any jurisdiction, domestic
or foreign, having jurisdiction over the transactions contemplated by this
Agreement or the Ancillary Agreements, including, without limitation,
notifications, approvals, orders, authorizations or filings required by the HSR
Act, the SEC, the Securities Act and the EU Merger Regulation.
"RETAINED ASSET" shall have the meaning set forth in SECTION 2.4.
"SAVINGS PLAN" shall mean the Trident NGL, Inc. Savings Plan providing for,
among other things, a profit sharing plan and a savings plan.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PARTICIPATING PREFERRED STOCK" shall mean the Series A
Participating Preferred Stock of the Surviving Corporation which shall have the
relative rights, designations and preferences set forth in the Certificate of
Incorporation attached hereto as EXHIBIT 2.2(D)(I).
"SIGNIFICANT AFFILIATE" shall mean Accord and NCL.
"SIGNIFICANT DISPOSITION" means, as to any Person, any possible or proposed
transaction involving the disposition of $100 million or more in value of
interests in the (i) NGC Assets or (b) the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business, taken as a whole.
"SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any
corporation, association, joint venture, partnership or other business entity of
which securities or other ownership interests representing more than 50% of the
ordinary voting power or beneficial interest are, at the time as of which any
determination is being made, owned directly or indirectly by the Parent or one
or more subsidiaries of the Parent, PROVIDED, HOWEVER, that the term Subsidiary
shall not include Joint Operations.
"SURVIVING CORPORATION" shall mean Newco, as the surviving corporation in
the Merger.
"SURVIVING CORPORATION GROUP" shall mean Surviving Corporation and its
Subsidiaries that are part of an affiliated group of corporations (as defined in
Section 1504(a) of the Code) as of the Closing Date.
"SURVIVING CORPORATION COMMON STOCK" shall mean the common stock, $0.01 par
value per share, of the Surviving Corporation.
"SURVIVING CORPORATION TAX" or "TAXES" shall have the meaning set forth in
SECTION 7.2(B).
"SURVIVING CORPORATION RETURNS" shall have the meaning set forth in SECTION
7.2(E).
"TAX" or "TAXES" shall mean and include any and all federal, state, county,
local, foreign and other taxes (including, without limitation, income taxes,
excise taxes, sales taxes, use taxes, gross receipts taxes, motor vehicle taxes,
franchise taxes, withholding taxes, ad valorem taxes, severance taxes,
employment and payroll-related taxes, property taxes, import duties and all
other governmental charges and assessments) and any and all interest, fines,
penalties, and additions with respect thereto.
"TAX AUDIT" shall have the meaning set forth in SECTION 7.5(A).
"TAX INDEMNITY PAYMENT" shall have the meaning set forth in SECTION 7.6(C).
"TAX RETURNS" shall have the meaning set forth in SECTION 7.2(E).
"TECHNOLOGY" shall mean trade secrets, proprietary information, inventions,
know-how, processes or procedures, whether patentable or unpatentable, and
similar proprietary rights wherever located.
"TERMINATION DATE" shall have the meaning set forth in SECTION 13.1.
8
"THIRD PARTY" shall mean any Person (including any Governmental Entity)
that is not a party to this Agreement or is not a Subsidiary, Equity Affiliate
or Significant Affiliate of any party to this Agreement.
"THIRD-PARTY CLAIM" shall have the meaning set forth in SECTION 14.5.
"THIRD PARTY INSURANCE POLICIES" shall mean any insurance policy providing
coverage on an "occurrence" basis that was issued by a third party which covers
specific Chevron Facilities and is not a Chevron Corporation Policy.
"TRIDENT HOLDING" shall mean Trident NGL Holding, Inc., a Delaware
corporation and predecessor in interest to NGC.
"TRIDENT NGL, INC." shall mean Trident NGL, Inc., a Delaware corporation
and indirect wholly-owned subsidiary of NGC.
"VALUE EXPERTS" shall have the meaning set forth in SECTION 15.5.
"UNADJUSTED NGC TAX LOSS" shall have the meaning set forth in SECTION
7.8(B).
"USED" shall mean with respect to the assets, Contracts or Governmental
Authorizations of any Person, those owned by such Person which are used, or have
been acquired for use but not yet placed in use.
"WARN ACT" shall have the meaning set forth in SECTION 8.2(A).
"WARRANT" shall have the meaning set forth in SECTION 4.2.
"WARREN PETROLEUM COMPANY" shall mean The Warren Petroleum Company, an
unincorporated division of Chevron.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text of this
Agreement and shall have the meaning indicated herein.
1.3 OTHER DEFINITIONAL PROVISIONS. The words "hereof," "herein" and
"hereunder" and words of similar import, when used in this Agreement shall refer
to this Agreement as whole and not to any particular provision of this
Agreement. Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
1.4 "KNOWLEDGE". When used in this Agreement, "KNOWLEDGE" shall mean the
actual, and not implied or assumed, knowledge of any of the individuals set
forth on SCHEDULE 1.4 hereto.
ARTICLE 2
THE CONTRIBUTIONS
2.1 CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Closing
and immediately prior to the Effective Time (as defined herein), Newco and the
Contributing Parties will execute and deliver the Contribution and Assumption
Agreement in the form of EXHIBIT 2.1 hereto, pursuant to which the Contributing
Parties will contribute the Contributed Businesses and the Contributed West
Texas LPG Pipeline Business to Newco in exchange for (A) the issuance to Chevron
of 38,623,210 shares of Newco Common Stock and 7,815,363 shares of Series A
Participating Preferred Stock, (B) the assumption by Newco of the Assumed
Liabilities, including the assumption by Newco of the Assumed Indebtedness in
the amount of $155.373 million (subject to adjustment as provided in SECTION
2.3); and (C) the issuance of a promissory note to the Contributing Parties in a
principal amount of $138.4 million (the amount of which reflects the changes set
forth in SCHEDULE 2.1(C) hereof) and in the form of EXHIBIT 2.1(C) hereto (the
"NEWCO NOTE"), subject to adjustment as provided in SECTION 2.3. The
consideration to be received by the Contributing Parties as described in this
SECTION 2.1 is hereinafter called the "CONSIDERATION."
2.2 THE MERGER AND PAYMENT OF THE NEWCO NOTE. Upon the terms and conditions
set forth in this Agreement and the Certificate of Merger, at the Closing but
after the contribution described in SECTION 2.1, NGC shall be merged with and
into Newco in accordance with the applicable provisions of the DGCL (the
"MERGER"). Newco shall be the surviving corporation in the Merger (in such
capacity, the "SURVIVING CORPORATION") and shall continue its corporate
existence under the laws of the State of Delaware. The name
9
of the Surviving Corporation shall be "NGC Corporation." The Merger shall have
all effects set forth in the DGCL, this Agreement and the Certificate of Merger.
(a) Subject to the terms and conditions of this Agreement, a
certificate of merger in the form of EXHIBIT 2.2(A) (the "CERTIFICATE OF
MERGER") shall be duly prepared, executed and acknowledged by Newco, which
will be the Surviving Corporation in the Merger, and thereafter delivered
to the Secretary of State of the State of Delaware for filing, as provided
in the DGCL, as soon as practicable on the Closing Date (but in no event
before the execution and delivery of the Contribution and Assumption
Agreement by the parties thereto). The Merger shall become effective upon
filing the Certificate of Merger with the Secretary of State of the State
of Delaware (the "EFFECTIVE TIME").
(b) At the Effective Time, each issued and outstanding share of Newco
will continue to be an issued and outstanding share of the Surviving
Corporation and each issued and outstanding share of NGC Corporation Stock
shall be automatically converted, without any action on the part of the
holder thereof, into one share of Surviving Corporation Common Stock. Upon
such conversion, all such shares of NGC Corporation Stock shall be canceled
and cease to exist and each certificate theretofore representing any such
shares shall, without any action on the part of the holder thereof, be
deemed to represent an equivalent number of shares of Surviving Corporation
Common Stock.
(c) From and after the Effective Time, the Merger shall have all of
the effects provided by applicable law.
(d) At the Effective Time, the Certificate of Incorporation and Bylaws
of Newco in the forms attached as EXHIBITS 2.2(D)(I) and 2.2(D)(II) to this
Agreement, respectively, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation until thereafter amended in accordance
with the provisions thereof or of the DGCL.
(e) The number of directors of the Surviving Corporation shall be 13
until otherwise determined pursuant to the Bylaws of the Surviving
Corporation. The directors of the Surviving Corporation shall include each
of the ten directors of NGC as of the Effective Time and the three
individuals who are serving as directors of Newco immediately prior to the
Effective Time. The initial executive officers of the Surviving Corporation
immediately following the Effective Time shall be those individuals listed
on SCHEDULE 2.2(E) to this Agreement. The directors and executive officers
of the Surviving Corporation shall serve in such capacities until their
respective successors are duly elected or appointed.
(f) At the Effective Time, the Surviving Corporation shall assume all
rights and obligations of NGC under the NGC Plans and the Purchase Plans as
in effect at the Effective Time and shall continue such plans in accordance
with their respective terms.
(g) At the Effective Time, the stock transfer books of NGC shall be
closed and there shall be no transfers on such stock transfer books of
shares of NGC Corporation Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, certificates representing
any such shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for certificates representing shares of Surviving
Corporation Common Stock.
(h) At the Effective Time, the Surviving Corporation shall repay the
Newco Note by wire transfer to a bank account, which shall have been
designated by Chevron not less than two Business Days prior to the Closing.
2.3 CONSIDERATION ADJUSTMENT. The Consideration due to Chevron shall be
subject to the adjustments referred to in SECTION 2.3 and SECTION 2.4 hereof (in
the aggregate, the "CONSIDERATION ADJUSTMENT").
(a) NGBU FIXED BOOK. The amount of the Newco Note includes a value for
the NGBU long-term fixed price position "book" (the "FIXED BOOK VALUE") of
$12 million. The Fixed Book Value shall be recomputed as of the Closing in
accordance with the provisions of SCHEDULE 2.3(A), and the Consideration
will be (i) increased by any amount by which the Fixed Book Value as of the
Closing exceeds $12 million, and (ii) decreased by any amount by which $12
million exceeds the Fixed Book Value as of the Closing.
10
(b) INVENTORY ADJUSTMENT. The amount of each product of the inventory
of Warren Petroleum Company will be determined as of the Closing Date based
on accounting records, subject to NGC's review, which amount shall be
compared to the agreed upon quantities by product set forth on SCHEDULE
2.3(B), with the difference valued based on the provisions of SCHEDULE
2.3(B). For each product of inventory, (i) if the amount on hand on the
Closing Date is greater than the amount of the inventory set forth on
SCHEDULE 2.3(B), then the difference shall result in an increase in the
Consideration by the value of such amount, and (ii) if the amount on hand
on the Closing Date is less than the amount set forth on SCHEDULE 2.3(B),
then the difference shall result in a reduction of the Consideration by the
value of such amount.
(c) DISPOSITION OF ASSETS. The Consideration shall be reduced by an
amount equal to any cash or the value of other consideration received or to
be received by Chevron (unless such other consideration is included in the
Contributed Businesses or the Contributed West Texas LPG Pipeline Business)
as a result of any dispositions of any of the properties or assets that
comprise the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business during the period commencing on the date hereof and
continuing through and including the Closing Date, except for (i) sales of
inventory, (ii) sales or other dispositions of any of the assets and
properties that comprise the Contributed Businesses or the Contributed West
Texas LPG Pipeline Business to the extent subsequently replaced with assets
or properties of equivalent value prior to the Closing Date and (iii) minor
sales or dispositions of assets or properties comprising the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business that do not
exceed $25,000 individually or $500,000 in the aggregate.
(d) CASUALTY LOSSES. The Consideration shall be (1) reduced by the
amount of any Casualty Loss that occurs with respect to the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business after the
date hereof and prior to the Closing Date, and (ii) increased by the amount
of any Casualty Loss with respect to the NGC Facilities that occurs after
the date hereof and prior to the Closing Date MULTIPLIED by a fraction (the
"CHEVRON CASUALTY LOSS RATIO"), the (A) numerator of which is 28 and (B)
the denominator of which is 72; provided, however, that to the extent that
any Casualty Loss occurs, the Closing contemplated shall not be affected
subject to the respective rights of Chevron and NGC under SECTION 12.2(A)
and SECTION 12.3(A), respectively, unless the amount of the Casualty Loss
or Losses, along with other losses resulting from breaches of
representations and warranties, causes an aggregate adverse effect on
either NGC or the Contributed Businesses in an amount in excess of $25
million.
(e) RETAINED ASSETS. The Consideration shall be reduced by the Minimum
Value or Agreed Value (as applicable) of any Retained Asset pursuant to
SECTION 2.4.
(f) NGBU STORED GAS. The Consideration shall be increased by the fair
market value of the aggregate amount of natural gas maintained by the NGBU
in storage as of the Closing date as determined in accordance with SCHEDULE
2.3(F).
(g) NUG CONTRACT ADJUSTMENTS. The amount of the Newco Note has been
computed based on an assumed value for the Included NUG Contracts (the "NUG
VALUE") of $38 million. This value was computed based on such contracts
being marked to market employing fair market values as of April 26, 1996,
as more particularly set forth in SCHEDULE 2.3(G). The NUG Value shall be
recomputed as of the Closing Date, in accordance with the terms set forth
in such schedule, and the Consideration shall be (i) increased by any
amount by which the NUG Value as of the Closing exceeds $38 million, and
(ii) decreased by any amount by which $38 million exceeds the NUG Value as
of the Closing.
(h) POST JUNE 1ST ADDITIONAL ADJUSTMENTS. In the event the Closing
Date occurs after June 1, 1996, the following additional adjustments to
Consideration shall be made. The Consideration shall
(i) be REDUCED by:
(A) the Net Operating Cash Flow from the Contributed Warren Business
during the period commencing on June 1, 1996 and continuing through and
including the Closing Date (the "ADJUSTMENT
11
PERIOD"), adjusted to give effect to the Ancillary Agreements relating to
the Contributed Warren Business during the Adjustment Period, as if each of
such Ancillary Agreements were in effect as of June 1, 1996; as used herein
the term "NET OPERATING CASH FLOW" shall mean an amount equal to net
income (after taxes and excluding out of period items exceeding $250,000
individually related to pre-June 1, 1996 operations,) plusthe amount of
depreciation and amortization and any write-downs of assets for accounting
purposes, but only to the extent that such write-downs have an earnings but
not a cash effect; in the calculation of the Net Operating Cash Flow, there
shall be no deductions for the severance costs which the Chevron Group is
required to bear pursuant to the provisions of ARTICLE 8 hereof.
(B) an amount equal to $952,865 per month to reflect an agreed
adjustment to the Consideration for the cash flow from the Non Warren
Businesses for the Adjustment Period (proportionately reduced for each
portion of a month if the Closing does not occur on the first day of a
month), and
(ii) be INCREASED by
(A) any amount reflected in net income related to (x) a Casualty Loss
with respect to the Contributed Warren Business covered by paragraph (d)
above or (y) a disposition covered by paragraph (c) above,
(B) the amount of capital expenditures on the Contributed Warren
Businesses reasonably made by Chevron in accordance with SECTION 10.7
hereof during the Adjustment Period,
(C) interest at the rate of 6% per annum during the Adjustment Period
on the sum of the Assumed Indebtedness and the Newco Note, as adjusted to
take into account the Estimated Consideration Adjustment, and
(D) an amount equal to $580,482.16 times the number of record dates
for the payment of dividends on NGC Corporation Stock after June 1, 1996
through the date of Closing.
Five (5) calendar days prior to the Closing Date, Chevron shall deliver to
NGC (after consultation with NGC) an estimate available at such time (the
"ESTIMATED CONSIDERATION ADJUSTMENT"), which estimate shall be used to determine
the consideration due to Chevron under SECTIONS 2.1(B) AND 2.1(C). If the
Estimated Consideration Adjustment results in an aggregate increase in the
Consideration due to Chevron, then at Closing the amount of the Estimated
Consideration Adjustment shall be added to the outstanding principal balance of
the Newco Note. If the Estimated Consideration Adjustment results in an
aggregate decrease in the Consideration due Chevron of $138.4 million or less,
then at Closing the principal amount of the Newco Note shall be reduced by an
amount equal to the Estimated Consideration Adjustment. If the Estimated
Consideration Adjustment results in an aggregate decrease in the Consideration
due Chevron that is equal to or greater than $138.4 million, then the Newco Note
shall be canceled and the remainder, if any, of the Estimated Consideration
Adjustment shall be applied to reduce the outstanding principal balance of the
Assumed Indebtedness.
Following the Closing, further Consideration Adjustments shall be made as
required pursuant to SECTIONS 15.3, 15.4, 15.5 AND 15.6.
2.4 ADJUSTMENTS FOR RETAINED ASSETS. If for any good and sufficient reason,
including Preferential Rights, Requisite Regulatory Approvals, or the discovery
of a sale or other transfer prior to the date of this Agreement, either party
determines, in good faith, that a Contributing Party is unable (or in the case
of contracts, that it is impractical) to transfer to Newco an asset or property
included in the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business or is unable to transfer to Newco such asset or property
without a significant loss of use thereof by the Surviving Corporation, such
party shall promptly communicate such fact to the other party and consult with
such party concerning such impediment. If Chevron and NGC are unable to agree on
a solution to overcome such impediment (which could include alternative means of
transferring value effectively), the Contributing Party shall retain such asset
or property (whether one or more, the "RETAINED ASSET") and the net value which
cannot be effectively transferred. In such case, Chevron and NGC shall endeavor
in good faith to determine the fair value of the Retained Asset (net of the
economic value which has been transferred) for purposes of the Estimated
12
Consideration Adjustment. If the parties agree on such fair value (the "AGREED
VALUE"), they shall document their agreement in writing, which shall provide,
among other things, the Agreed Value the parties ascribed to the Retained Asset.
The Agreed Value set forth in such written agreement shall be final and binding
on the parties. If Chevron and NGC are unable to agree on the fair value of the
Retained Asset, then not less than five (5) Business Days prior to the Closing
Date, Chevron shall provide NGC with a document providing a reasonable estimate
of the fair value of the Retained Asset (the "MINIMUM VALUE") and the basis
for determining such value. The parties acknowledge and agree that the Minimum
Value shall be binding on the parties hereto for the purpose of Closing, but
shall be subject to adjustment after Closing as provided by SECTION 15.5. To the
extent that a Contributing Party does not transfer a Retained Asset pursuant to
this SECTION 2.4, the Closing contemplated hereby shall not be affected, subject
to NGC's rights under SECTION 12.3(A) in the event that NGC's reasonable
estimate of the fair value of the Retained Asset, along with other losses and
costs resulting from breaches of representations and warranties by Chevron,
exceed $25 million in the aggregate. The parties hereto acknowledge that the
Minimum Value shall not be binding on NGC in determining a reasonable estimate
of the fair value of the Retained Asset for the purposes of the immediately
preceding sentence.
ARTICLE 3
THE CLOSING
3.1 CLOSING DATE. Subject to satisfaction or waiver of the conditions set
forth in ARTICLE 12 and the termination or expiration of the applicable waiting
period required under the HSR Act, the closing ("CLOSING") of the transactions
contemplated by this Agreement shall take place at the offices of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. located at 1900 Pennzoil Place -- South Tower, 711
Louisiana, Houston, Texas (A) at 10:00 a.m., Houston time, on the date of the
Special Meeting of NGC Stockholders at which NGC Stockholder Approval is
obtained or as soon thereafter as practicable or (B) at such other date or time
as the parties hereto shall mutually agree in writing. The date of the Closing
shall hereinafter be referred to as the "CLOSING DATE."
3.2 DELIVERIES OF ANCILLARY DOCUMENTS AT CLOSING. At the Closing, the
following documents and agreements shall have been executed and delivered by and
among the parties thereto (collectively, the "ANCILLARY AGREEMENTS").
(a) Contribution and Assumption Agreement in the form of EXHIBIT 2.1
hereto.
(b) Stockholders Agreement in the form of EXHIBIT 3.2(B)
(c) Registration Rights Agreement in the form of EXHIBIT 3.2(C)
(d) Master Alliance Agreement in the form of EXHIBIT 3.2(D)
(e) Natural Gas Purchase and Sale Agreement in the form of EXHIBIT 3.2(E)
(f) Gas Supply and Purchase Agreement (St. James) in the form of EXHIBIT
3.2(F)
(g) Gas Supply and Service Agreement (Oak Point Plant) in the form of
EXHIBIT 3.2(G)
(h) Gas Supply and Service Agreement (Orange Plant) in the form of EXHIBIT
3.2(H)
(i) Gas Supply and Service Agreement (Cedar Bayou Plant) in the form of
EXHIBIT 3.2(I)
(j) Gas Supply and Service Agreement (Pascagoula Refinery) in the form of
EXHIBIT 3.2(J)
(k) Gas Supply and Service Agreement (Salt Lake City Refinery) in the form
of EXHIBIT 3.2(K)
(l) Gas Supply and Service Agreement (El Segundo Refinery) in the form of
EXHIBIT 3.2(L)
(m) Gas Supply and Service Agreement (Perth Amboy Refinery) in the form of
EXHIBIT 2.3(M)
(n) Gas Supply and Service Agreement (Richmond Refinery) in the form of
EXHIBIT 3.2(M)
(o) Master Natural Gas Processing Agreement in the form of EXHIBIT 3.2(O)
13
(p) Master Natural Gas Liquids Purchase Agreement in the form of EXHIBIT
3.2(P)
(q) Feedstock Sale and Refinery Product Purchase Agreement (El Paso) in the
form of EXHIBIT 3.2(Q)
(r) Feedstock Sale and Refinery Product Purchase Agreement (El Segundo) in
the form of EXHIBIT 3.2(R)
(s) Refinery Product Sale Agreement (Hawaii) in the form of EXHIBIT 3.2(S)
(t) Feedstock Sale and Refinery Product Purchase Agreement (Pascagoula) in
the form of EXHIBIT 3.2(T)
(u) Feedstock Sale and Refinery Product Purchase Agreement (Richmond) in
the form of EXHIBIT 3.2(U)
(v) Feedstock Sale and Refinery Product Purchase Agreement (Salt Lake City)
in the form of EXHIBIT 3.2(V)
(w) Feedstock and Refinery Product Master Services Agreement in the form of
EXHIBIT 3.2(W)
(x) CCC Product Sale and Purchase Agreement in the form of EXHIBIT 3.2(X)
(y) CCC/WPC Services Agreement in the form of EXHIBIT 3.2(Y)
(z) Operating Agreement between Newco and Chevron Pipe Line Company (Mt.
Belvieu Pipelines) in the form of EXHIBIT 3.2(Z)
(aa) LPG System Loss/Gain Settlement Agreement in the form of EXHIBIT
3.2(AA)
(bb) Transition Services Agreement in the form of EXHIBIT 3.2(BB)
(cc) Master Power Agreement (Chevron U.S.A. Production Company) in the form
of EXHIBIT 3.2(CC)
(dd) Master Power Service Agreement (Chevron Chemical Company) in the form
of EXHIBIT 3.2(DD)
(ee) Master Power Service Agreement (Chevron U.S.A. Products Company) in
the form of EXHIBIT 3.2(EE)
(ff) Galena Park Services Agreement in the form of EXHIBIT 3.2(FF)
(gg) Venice Operating Agreement in the form of EXHIBIT 3.2(GG)
(hh) Product Storage Lease and Terminal Access Agreement (Venice) in the
form of EXHIBIT 3.2(HH)
(ii) An agreement incorporating the terms contained in the Term Sheet
regarding Fractionation Agreement (Venice) in the form of EXHIBIT 3.2(II).
(jj) Technical Services Agreement in the form of EXHIBIT 3.2(JJ)
(kk) Miscellaneous Master Services Agreement in the form of EXHIBIT 3.2(KK)
(ll) An agreement incorporating the terms contained in the Barge Co Term
Sheet attached as EXHIBIT 3.2(LL)
(mm) Natural Gas Purchase and Sale Agreement (Canadian Version #1) in the
form of EXHIBIT 3.2(MM)
(nn) Natural Gas Purchase and Sale Agreement (Canadian Version #2) in the
form of EXHIBIT 3.2(NN)
(oo) Agency Agreement for Administration of Natural Gas Purchase and Sale
Contracts in the form of EXHIBIT 3.2(OO)
(pp) Lone Star Swap Transaction Confirmation CUSA/NGC Master Swap Agreement
in the form of EXHIBIT 3.2(PP)
14
(qq) Transportation Assignment and Valuation Agreement in the form of
EXHIBIT 3.2(QQ)
(rr) Interstate Pipeline Capacity Release Agreement in the form of EXHIBIT
3.2(RR).
(ss) West Texas LPG Pipeline Partnership Agreement in the form of EXHIBIT
(SS).
(tt) West Texas LPG Pipeline Operating Agreement in the form of EXHIBIT
3.2(TT).
(uu) West Texas LPG Pipeline License Agreement in the form of EXHIBIT
3.2(UU).
provided that, prior to the Closing, the parties will enter into any
clarifications or amendments to the Ancillary Agreements (other than those
listed in paragraphs (a), (b) and (c) of SECTION 3.2) as may be necessary to
ensure that only such Affiliates of any party as were clearly intended by the
parties to be bound by such agreements and entitled to benefits thereunder are
in fact so bound or become such beneficiaries.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NGC
NGC represents and warrants to Chevron and Newco that:
4.1 CORPORATE STATUS. NGC is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is being conducted on the date of this
Agreement. NGC is duly qualified to conduct business and is in good standing in
each jurisdiction in which the nature of the business transacted by it requires
qualification, except where the failure to so qualify would not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on NGC. Copies of the Certificate of Incorporation and By-laws of
NGC have been furnished or made available to Chevron, reflecting all amendments
thereto, and all such documents are now in effect and are complete and correct.
4.2 CAPITALIZATION. As of April 30, 1996, the authorized capital stock of
NGC consisted of (i) 300,000,000 shares of NGC Corporation Stock, of which
110,969,968 shares were issued and outstanding, options to purchase 12,726,728
shares were outstanding pursuant to the grant of Options under the NGC Plans
with vesting, exercise and expiration terms as set forth in SCHEDULE 4.2 and
15,198,019 shares were reserved for future issuance pursuant to the NGC Plans,
179,286 shares were reserved for issuance under the terms of the Savings Plan,
1,131,364 shares were reserved for issuance pursuant to the Purchase Plans,
6,228 were reserved for issuance pursuant to a Warrant issued in favor of J.
Otis Winters (the "WARRANT") and no shares were held as treasury stock; (ii)
50,000,000 shares of preferred stock, none of which were outstanding and none of
which were held in reserve or as treasury stock. As of May 15, 1996, the
authorized capital stock of NGC consisted of (i) 300,000,000 shares of NGC
Corporation Stock, of which 110,972,191 shares were issued and outstanding,
options to purchase 12,712,610 shares were outstanding pursuant to the grant of
Options under the NGC Plans with vesting, exercise and expiration terms as set
forth in SCHEDULE 4.2 and 22,895,795 (19,695,795 if the Combination is not
consummated) shares were reserved for future issuance pursuant to the NGC Plans,
179,286 shares were reserved for issuance under the terms of the Savings Plan,
1,131,364 shares were reserved for issuance pursuant to the Purchase Plans,
6,228 shares were reserved for issuance pursuant to a Warrant issued in favor of
J. Otis Winters (the "WARRANT") and no shares were held as treasury stock; (ii)
50,000,000 shares of preferred stock, none of which were outstanding and none of
which were held in reserve or as treasury stock. All outstanding shares of NGC
Corporation Stock are validly issued, fully paid and nonassessable. Except for
(i) the right to purchase shares of NGC Corporation Stock pursuant to the
Options currently outstanding under the NGC Plans, (ii) the right of NGC to
issue shares of NGC Corporation Stock pursuant to the terms of the Savings Plan,
(iii) the right to purchase shares of NGC Corporation Stock pursuant to the
Purchase Plans, (iv) the right to purchase shares of NGC Corporation Stock
pursuant to the Warrant, (v) the right of British Gas, NOVA and the other
Clearinghouse Owners to purchase NGC Corporation Stock pursuant to that certain
Stockholders Agreement dated October 21, 1994 by and among NGC and the
Clearinghouse Owners and (vi) the obligation of NGC to issue Options pursuant to
Paragraph IV of the NGC Corporation EEP, as of the date of this Agreement, there
are no options, warrants, calls, rights, commitments, preemptive rights or
agreements of any character to which NGC is a party or by which any party is
bound obligating NGC to
15
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of NGC or any securities or obligations convertible into
or exchangeable for such shares, or to grant, extend or enter into any option,
warrant, call, right, commitment, preemptive right or similar agreement.
4.3 OTHER SUBSIDIARIES. SCHEDULE 4.3 to this Agreement contains a list of
all of the Equity Affiliates of NGC and indicates for each Equity Affiliate of
NGC as of the date of this Agreement: (a) the percentage and type of equity
securities of each such Equity Affiliate owned or controlled by NGC and its
Subsidiaries, (b) the identity of any other beneficial or record owner of any
interest in any such Equity Affiliate and the percentage and type of ownership
and (c) the jurisdiction of incorporation or organization. Except as set forth
in SCHEDULE 4.3, all equity securities listed thereon as being owned by NGC or a
Subsidiary of NGC are owned by such Person, free and clear of all Liens of any
nature whatsoever. Except as set forth in SCHEDULE 4.3, there are no options,
warrants, calls, rights, commitments, preemptive rights or agreements of any
character to which any of NGC's Subsidiaries is a party or by which any such
party is bound obligating it to issue, deliver or sell, or cause to be issued,
delivered or sold, additional equity interests of a Subsidiary or any securities
or obligations convertible into or exchangeable for such interests or to grant,
extend or enter into any such option, warrant, call, right, commitment,
preemptive right or agreement. Each Subsidiary of NGC and, to the knowledge of
NGC, each Equity Affiliate of NGC is duly qualified to conduct its business and
is in good standing in each jurisdiction in which the nature of the business
transacted by it requires qualification, except where the failure to be so
qualified or registered or to be in good standing would not, either individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
NGC. Each Subsidiary of NGC and, to the knowledge of NGC, each Equity Affiliate
of NGC has all requisite corporate or partnership power and authority to own,
operate and lease its properties and to conduct its business as it is being
conducted on the date of this Agreement, except where the failure to have such
requisite corporate or partnership power and authority would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
NGC or on the ability of the Surviving Corporation to perform its obligations
under the Ancillary Agreements. A true and correct copy of the certificate or
articles of incorporation (as applicable) and bylaws of each corporate
Subsidiary of NGC and of the organizational and governing documents of each
other Subsidiary of NGC and, to the extent requested by Chevron, each Equity
Affiliate of NGC, as in effect on the date of this Agreement, has been provided
to Chevron.
4.4 NO GOVERNMENTAL APPROVALS. No Requisite Regulatory Approval is required
on the part of NGC or any Subsidiary or Equity Affiliate of NGC in connection
with the execution and delivery of this Agreement and the Ancillary Agreements
or the consummation by NGC or any of its Subsidiaries of the transactions
contemplated by this Agreement and the Ancillary Agreements, except for (a)
compliance with the HSR Act, the Securities Act, the Exchange Act, state
securities and takeover laws, PUHCA, and the Federal Energy Regulatory
Commission, (b) filings required by the EU Merger Regulation, (c) the filing and
recordation requirements of the DGCL and (d) any Requisite Regulatory Approval
that, if not obtained, would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Surviving
Corporation or on the ability of the Surviving Corporation to perform its
obligations under the Ancillary Agreements.
4.5 AUTHORITY. The execution, delivery and performance by NGC of this
Agreement and the consummation by NGC of the transactions contemplated hereby
have been duly and validly authorized and approved by all necessary corporate
action (except the NGC Stockholder Approval) on the part of NGC. This Agreement
has been duly executed and delivered by NGC and this Agreement is the valid and
binding obligation of NGC, enforceable against NGC in accordance with its terms,
subject to (i) obtaining the Requisite Regulatory Approvals referenced in
SECTION 4.4 and (ii) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity). Without limiting the foregoing, the Board of Directors of NGC has
approved, for purposes of Section 203 of the DGCL and otherwise, this Agreement.
16
4.6 NO CONFLICTS. Except as set forth in SCHEDULE 4.6 to this Agreement,
and assuming the receipt of all Requisite Regulatory Approvals referenced in
SECTION 4.4, the execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements will not conflict with, or result in
any violation of or default or loss of any benefit under, any provision of the
certificate (or articles) of incorporation or bylaws of NGC and each corporate
Subsidiary or the organizational documents of each other Subsidiary of NGC or
any agreement or other arrangement to which any of them is a party or of any
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to NGC or any of its Subsidiaries
or Affiliates, other than any conflict, violation, default or loss that would
not, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC or on the ability of the Surviving Corporation or
its Affiliates to perform their respective obligations under the Ancillary
Agreements.
4.7 SEC DOCUMENTS.
(a) NGC has furnished Chevron with a true and complete copy of the NGC
SEC Documents. The NGC SEC Documents are all the documents (other than
preliminary material) that Trident Holding and NGC have been required to
file with the SEC since January 1, 1995. As of its filing date (and, with
respect to any registration statement, the date on which it or any
post-effective amendment was declared effective), each NGC SEC Document was
in compliance, in all material respects, with the applicable requirements
of the Securities Act and the Exchange Act, contained no untrue statement
of a material fact and did not omit any statement of a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of NGC, Clearinghouse, Trident NGL, Inc., and
Trident Holding included in the NGC SEC Documents complied, at the time of
filing with the SEC (and, with respect to any registration statement, at
the time it was declared effective), as to form, in all material respects,
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (subject, in the case of unaudited statements,
to the omission of certain footnotes) and fairly present, in all material
respects (subject, in the case of the unaudited statements, to normal,
recurring year-end audit adjustments) the consolidated financial position
of NGC, Clearinghouse, Trident NGL, Inc. and Trident Holding, as
applicable, as of the dates thereof and the consolidated results of their
operations for the periods presented. Except as set forth on SCHEDULE 4.24,
since December 31, 1995, there has not been any change in the business,
assets, financial condition or results of operation of NGC or any of its
Subsidiaries, which in any case would, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on NGC
or on the ability of the Surviving Corporation to perform its obligations
under the Ancillary Agreements, other than changes resulting from
industry-wide conditions or general economic conditions affecting the
industry in which NGC carries on its business.
(b) NGC has made available to Chevron true and complete copies of all
internal audit reports that have been issued by NGC or any of its
predecessors or Subsidiaries or Significant Affiliates during the past
three years which would indicate that the internal controls associated with
or otherwise covering the NGC Assets have or had any material weaknesses or
its or their accounting records contained or could contain any material
errors. NGC's public accountants have not issued any audit reports or other
reports on internal controls which indicate that the internal controls
associated with or otherwise covering any of the NGC Assets have or had any
material weaknesses or that the accounting records associated with or
otherwise covering any of the NGC Assets contained or could contain any
material errors.
4.8 LITIGATION. Except as set forth in SCHEDULE 4.8 to this Agreement,
there are no (a) suits, actions or proceedings pending or, to the knowledge of
NGC, threatened, against or affecting NGC, any of its Subsidiaries or any Equity
Affiliate or any of their properties, which, if adversely determined, would,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC or (b)
17
judgments, decrees, injunctions, rules or orders of any Governmental Entity or
arbitrator outstanding against NGC or any of its Subsidiaries, which would,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC or on the ability of the Surviving Corporation to
perform its obligations under the Ancillary Agreements.
4.9 COMPLIANCE WITH LAWS. Except (i) to the extent the matter is otherwise
covered by SECTION 4.15 or 4.16, (ii) as set forth in SCHEDULE 4.9 to this
Agreement and (iii) matters relating to Environmental and Safety Laws (which are
dealt with in ARTICLE 6 hereof), the businesses of NGC and its Subsidiaries have
been operated in compliance with all laws, ordinances and regulations of all
Governmental Entities (including, without limitation, those relating to licenses
and permits for the ownership, occupancy and operation of their properties),
except for violations that would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on NGC or on the
ability of the Surviving Corporation to perform its obligations under the
Ancillary Agreements. Except (x) as disclosed in SCHEDULE 4.9 to this Agreement,
(y) for matters relating to Environmental and Safety Laws (which are dealt with
in ARTICLE 6 hereof), and (z) for any investigation or review that would not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC, as of the date of this Agreement, no
investigation or review by any Governmental Entity (including without limitation
any audit or similar review by any federal, state or local taxing authority)
with respect to NGC or any of its Subsidiaries or any of their respective
properties is pending or, to the knowledge of NGC, threatened.
4.10 MATERIAL AGREEMENTS. Except as set forth in the exhibit index to the
NGC 1995 10-K and SCHEDULES 4.10 AND 8.1(A) to this Agreement and except for
this Agreement and the Ancillary Agreements, as of the date hereof, none of NGC,
any of its Subsidiaries or either of its Significant Affiliates, is a party to
or is bound by any Contract which is material to NGC and its Subsidiaries and
Significant Affiliates, taken as a whole. True and complete copies of each
document filed as an exhibit to the NGC 1995 10-K have been furnished or made
available to Chevron. Except as set forth on SCHEDULE 4.10, (i) NGC and each of
its Subsidiaries and Significant Affiliates, as applicable, has performed or
complied with all obligations required to be performed or complied with by it or
them, as applicable, under the Contracts listed on the exhibit index to the NGC
1995 10-K and SCHEDULE 4.10, (ii) there does not exist under any such Contract
any default, or any event or condition which, either individually or in the
aggregate (after notice or the lapse of time or both), would constitute a
default by NGC, its Subsidiaries or either of its Significant Affiliates or, to
the best of NGC's knowledge and belief, by any other party thereto and (iii) to
the best of NGC's knowledge, no course of conduct has modified in any respect
any of the written terms in any such Contract; except, in each case, where it
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC or on the ability of the Surviving Corporation to
perform its obligations under the Ancillary Agreements.
4.11 NO UNDISCLOSED MATERIAL LIABILITIES. As of the date of this Agreement,
there are no liabilities of NGC and its Subsidiaries of any kind whatsoever,
whether or not accrued and whether or not contingent or absolute, determined or
otherwise, other than (a) liabilities recorded in the financial statements of
NGC and Accord included in the NGC 1995 10-K or disclosed in notes 3 ("MARKET
RESERVES"), 7, 9 and 11 ("PENSION PLAN") to such NGC financial statements and
notes 12, 14 and 17 to such Accord financial statements or any schedule to this
Agreement and (b) liabilities that in the aggregate would not reasonably be
expected to have a Material Adverse Effect on NGC or on the ability of the
Surviving Corporation to perform its obligations under the Ancillary Agreements.
4.12 PUBLIC UTILITY. Other than Electric Clearinghouse, Inc., neither NGC
nor any of its Subsidiaries nor any Person in which it owns an equity interest
is a "holding company," a "subsidiary company" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" as each of
such terms is defined in PUHCA, as amended, and the rules and regulations
promulgated thereunder. Electric Clearinghouse, Inc. is a "utility" as defined
in PUHCA, but has received a "no action letter" from the SEC, a copy of which
has been delivered to Chevron.
4.13 BROKERS OR FINDERS. No broker, investment banker or other firm or
Person is or will be entitled by virtue of any agreement, commitment or action
made or taken by NGC or its Subsidiaries any broker's or
18
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except that Lehman Brothers
shall be entitled to a fee to be paid by NGC for acting as financial advisor to
NGC in connection with the transactions contemplated by this Agreement.
4.14 FULL DISCLOSURE. To the best knowledge of NGC, any information
furnished by or on behalf of NGC, its Subsidiaries or its Significant Affiliates
to Chevron or Newco pursuant to the Combination, and any information contained
in the schedules referred to in this Agreement, does not and will not contain
any untrue statement of a material fact and does not and will not omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
4.15 TITLE TO PERSONAL PROPERTY ASSETS. Except with respect to the NGC
Assets specifically covered by SECTIONS 4.16(A), 4.16(B) OR 4.16(C) below and to
matters set forth on SCHEDULE 4.15, NGC or its Subsidiaries have, and the
Surviving Corporation will acquire upon consummation of the transactions
contemplated hereby, title to or ownership of all of the personal property
assets of NGC free and clear of any Lien, except for Permissible Burdens and for
Liens securing purchase money indebtedness not exceeding $200,000 with respect
to any personal property asset (all of which indebtedness is currently paid as
of the date hereof) and capital leases covering personal property assets with
lease payments not exceeding $200,000 over the term of any single lease (which
leases are currently paid as of the date hereof).
4.16 NGC FACILITIES -- TITLE AND OTHER MATTERS.
(a) NGC or its Subsidiaries or Equity Affiliates are the owner of, and
the Surviving Corporation will acquire upon consummation of the Merger,
title to the properties listed on SCHEDULE 4.16(A)(1) and identified as
being owned directly or indirectly in fee, in whole or in part, by NGC or
its Subsidiaries or Equity Affiliates (as applicable) and to all of the
buildings, structures and other improvements located thereon free and clear
of all Liens, except for (A) Permissible Burdens and (B) Liens referred to
on SCHEDULE 4.16(A)(2) (such Liens and Permissible Burdens shall
hereinafter be collectively referred to as the "NGC PERMITTED EXCEPTIONS").
(b) NGC or its Subsidiaries or Equity Affiliates have, and the
Surviving Corporation will acquire upon consummation of the Merger, title
to the leasehold estate purported to be granted under each lease, sublease
or similar agreement with respect to each property listed in SCHEDULE
4.16(B) and identified as being leased lands and, unless otherwise provided
in such agreement, to all of the buildings, structures, fixtures and other
improvements located thereon, free and clear of all Liens, except for NGC
Permitted Exceptions. Each such lease is valid, binding and in full force
and effect, all rent and other sums and charges payable by NGC or its
Subsidiaries or, to the best knowledge of NGC, its Equity Affiliates (as
applicable) thereunder are current, no notice of default or termination
under any such lease is outstanding, no termination event or condition or
uncured default on the part of NGC or its Subsidiaries or, to the best
knowledge of NGC, its Equity Affiliates (as applicable) or, to the best of
NGC's knowledge and belief, the lessor thereof, exists under any such
lease, and no event has occurred and no condition exists which, with the
giving of notice or the lapse of time or both, would constitute such a
default or termination event. For purposes of this Agreement, the
properties listed on SCHEDULES 4.16(A)(1) and 4.16(B) shall be referred to
as the "NGC NGL FACILITIES." Neither NGC nor its Subsidiaries or Equity
Affiliates currently has interests in any assets or properties that are of
a similar nature or type to the foregoing that are not set forth in such
Schedules.
(c) NGC or its Subsidiaries or Equity Affiliates have, and the
Surviving Corporation will acquire upon consummation of the Merger, title
to the pipeline assets listed on of SCHEDULE 4.16(C) (the "NGC PIPELINE
FACILITIES") so as to permit the use of the NGC Pipeline Facilities as
they are currently used by NGC or its Subsidiaries or Equity Affiliates,
free and clear of any Liens, except for NGC Permitted Exceptions. Subject
to the NGC Permitted Exceptions, NGC or its Subsidiaries or Equity
Affiliates (as applicable) has title to the Easements on which the NGC
Pipeline Facilities are located and such Easements grant to NGC or its
Subsidiaries or Equity Affiliates (as applicable) the full power and legal
right to own and operate the NGC Pipeline Facilities in the manner in which
the same are currently being operated. Neither NGC nor its Subsidiaries or
Equity Affiliates currently has interests
19
in any assets or properties that are of a similar nature or type to the
foregoing that are not set forth in such Schedule.
For purposes of this Agreement, (i) "NGC FACILITIES" shall mean the
NGC NGL Facilities and NGC Pipeline Facilities, collectively and taken as a
whole, and an "NGC FACILITY" shall mean any one of the NGC Facilities and
(ii) "FORMER NGC FACILITIES" shall mean assets or properties of similar
type to the NGC Facilities which have been transferred by NGC or its
Subsidiaries or Equity Affiliates prior to the date hereof.
(d) SCHEDULE 4.16(D) sets forth with respect to each NGC Facility,
the name and location of such NGC Facility, whether such NGC Facility is a
gas processing, fractionation or pipeline facility, the capacity of such
NGC Facility, the ownership interest of NGC in such NGC Facility and the
name of the Person operating such NGC Facility.
4.17 MAJOR CUSTOMERS AND SUPPLIERS. SCHEDULE 4.17 contains a complete and
correct list of the top 10 customers of each of Clearinghouse and Trident NGL,
Inc. and the top 10 vendors or suppliers of each of Clearinghouse and Trident
NGL, Inc., in each case for the fiscal year ended December 31, 1995, in terms of
the aggregate dollar purchases or aggregate dollar sales, as applicable.
4.18 BUILDINGS, VEHICLES, MACHINERY, EQUIPMENT, ETC. Except as set forth on
SCHEDULE 4.18, the buildings, fixtures, vehicles, pipelines, machinery and
equipment included in, or subject to any Contract included in, the NGC Assets
are in all material respects adequate for the purposes for which such assets are
presently used. To the best of NGC's knowledge and belief, there are no facts or
conditions affecting any of the buildings, structures, fixtures, pipelines and
other improvements included within the NGC Facilities which would interfere in
any material respect with the use, occupancy or operation thereof as currently
used, occupied or operated, except for NGC Permitted Exceptions.
4.19 INVENTORY. All inventories included as a part of the NGC Assets as of
the date of this Agreement are of a quality and condition that is usable or
saleable, as the case may be, in the ordinary course of business for the
purposes for which intended in conformity with industry standards.
4.20 PREFERENTIAL RIGHTS. Except as set forth on SCHEDULE 4.20 and except
for consents to assign Requisite Regulatory Approvals, to the best of NGC's
knowledge, there are no Preferential Rights in respect of any of the NGC
Facilities which can be exercised with respect to the NGC Facilities, as a
result of, or for, the execution, delivery, performance or consummation of the
transactions contemplated hereby or by the Ancillary Agreements; provided,
however, that in no event shall a breach of this representation be actionable by
Chevron if, in the event of a subsequent transfer by the Surviving Corporation
of an asset, property or Contract contributed to the Surviving Corporation by
NGC, a third party exercises a Preferential Right (with respect to such
subsequent transfer) to purchase an interest in such asset or property.
4.21 INTELLECTUAL PROPERTY, ETC. SCHEDULE 4.21 accurately discloses all
licenses, sublicenses or agreements relating to the use of the Intellectual
Property and Technology in connection with the NGC Assets pursuant to a license
or sublicense agreement with a third party. Except as set forth in SCHEDULE
4.21, there is no existing or threatened infringement, misuse or
misappropriation by others of the Intellectual Property or Technology that is
material to NGC taken as a whole, there is no pending or threatened claim by NGC
against others for any such infringement, misuse or misappropriation, and there
is no pending judicial proceeding involving any claim, and NGC has not received
any written notice of claim of any infringement, misuse or misappropriation by
NGC of any Intellectual Property or Technology owned by any third party.
4.22 JOA RELATED AGREEMENTS. Except as disclosed on SCHEDULE 4.22, with
respect to each Joint Operation in which NGC or any of its Subsidiaries is a
participant, to the best of NGC's knowledge, (i) all JOA Related Agreements to
which NGC or its Subsidiaries is a party are in full force and effect, (ii) each
Person who is a party thereto has performed in all material respects all
obligations required to be performed by it thereunder, and (iii) there does not
exist under any such JOA Related Agreement any breach or default; except, in
each case, where it would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on NGC or on the
ability of the Surviving Corporation to perform its obligations under the
Ancillary Agreements.
20
4.23 INSURANCE. NGC has maintained and is maintaining as of the date hereof
insurance covering its assets and operations in an amount and with a scope of
coverage that is consistent with industry standards.
4.24 ABSENCE OF CHANGES OR EVENTS. Except as set forth on SCHEDULE 4.24 or
in note 14 to the financial statements of NGC included in the NGC 1995 10-K or
as permitted by SECTION 11.5, since December 31, 1995 NGC has operated the NGC
Assets in the ordinary course consistent with past practice and has not, on
behalf of, arising from or attributable to the NGC Assets:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for NGC
Permitted Exceptions or except in the ordinary course of business
consistent with past practice;
(b) created or permitted to be created any Lien other than an NGC
Permitted Exception on any of the NGC Assets;
(c) sold, transferred, leased to or otherwise disposed of any of the
NGC Assets, except for inventory sold in the ordinary course of business,
or cancelled or compromised any material debt or claim, or waived or
released any right of material value except in the ordinary course of
business consistent with past practice;
(d) suffered any material damage, destruction or Casualty Loss
(whether or not covered by insurance);
(e) encountered any labor union organizing activity, had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts, or had
any material adverse change in their relations with any of the employees,
agents, customers or suppliers;
(f) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or Governmental Entity;
(g) entered into any transaction or Contract other than in the
ordinary course of business consistent with past practices and except for
(i) this Agreement and the Ancillary Agreements and (ii) any employee
benefit plans described in the NGC proxy statement dated March 29, 1996
that are to be considered and voted upon by the stockholders of NGC at the
1996 Annual Meeting;
(h) amended, modified or terminated any Contract except in the
ordinary course of business consistent with past practice;
(i) with respect to any Subsidiary, purchased or redeemed any shares
of its capital stock or any option, warrant or right to purchase any of its
capital stock;
(j) with respect to any Subsidiary, issued, sold or delivered or
agreed to issue, sell or deliver any additional shares of its capital
stock, any options, warrants or rights to acquire any such capital stock,
any securities convertible into or exchangeable for such capital stock or
any bonds or other securities;
(k) made any material increase in the compensation payable or to
become payable by NGC (other than in the ordinary course of business,
consistent with past practices), or any material increase in benefits or
benefit plan costs (other than in the ordinary course of business
consistent with past practices or costs outside the control of NGC), or any
material increase in bonus, insurance, pension, compensation or other
benefit plans, in each case, with respect to its employees; or
(l) entered into any agreement or made any commitment to take any of
the types of action described in subparagraphs (a) through (k) above;
except, in each case, where the failure to so operate would not,
individually or in the aggregate, have a Material Adverse Effect on NGC or
the Surviving Corporation or on the ability of the Surviving Corporation to
perform the Ancillary Agreements.
4.25 ACQUISITIONS; CAPITAL EXPENDITURES. Except for existing commitments
which have been set forth on SCHEDULE 4.25 hereto, neither NGC nor any
Subsidiary has any existing commitments or agreements to acquire any assets
(including under circumstances where such acquisition would be classified as a
capital expenditure under generally accepted accounting principles consistently
applied) or to make any
21
capital expenditure or contribution in any individual transaction or project
where the purchase price, capital expenditure or contribution required of NGC or
a Subsidiary, directly or indirectly, exceeds $10 million or in transactions or
projects where the aggregate purchase price, capital expenditure or contribution
exceeds $50 million.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CHEVRON
Chevron represents and warrants to NGC that:
5.1 CORPORATE STATUS. Each Contributing Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is being
conducted on the date of this Agreement. Each Contributing Party is duly
qualified to conduct business and is in good standing in each jurisdiction in
which the nature of the business transacted by it requires qualification, except
where the failure to so qualify would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Contributed Businesses.
5.2 NEWCO STATUS AND CAPITALIZATION. Newco is duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
authorized capital stock of Newco consists of 400,000,000 shares of common
stock, $0.01 par value ("NEWCO COMMON STOCK") and 50,000,000 shares of
Preferred Stock, $0.01 par value, of which 7,815,363 shares have been designated
Series A Participating Preferred Stock. As of the date of this Agreement, one
share of Newco Common Stock is validly issued and outstanding and is held by
Chevron of record and beneficially and no shares of Preferred Stock of Newco are
issued or outstanding.
5.3 NO GOVERNMENTAL APPROVALS. No Requisite Regulatory Approval is
required on the part of Chevron or its Affiliates in connection with the
execution and delivery of this Agreement and the Ancillary Agreements or the
consummation by Chevron or its Affiliates of the transactions contemplated by
this Agreement and the Ancillary Agreements, except (a) as set forth on SCHEDULE
5.3, (b) for compliance with the HSR Act, the Securities Act, the Exchange Act,
state takeover laws, PUHCA and the Federal Energy Regulatory Commission, (c)
filings required by the EU Merger Regulation, (d) the filing and recordation
requirements of the DGCL and (e) for any Requisite Regulatory Approval that, if
not obtained, would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business (taken as a whole) or the ability
of Chevron or its Affiliates to perform their obligations under the Ancillary
Agreements.
5.4 AUTHORITY. The execution, delivery and performance by Chevron of this
Agreement has been, and the execution, delivery and performance by Chevron and
its Affiliates, as applicable, of the Ancillary Agreements and the consummation
by Chevron and its Affiliates of the transactions contemplated hereby and
thereby will be at Closing, duly and validly authorized and approved by all
necessary corporate action. This Agreement has been duly executed and delivered
by Chevron and this Agreement is, and, upon due execution and delivery thereof
the Ancillary Agreements shall be, valid and binding obligations of Chevron and
its Subsidiaries or Affiliates, as applicable, enforceable against Chevron and
its Subsidiaries or Affiliates, as applicable, in accordance with their
respective terms, subject to (i) obtaining the Requisite Regulatory Approvals
referenced in SECTION 5.3 and (ii) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5.5 NO CONFLICTS. Except as set forth in SCHEDULE 5.5 to this Agreement
and assuming the receipt of all Requisite Regulatory Approvals referenced in
SECTION 5.3, the execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements will not conflict with, or result in
any violation of or default
22
or loss of any benefit under, any provision of the certificate of incorporation
or bylaws of Chevron or its Subsidiaries or Affiliates, as applicable, or any
agreement or other arrangement to which any of them is a party or of any permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Chevron or any of its Subsidiaries
or Affiliates other than any conflict, violation, default or loss that would
not, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Contributed Businesses and the Contributed West
Texas LPG Pipeline Business (taken as a whole) or on the ability of Chevron or
its Affiliates to perform their obligations under the Ancillary Agreements.
5.6 FINANCIAL STATEMENTS. Chevron previously has delivered to NGC a true
and complete copy of:
(i) the balance sheet of the Contributed Warren Business (without
giving effect to the changes shown on SCHEDULE 5.6) as of December 31,
1995, and the related statement of income for the year ended December 31,
1995 together with notes describing the basis and assumptions on which such
financial statements were prepared and any departures from generally
accepted accounting principles and accompanied by a report by Price
Waterhouse LLP describing the work performed and significant matters that
came to their attention as a result of performing certain limited
procedures as outlined in the Chevron and Price Waterhouse LLP engagement
letter dated February 15, 1996, and
(ii) the balance sheet of the Contributed NGBU Business (without
giving effect to the changes shown on SCHEDULE 5.6) as of December 31,
1995, and the related statement of income for the year ended December 31,
1995 together with notes describing the basis and assumptions on which such
financial statements were prepared and any departures from generally
accepted accounting principles and accompanied by a report by Price
Waterhouse LLP describing the work performed and significant matters that
came to their attention as a result of performing certain limited
procedures as outlined in the Chevron and Price Waterhouse LLP engagement
letter dated February 15, 1996.
(all of the foregoing financial statements being referred to herein as the
"FINANCIAL STATEMENTS"). Subject to the changes set forth on SCHEDULE 5.6, the
Financial Statements fairly present the financial position and the results of
operations of the Contributed Warren Business and the Contributed NGBU Business,
as applicable, as of the dates and for the periods indicated, in each case in
accordance with generally accepted accounting principles (except as noted in the
notes to the Financial Statements). The statements of income included in the
Financial Statements do not contain any material items of special or
nonrecurring income except as expressly specified therein. Except as set forth
in SCHEDULE 5.25, or as permitted by SECTION 10.4, since December 31, 1995,
there has not been any change in the business, assets, financial condition or
results of operation of the Contributed Warren Business or the Contributed NGBU
Business, which would, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Contributed Businesses or on
the ability of Chevron or its Affiliates to perform their obligations under the
Ancillary Agreements, other than changes resulting from industry-wide conditions
or general economic conditions affecting the industry in which the Contributed
Warren Business or Contributed NGBU Business, as applicable, carry on their
respective businesses.
5.7 FINANCIAL INFORMATION; INTERNAL CONTROL REPORTS.
(a) Chevron previously has delivered to NGC a true and complete copy
of:
(i) the consolidated balance sheets of the Warren Petroleum Company
as of December 31, 1995, 1994 and 1993, and the related consolidated
statements of income for each of the fiscal years ended December 31,
1995, 1994 and 1993;
(ii) financial schedules detailing the NGBU's revenues,
transportation costs, other direct costs and direct and indirect
overhead costs of each of the fiscal years ended December 31, 1995, 1994
and 1993; and
(iii) computer disks containing the NGBU's long-term fixed price
position "book" as of March 7, 1996.
23
The financial statements set forth in SECTION 5.7(A)(I) and the financial
schedules set forth in SECTION 5.7(A)(II) were prepared in accordance with
Chevron's internal accounting policies and procedures; based on these policies
and procedures, the financial statements set forth in SECTION 5.7(A)(I) fairly
present the financial position and results of operations of the Warren Petroleum
Company and the financial schedules set forth in SECTION 5.7(A)(II) fairly
present the revenues and specified costs of NGBU, in each case as of the dates
and for the periods indicated. Chevron has previously provided NGC with a
summary description of its internal accounting policies and procedures.
(b) Chevron has made available to NGC financial information relating
to the Contributed West Texas LPG Pipeline Business certified by Chevron
(or Chevron Affiliates) to the United States Federal Energy Regulatory
Commission in Docket IS 94-32-000, and such certification was accurate,
true and correct to such officer's knowledge and belief as of the date
certified or submitted.
(c) Chevron has made available to NGC true and complete copies of all
internal audit reports that have been issued by Chevron or any of its
Subsidiaries or Affiliates during the past three years which would indicate
that the internal controls associated with or otherwise covering either of
the Contributed Businesses have or had any material weaknesses or that the
accounting records covering either of the Contributed Businesses contained
or could contain any material errors. Chevron's public accountants have not
issued any audit reports or other reports on internal controls which
indicate that the internal controls associated with or otherwise covering
either of the Contributed Businesses have or had any material weaknesses or
that the accounting records associated with or otherwise covering either of
the Contributed Businesses contained or could contain any material errors.
5.8 LITIGATION. Except as set forth in SCHEDULE 5.8, there are no (a)
suits, actions or proceedings pending or, to the knowledge of Chevron,
threatened, against any Contributing Party or otherwise affecting the
Contributed Businesses which, if adversely determined, would, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Contributed Businesses or (b) judgments, decrees,
injunctions, rules or orders of any Governmental Entity or arbitrator
outstanding against any Contributing Party or otherwise affecting the
Contributed Businesses which would, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Contributed
Businesses or on the ability of Chevron or its Affiliates to perform their
obligations under the Ancillary Agreements.
5.9 COMPLIANCE WITH LAWS. Except (i) to the extent the matter is
otherwise covered by SECTION 5.17 or 5.18, (ii) as set forth in SCHEDULE 5.9 and
(iii) for matters relating to Environmental and Safety Laws (which are dealt
with in ARTICLE 6 hereof), the Contributed Businesses have been operated in
compliance with all laws, ordinances and regulations of all Governmental
Entities (including, without limitation, those relating to licenses and permits
for the ownership, occupancy and operation of their properties), except for
violations that would not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Contributed Businesses or
on the ability of Chevron or its Affiliates to perform their obligations under
the Ancillary Agreements. As of the date of this Agreement, no investigation or
review by any Governmental Entity (including without limitation any audit or
similar review by any federal, state or local taxing authority) with respect to
the Contributed Businesses is pending or, to the knowledge of Chevron,
threatened, except (x) as disclosed in SCHEDULE 5.9, (y) for matters relating to
Environmental and Safety Laws (which are dealt with in ARTICLE 6 hereof) and (z)
for any investigation or review that would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Contributed Businesses or on the ability of Chevron or its Affiliates to perform
their obligations under the Ancillary Agreements.
5.10 INTENTIONALLY OMITTED.
5.11 SUFFICIENCY OF ASSETS. The assets and properties comprising the
Contributed Businesses constitute the assets, properties and Contracts
sufficient to conduct the Contributed Warren Business and the Contributed NGBU
Business and to produce the earnings set forth in the Financial Statements,
except as set forth on SCHEDULE 5.6.
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5.12 MATERIAL AGREEMENTS. SCHEDULE 5.12 contains or refers to a complete
and correct list of all Contracts with payments, receipts or other obligations
with an aggregate value in excess of $100,000 per annum (i) that are included in
the Contributed Businesses or (ii) by which any of the assets or properties
comprising the Contributed Businesses are bound or otherwise subject. All
Contracts listed on SCHEDULE 5.12 are in full force and effect. Except as set
forth on SCHEDULE 5.12, (i) Chevron or its Affiliates have performed or complied
with all obligations required to be performed or complied with by it or them, as
applicable, under the Contracts listed on SCHEDULE 5.12, (ii) there does not
exist under any such Contract any default, or any event or condition which,
either individually or in the aggregate (after notice or the lapse of time or
both), would constitute a default by Chevron or its Affiliates and (iii) to the
best of Chevron's knowledge, no course of conduct has modified in any respect
any of the written terms in any such Contract; except, in each case, where it
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Contributed Businesses or on the ability of
Chevron or its Affiliates to perform their obligations under the Ancillary
Agreements.
5.13 NO UNDISCLOSED MATERIAL LIABILITIES. As of the date of this
Agreement, there are no liabilities relating to the Contributed Warren Business
and the Contributed NGBU Business of any kind whatsoever, whether or not accrued
and whether or not contingent or absolute, determined or otherwise, other than
(a) liabilities disclosed in the Financial Statements or in the financial
statements or schedules referenced in SECTION 5.7(A) or any schedule to this
Agreement, (b) the Chevron Permitted Exceptions, and (c) liabilities that in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
the Contributed Businesses or on the ability of Chevron or its Affiliates to
perform their obligations under the Ancillary Agreements.
5.14 PUBLIC UTILITY. None of the Contributing Parties, the Contributed
Warren Business, the Contributed NGBU Business, nor any Person in which it or
they own an equity interest is a "holding company," a "subsidiary company"
of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility" as each of such terms is defined in the
PUHCA, and the rules and regulations promulgated thereunder.
5.15 BROKERS OR FINDERS. No agent, broker, investment banker or other
firm or Person is or will be entitled by virtue of any agreement, commitment or
action made or taken by Chevron or its Subsidiaries to any broker's or finder's
fee or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, except that Goldman Sachs & Co.
shall be entitled to a fee to be paid by Chevron for acting as financial advisor
to Chevron in connection with the Combination.
5.16 FULL DISCLOSURE. To the best knowledge of Chevron, any information
furnished by or on behalf of Chevron or its Affiliates to NGC or Newco pursuant
to the Combination, and any information contained in the schedules referred to
in this Agreement, does not and will not contain any untrue statement of a
material fact and does not and will not omit to state any material fact
necessary to make any statement, in light of the circumstances under which such
statement is made, not misleading.
5.17 TITLE TO PERSONAL PROPERTY ASSETS. Except with respect to the assets
and properties comprising the Contributed Businesses specifically covered by
SECTIONS 5.18(A), 5.18(B) OR 5.18(C) below, the Contributing Parties have, and
the Surviving Corporation will acquire upon consummation of the transactions
contemplated hereby, title to or ownership of all of the personal property
assets comprising the Contributed Businesses free and clear of any Lien, except
for Permissible Burdens and for Liens securing purchase money indebtedness not
exceeding $200,000 with respect to any personal property asset (all of which
indebtedness is currently paid as of the date hereof) and capital leases
covering personal property assets with lease payments not exceeding $200,000
over the term of any single lease (which leases are currently paid as of the
date hereof).
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5.18 CHEVRON FACILITIES -- TITLE AND OTHER MATTERS.
(a) The Contributing Parties are the owners of, and the Surviving
Corporation will acquire upon consummation of the transactions contemplated
hereby, title to the properties listed in SCHEDULE 5.18(A)(1) and
identified as being owned in fee, in whole or in part, by the Contributing
Parties and to all of the buildings, structures and other improvements
located thereon (other than any "Excluded Assets", as defined in the
Contribution Agreement) free and clear of all Liens except for (A)
Permissible Burdens and (B) Liens referred to on SCHEDULE 5.18(A)(2),
including any Liens securing the Assumed Liabilities (such Liens and
Permissible Burdens are hereinafter collectively referred to as the
"CHEVRON PERMITTED EXCEPTIONS").
(b) The Contributing Parties have, and the Surviving Corporation will
acquire upon consummation of the transactions contemplated hereby, title to
the leasehold estate purported to be granted under each lease, sublease or
similar agreement with respect to each property listed in SCHEDULE 5.18(B)
and identified as being leased lands and, unless otherwise provided in such
agreement, to all of the buildings, structures, fixtures and other
improvements located thereon (other than any "Excluded Assets", as
defined in the Contribution Agreement), free and clear of all Liens, except
for Chevron Permitted Exceptions. Each such lease is valid, binding and in
full force and effect, all rent and other sums and charges payable by any
of the Contributing Parties thereunder are current, no notice of default or
termination under any such lease is outstanding, no termination event or
condition or uncured default on the part of any of the Contributing Parties
or, to the best of Chevron's knowledge and belief, the lessor thereof,
exists under any such lease, and no event has occurred and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event.
For purposes of this Agreement, the properties listed on SCHEDULES
5.18(A)(1) and 5.18(B) shall be referred to as the "CHEVRON NGL
FACILITIES."
(c) The Contributing Parties have, and the Surviving Corporation will
acquire upon consummation of the transactions contemplated hereby, title to
the assets and properties comprising the Contributed Businesses that are
specifically listed on SCHEDULE 5.18(C) (the "CHEVRON PIPELINE
FACILITIES") so as to permit the use of the Chevron Pipeline Facilities as
currently used by the Contributing Parties, free and clear of any Liens,
except for Chevron Permitted Exceptions. Subject to the Chevron Permitted
Exceptions, the Contributing Parties have title to the Easements on which
the Chevron Pipeline Facilities are located, and such Easements grant to
the Contributing Parties the full power and legal right to own and operate
the Chevron Pipeline Facilities in the manner in which the same are
currently being operated. SCHEDULE 5.18(C) sets forth the ownership
interest of the applicable Contributing Party in each of the Chevron
Pipeline Facilities.
For purposes of this Agreement, "CHEVRON FACILITIES" shall mean the
Chevron NGL Facilities and Chevron Pipeline Facilities, collectively and
taken as a whole, and a "CHEVRON FACILITY" shall mean any one of the
Chevron Facilities.
(d) SCHEDULE 5.18(D) sets forth with respect to each Chevron NGL
Facility, the name and location of such Chevron NGL Facility, whether such
Chevron NGL Facility is a gas processing or fractionation facility, the
capacity of such Chevron NGL Facility, the ownership interest of the
applicable Contributing Party in such Chevron NGL Facility and the name of
the Person operating such Chevron NGL Facility.
5.19 MAJOR CUSTOMERS AND SUPPLIERS. SCHEDULE 5.19 contains a complete and
correct list of the top 10 customers of each of Warren Petroleum Company and
NGBU and the top 10 vendors and suppliers of each of Warren Petroleum Company
and NGBU, in each case for the fiscal year ended December 31, 1995, in terms of
the aggregate dollar purchases or aggregate dollar sales, as applicable.
5.20 BUILDINGS, VEHICLES, MACHINERY, EQUIPMENT, ETC. Except as set forth
on SCHEDULE 5.20, the buildings, fixtures, vehicles, pipelines, machinery and
equipment included in, or subject to any Contract included in, the Contributed
Businesses are in all material respects adequate for the purposes for which such
26
assets are presently used. There are no facts or conditions affecting any of the
buildings, structures, fixtures, pipelines and other improvements included
within the Chevron Facilities which would interfere in any material respect with
the use, occupancy or operation thereof as currently used, occupied or operated,
except for Chevron Permitted Exceptions.
5.21 INVENTORY. All inventory included in the Contributed Businesses is
of a quality and condition that is usable or saleable, as the case may be, in
the ordinary course of business for the purposes for which intended in
conformity with industry standards.
5.22 PREFERENTIAL RIGHTS. Except as set forth on SCHEDULE 5.22 and except
for consents to assign Requisite Regulatory Approvals, to the best of Chevron's
knowledge, there are no Preferential Rights which can be exercised with respect
to any of the assets and properties comprising the Contributed Businesses or the
Contributed West Texas LPG Pipeline Business, as a result of, or for, the
execution, delivery, performance or consummation of the transactions
contemplated hereby or by the Ancillary Agreements; provided, however, that in
no event shall a breach of this representation be actionable by the Surviving
Corporation if, in the event of a subsequent transfer by the Surviving
Corporation of an asset, property or Contract contributed to the Surviving
Corporation by any of the Contributing Parties, a third party exercises a
Preferential Right (with respect to such subsequent transfer) to purchase an
interest in such asset or property.
5.23 INTELLECTUAL PROPERTY, ETC. SCHEDULE 5.23 accurately discloses all
licenses, sublicenses or agreements relating to the use of the Intellectual
Property and Technology in connection with the Contributed Businesses pursuant
to a license or sublicense agreement with a third party. Except as set forth in
SCHEDULE 5.23, there is no existing or threatened infringement, misuse or
misappropriation by others of the Intellectual Property or Technology that is
material to the Contributed Businesses, there is no pending or threatened claim
by any Contributing Party (with respect to the Contributed Businesses) against
others for any such infringement, misuse or misappropriation, and there is no
pending judicial proceeding involving any claim, and no Contributing Party has
received any written notice of claim of any infringement, misuse or
misappropriation by the Contributing Party (with respect to the Contributed
Businesses) of any Intellectual Property or Technology owned by any third party.
5.24 JOA RELATED AGREEMENTS. Except as disclosed on SCHEDULE 5.24, with
respect to each Joint Operation to which any of the assets or properties
comprising the Contributed Businesses is subject, to the best of Chevron's
knowledge, (i) all JOA Related Agreements are in full force and effect, (ii)
each Person who is a party thereto has performed in all material respects all
obligations required to be performed by it thereunder, and (iii) there does not
exist under any such JOA Related Agreement any breach or default; except, in
each case, where it would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Contributed
Businesses or on the ability of Chevron or its Affiliates to perform their
obligations under the Ancillary Agreements.
5.25 ABSENCE OF CHANGES OR EVENTS. Except as set forth on SCHEDULE 5.25
or as permitted by SECTION 10.4, since December 31, 1995, Chevron and its
Subsidiaries and Affiliates have operated the Contributed Businesses in the
ordinary course consistent with past practice and have not, on behalf of,
arising from or attributable to the Contributed Businesses:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for the
Chevron Permitted Exceptions or except in the ordinary course of business
consistent with past practice;
(b) created or permitted to be created any Lien other than a Chevron
Permitted Exception on any of the assets or properties comprising the
Contributed Businesses;
(c) sold, transferred, leased to or otherwise disposed of the
Contributed Businesses, except for Inventory sold in the ordinary course of
business, or cancelled or compromised any material debt or claim, or waived
or released any right of material value except in the ordinary course of
business consistent with past practice;
27
(d) suffered any material damage, destruction or Casualty Loss
(whether or not covered by insurance);
(e) encountered any labor union organizing activity, had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts, or had
any material adverse change in their relations with any of the employees,
agents, customers or suppliers;
(f) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or Governmental Entity;
(g) entered into any transaction or Contract other than in the
ordinary course of business consistent with past practices and except for
this Agreement and the Ancillary Agreements;
(h) amended, modified or terminated any Contract except in the
ordinary course of business consistent with past practices;
(i) made any material increase in the compensation payable or to
become payable by Chevron (other than in the ordinary course of business,
consistent with past practices), or any material increase in benefits or
benefit plan costs (other than in the ordinary course of business
consistent with past practices or costs outside the control of Chevron), or
any material increase in bonus, insurance, pension, compensation or other
benefit plans, in each case, with respect to the Prospective Employees; or
(j) entered into any agreement or made any commitment to take any of
the types of action described in subparagraphs (a) through (i) above;
except, in each case, where the failure to so operate would not,
individually or in the aggregate, have a Material Adverse Effect on the
Contributed Businesses or on the ability of Chevron or its Affiliates to
perform their obligations under the Ancillary Agreements.
ARTICLE 6
ENVIRONMENTAL MATTERS
6.1 CHEVRON'S ENVIRONMENTAL INDEMNITY.
(a) Subject to the limitations set forth in ARTICLE 14, Chevron
agrees to and shall indemnify and hold the NGC Indemnitees harmless against
and from any and all Losses from:
(i) the Release of Hazardous Materials in, on, at, or from the
Chevron Facilities occurring prior to the Closing Date in violation of
any Environmental and Safety Law;
(ii) liability to third parties as a result of Releases of
Hazardous Materials in, on, at, or from the Chevron Facilities occurring
prior to the Closing Date;
(iii) the designation of the Surviving Corporation under CERCLA or
any analogous state statute as a potentially responsible party for, or
any private party action relating to, onsite or offsite disposal of
Hazardous Materials, to the extent such substances were generated at or
disposed on the Chevron Facilities prior to the Closing Date;
(iv) fines or penalties for which the Surviving Corporation may
become liable with respect to any violation of Environmental and Safety
Laws at a Chevron Facility occurring prior to the Closing Date;
(v) a failure of a Contributing Party to operate a Chevron Facility
as of the Closing Date in substantial compliance with (i) all applicable
Environmental and Safety Laws, (ii) all terms and conditions of
Environmental Permits, and (iii) all environmental orders and consent
agreements in effect and applicable to the Chevron Facility;
(vi) the failure of a Contributing Party or an operator of a
Chevron Facility to have all the Environmental Permits required by
Environmental and Safety Laws to operate the Chevron Facilities as they
are being operated as of the Closing Date; and
28
(vii) environmental conditions that exist on the Chevron Facilities
as of the Closing Date that would, solely with the lapse of time or the
giving of notice or both, subject the Surviving Corporation to any
responsibility for any current remediation obligations under any
applicable Environmental and Safety Laws.
(b) Subject to the provisions of SECTION 6.4 below, in the event that
the Surviving Corporation (or any Affiliate) sells, transfers or otherwise
conveys any of the assets or properties comprising the Contributed
Businesses to a party that is not an Affiliate of the Surviving Corporation
(the "PURCHASER"), then the Surviving Corporation shall be entitled to
indemnification pursuant to the indemnity obligations set forth in
paragraph (a) of this SECTION 6.1 for Losses that result from an indemnity
covering environmental matters granted by the Surviving Corporation (or any
Affiliate) to the Purchaser in connection with the transfer of such asset
or property to the Purchaser, but only (x) with respect to claims asserted
by such Purchaser relating to or during the period of the Purchaser's
ownership and (y) to the extent that the Surviving Corporation would have
been entitled to such indemnification had it (instead of the Purchaser)
been the owner and asserted such claim for indemnification against Chevron
pursuant to SECTION 6.1(A) hereof; provided, however, that any claims by
the Surviving Corporation for indemnification under this paragraph (b)
shall be subject, along with any other Discrete Claims made under SECTION
6.1(A) or ARTICLE 14, to the limitations set forth in SECTION 14.4; and
provided further, that in no event shall this Section 6.1(b)be construed to
provide any Purchaser with any indemnification rights hereunder from either
Chevron or the Surviving Corporation, nor shall Chevron or the Surviving
Corporation be in any way liable or otherwise obligated to any Purchaser
under this SECTION 6.1.
6.2 SURVIVING CORPORATION'S ENVIRONMENTAL INDEMNITY.
(a) Subject to the limitations set forth in Article 14, NGC, for and
on behalf of the Surviving Corporation, agrees that the Surviving
Corporation shall indemnify and hold the Chevron Indemnitees harmless
against and from any and all Losses from:
(i) the Release of Hazardous Materials in, on, at, or from the NGC
Facilities or Former NGC Facilities occurring prior to the Closing Date
in violation of any Environmental and Safety Law;
(ii) liability to third parties as a result of Releases of
Hazardous Materials in, on, at, or from the NGC Facilities or Former NGC
Facilities occurring prior to the Closing Date;
(iii) the designation of the Surviving Corporation under CERCLA or
any analogous state statute as a potentially responsible party for, or
any private party action relating to, onsite or offsite disposal of
Hazardous Materials, to the extent such substances were generated at or
disposed on the NGC Facilities or Former NGC Facilities prior to the
Closing Date;
(iv) fines or penalties for which the Surviving Corporation may
become liable with respect to any violation of Environmental and Safety
Laws at an NGC Facility occurring prior to the Closing Date;
(v) a failure of NGC or any of its Subsidiaries or Equity
Affiliates to operate an NGC Facility as of the Closing Date in
substantial compliance with (i) all applicable Environmental and Safety
Laws, (ii) all terms and conditions of Environmental Permits, and (iii)
all environmental orders and consent agreements in effect and applicable
to the NGC Facility;
(vi) the failure of NGC or any of its Subsidiaries or Equity
Affiliates or an operator of an NGC Facility to have all the
Environmental Permits required by Environmental and Safety Laws to
operate the NGC Facilities as they are being operated as of the Closing
Date; and
(vii) environmental conditions that exist on the NGC Facilities or
Former NGC Facilities as of the Closing Date that would, solely with the
lapse of time or the giving of notice or both, subject the Surviving
Corporation to any responsibility for any current remediation
obligations under any applicable Environmental and Safety Laws.
29
6.3 FURTHER LIMITATION ON RECOVERY FOR LOSSES. Chevron and NGC agree that
no Losses suffered by the Surviving Corporation as a result of Releases from and
after the Closing Date shall be the subject of any payments to or from Chevron
under the provisions of ARTICLE 14.
6.4 PREVIOUSLY GRANTED INDEMNITIES. The parties hereby agree that the
transactions contemplated hereby, including, without limitation, the
contribution of the assets comprising the Contributed Businesses to Newco or the
Merger, shall not terminate or otherwise affect any indemnity granted prior to
the date hereof by NGC or any Affiliate thereof or any predecessor thereto in
favor of any Contributing Party or of any Contributing Party in favor of NGC or
any Affiliate thereof or any predecessor thereto covering environmental losses
or claims relating to any asset or property comprising a part of the Contributed
Businesses or the NGC Assets (as the case may be), notwithstanding the fact that
such indemnity by its terms would otherwise terminate upon the contribution of
such asset to Newco or the Merger.
6.5 SURVIVAL. Notwithstanding any other provisions of this Agreement, the
indemnities set forth in SECTIONS 6.1 and 6.2 shall survive for a period
commencing on the Closing Date and continuing through and including August 30,
2001, and shall terminate at the expiration of such period, except in the case
of (i) Third Party Claims or Use Claims for which a notice complying with the
terms of SECTION 14.5(A) and SECTION 14.7, respectively, and covering a Discrete
Claim that has previously occurred is received on or prior to August 30, 2001 or
(ii) Environmental Remediation Claims for which a notice complying with the
terms of SECTION 14.6(A) and covering a Discrete Claim that has previously
occurred is received on or prior to August 30, 2001.
ARTICLE 7
TAXES
7.1 TAX FILINGS AND REPRESENTATIONS.
(a) The parties believe that (i) the contribution of Contributed
Businesses and the Contributed West Texas LPG Pipeline Business by the
Chevron Group to Newco will be treated as a transaction described in
Section 351 of the Code and Chevron will be afforded nonrecognition
treatment, in part, under such section, and (ii) the Merger will constitute
a "reorganization" within the meaning of Section 368(a)(1)(A) of the
Code, with the result, in part, of affording nonrecognition treatment to
NGC and its stockholders with respect to the transfers and exchanges
occurring in the Merger. Each party agrees that it will file its Tax
Returns consistent with these tax consequences and the allocation
contemplated by SECTION 7.2(D).
(b) NGC represents that it has no present plan or intention for the
Surviving Corporation (a) to enter into a transaction or series of
transactions that would terminate the existence of Surviving Corporation,
(b) or its Subsidiaries to dispose of the assets and properties comprising
the Contributed Businesses and the Contributed West Texas LPG Pipeline
Business, other than dispositions in the ordinary course of business
operations (including dispositions to rationalize the various operations
acquired by Newco), and dispositions to members of the Surviving
Corporation Group or to partnerships wholly-owned by such members and/or
Chevron (or its Affiliates), or (c) to redeem or otherwise reacquire any
stock or indebtedness to be issued in the Combination (other than with
respect to Surviving Corporation Stock acquired from employees not referred
to in SECTION 12.2(D) through the NGC Plans and Savings Plan or the
exercise of rights to pay or call indebtedness as allowed by its terms).
7.2 TAX RESPONSIBILITIES. Chevron will be responsible for and shall pay
any and all Chevron Taxes. Chevron represents that each transferor of a part of
the Contributed Businesses and the Contributed West Texas LPG Pipeline Business
is a member of the Chevron Group. Surviving Corporation shall be responsible for
and shall pay any and all Surviving Corporation Taxes. Chevron shall have no
liability whatsoever with regard to Surviving Corporation Taxes or NGC
Stockholder Taxes, except as otherwise provided in SECTION 7.6. Surviving
Corporation and the NGC stockholders shall have no liability whatsoever with
regard to Chevron Taxes, except as otherwise provided in SECTION 7.6.
30
(a) The term "CHEVRON TAXES" or "CHEVRON TAX" shall mean any and
all Taxes imposed upon, paid, payable, or required to be collected by any
or all of Chevron and the Chevron Group for any and all taxable years or
periods. The term "CHEVRON TAXES" or "CHEVRON TAX" also includes any ad
valorem Tax imposed upon assets held by Chevron or the Chevron Group and
those Taxes identified as such in clause (iii) of SECTION 7.2(D). Newco and
its Subsidiaries, if any, shall be treated as members of the Chevron Group
through the Closing Date.
(b) The term "SURVIVING CORPORATION TAXES" or "SURVIVING
CORPORATION TAX" shall mean (i) assuming the Merger is effected, any and
all Taxes imposed upon, paid, payable or required to be collected by any or
all of NGC, the NGC Group, Clearinghouse, Trident NGL, Inc. and Trident
Holding for any and all taxable years or periods ending on or before the
Closing Date ("NGC TAXES") and (ii) for any and all taxable years or
other periods beginning on or after the Closing Date, any and all Taxes
imposed upon, paid, payable or required to be collected by Surviving
Corporation and the Surviving Corporation Group and those Taxes identified
as such in clause (iii) of SECTION 7.2(D). The term "SURVIVING CORPORATION
TAXES" or "SURVIVING CORPORATION TAX" also includes any ad valorem Tax
imposed upon assets held by NGC or Surviving Corporation, respectively.
(c) The term "NGC STOCKHOLDER TAXES" or "NGC STOCKHOLDER TAX"
shall mean any and all taxes paid, payable or required to be collected by
any and all of the NGC Stockholders. The term "NGC STOCKHOLDERS" shall
mean any and all of the stockholders of NGC or Surviving Corporation, other
than Chevron.
(d) For purposes of this SECTION 7.2:
(i) In the case of any Tax attributable to a taxable year or other
period that includes or ends on the Closing Date, such Tax shall be
allocated between the portion of such taxable year or other period
ending on the Closing Date and the portion beginning after the Closing
Date by allocating all items of income, loss, deduction, credit,
payroll, premium, capital, gross receipts, sales, and the like between
the portion ending on and the portion beginning after the Closing Date
based on an interim closing of the books as of 11:59 p.m. on the Closing
Date. The parties hereto agree that on the Closing Date they shall not
cause Newco or its Subsidiaries to participate in any transaction
outside of the ordinary course of business, other than the transactions
contemplated by this Agreement.
(ii) Provided, however, that if any such item cannot reasonably be
determined on the basis of an interim closing of the books, and except
to the extent otherwise required by applicable law, then such item shall
be allocated based on the number of days in the period ending on the
Closing Date and the number of days in the period beginning after the
Closing Date.
(iii) Notwithstanding anything to the contrary in this SECTION
7.2, Chevron shall be responsible for all transfer Taxes and other Taxes
relating to the contribution of the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business to Newco (which Taxes shall
be "CHEVRON TAXES"), and the Surviving Corporation shall be
responsible for all transfer Taxes and other Taxes relating to the
Merger (which Taxes shall be "SURVIVING CORPORATION TAXES").
(iv) Notwithstanding anything to the contrary in this SECTION 7.2,
any ad valorem Tax relating to any asset comprising a part of the
Contributed Businesses or the Contributed West Texas LPG Pipeline
Business that is attributable to a tax period that includes the Closing
Date shall be allocated as a Chevron Tax or a Surviving Corporation Tax
based on the number of days that each such party owned such asset during
such period.
(v) Notwithstanding anything to the contrary in this SECTION 7.2,
all Taxes imposed upon, paid, payable, or required to be collected by
Newco or its Subsidiaries while it is a member of the Chevron Group,
including any consolidated or combined liabilities of the Chevron Group
(including, without limitation, Tax liabilities incurred by reason of
Treasury Regulations 1.1502-6) shall be considered Chevron Taxes.
31
(e) Subject to the provisions of SECTIONS 7.1 (A) and 7.3 hereof, (i)
Chevron shall be responsible, at its sole cost and expense, for the
preparation, maintenance and filing of all tax returns, information
returns, reports, statements, and related documents (hereinafter
collectively referred to as "TAX RETURNS") relating to Chevron Taxes, and
(ii) Surviving Corporation or NGC shall be responsible, at its sole cost
and expense, for the preparation and filing of all Tax Returns relating to
Surviving Corporation Taxes or NGC Taxes. All Tax Returns required to be
filed by Chevron ("CHEVRON RETURNS") have been or will be filed at the
times and in the manner prescribed by law. All Tax Returns required to be
filed by Surviving Corporation or NGC ("SURVIVING CORPORATION RETURNS")
have been or will be filed by Surviving Corporation or NGC at the times and
in the manner prescribed by law.
7.3 RECORDS AND ASSISTANCE. Subject to the reimbursement of reasonable
out-of-pocket expenses, the parties hereto will provide each other such records
and assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax Return, and audit or other examination by any taxing
authority, and any judicial and administrative proceedings relating to liability
for Taxes (including, without limitation, any additions to or refunds of Taxes).
Surviving Corporation shall retain all records delivered to it by Chevron in the
Combination relating to Chevron Taxes for the longer of (i) six (6) years after
the September 15 following the end of the taxable year to which the Tax Audit
with respect to Chevron Taxes relates or (ii) upon notice from Chevron, with
respect to any Tax Audit, that the statute of limitations has been extended
beyond six (6) years after the September 15 following the end of the taxable
year to which the Tax Audit with respect to Chevron Taxes relates, until the end
of such extension period. Chevron shall reimburse Surviving Corporation for any
reasonable out-of-pocket expenses incurred by it with respect to such record
retention to the extent of the excess, if any, of the expenses attributable to
the period described in SECTION 7.3(II), over the expenses attributable to the
period described in SECTION 7.3(I). Surviving Corporation shall secure the same
access to records and assistance and the same record retention described in the
immediately preceding sentence in the event that Surviving Corporation disposes
of any of the Contributed Businesses or the Contributed West Texas LPG Pipeline
Business. All information provided pursuant to this ARTICLE 7 shall be held in
confidence and shall not be disclosed to persons other than requesting parties
hereto for any reason whatsoever, except to the extent that such disclosure is
required in order to effect the intent of this ARTICLE 7 or such disclosure is
required by law.
7.4 TAX SHARING AGREEMENTS. This Agreement supersedes and terminates any
and all other tax sharing, tax allocation, and other similar agreements,
policies, and arrangements previously in effect with respect to (i) all or any
of Newco or its Subsidiaries, on the one hand, and (ii) any or all of the other
members of the Chevron Group, on the other hand. Except as expressly provided in
this Agreement, neither Newco nor its Subsidiaries shall have any obligation,
directly or indirectly, to make any payment to or on behalf of any other member
of the Chevron Group in respect of any Tax or refund of Tax for any taxable
year.
7.5 TAX AUDITS. With respect to the taxable years of Chevron, NGC, Newco,
or Surviving Corporation not yet audited by, currently under audit by, or under
protest or appeal with, any taxing authority:
(a) Subject to SECTION 7.5(D), Chevron, at its sole cost and expense,
shall control the conduct of all stages of any audit or other judicial or
administrative proceeding (collectively referred to as a "TAX AUDIT")
with respect to Chevron Taxes. Surviving Corporation, at its sole cost and
expense, shall control the conduct of all Tax Audits with respect to
Surviving Corporation Taxes.
(b) Chevron shall give prompt notice to Surviving Corporation of any
Tax adjustment proposed in writing pursuant to any Tax Audit controlled by
Chevron (i) that may be borne by the Surviving Corporation (or any of its
Subsidiaries) or have an adverse effect on either of the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business or (ii) that
could give rise to an indemnification under SECTION 7.6(A). Upon Surviving
Corporation's reasonable request, Chevron shall discuss with Surviving
Corporation and Surviving Corporation's counsel the position that Chevron
intends to take regarding any issue concerning such Tax Audit, and shall
afford Surviving Corporation and its counsel a reasonable opportunity to
participate, at Surviving Corporation's sole cost and expense, in the
conduct of that portion of any such Tax Audit relating to such claim
(including, without
32
limitation, participation in conferences and subsequent non-judicial
proceedings with the taxing authority and submission of pertinent materials
in support of Chevron's position).
(c) Surviving Corporation shall give prompt notice to Chevron of any
Tax adjustment proposed in writing pursuant to any Tax Audit controlled by
Surviving Corporation (i) that could give rise to a claim against Chevron
under this Agreement or (ii) that could give rise to an indemnification
under SECTION 7.6(B). Upon Chevron's reasonable request, Surviving
Corporation shall discuss with Chevron and Chevron's counsel the position
that Surviving Corporation intends to take regarding any issue concerning
such Tax Audit, and shall afford Chevron and its counsel a reasonable
opportunity to participate, at Chevron's sole cost and expense, in the
conduct of that portion of any such Tax Audit relating to such claim
(including, without limitation, participation in conferences and subsequent
non-judicial proceedings with the taxing authority and submission of
pertinent materials in support of Surviving Corporation's position).
(d) In the case of a Tax Audit that Chevron believes could give rise
to an indemnity under clause (iii) of SECTION 7.6(B) (and so much of clause
(iv) as relates thereto), Chevron shall give prompt notice to Surviving
Corporation in writing as soon as reasonably possible after initial
discussions with or receipt of a written communication from any
representative of a taxing authority regarding any issues that could give
rise to a claim for such indemnity (the "AUDIT ISSUES"). Chevron shall at
all times take positions in the Tax Audit, with respect to the Audit
Issues, consistent with those advanced by Surviving Corporation in writing
and shall afford Surviving Corporation and its counsel a reasonable
opportunity to participate, at Surviving Corporation's sole cost and
expense, in the conduct of that portion of any Tax Audit relating to such
claim (including, without limitation, participation in conferences and
subsequent non-judicial proceedings with the taxing authority and
submission of pertinent materials in support of Chevron's position).
Chevron shall appeal (to the extent legally allowable) all decisions
inconsistent with the positions advanced by Surviving Corporation with
respect to such Audit Issues that could result in indemnification under
SECTION 7.6(B)(III), unless otherwise agreed by Chevron and Surviving
Corporation. If Surviving Corporation believes a decision of a court of law
with respect to such Audit Issues should be appealed, but Chevron
disagrees, Surviving Corporation shall reimburse Chevron for all costs and
expenses related to the Audit Issues of any such appeal.
7.6 TAX INDEMNITY.
(a) With the exception of increases in Chevron Taxes described in
clause (ii) of SECTION 7.6(B) hereof, Chevron shall indemnify, protect,
save, and keep harmless Surviving Corporation and its Subsidiaries and
their respective officers, directors, employees, agents and Affiliates from
and against (i) any and all Chevron Taxes directly incurred by any of them
in connection therewith, and (ii) any and all Surviving Corporation Taxes
payable for taxable periods beginning on or after the Closing Date, but
only to the extent (if any) of the amount of any such Surviving Corporation
Tax that is caused by or arises from a breach or other violation of, or
inaccuracy or incompleteness of, any of the covenants, warranties, or
representations of Chevron set forth in the last sentence of SECTION 7.1(A)
AND IN SECTION 7.2 hereof, and (iii) all reasonable costs and expenses
(including, without limitation, court costs and professional fees) incurred
by Surviving Corporation (or its Subsidiaries) in connection with an
indemnity provided in this SECTION 7.6(A).
(b) With the exception of increases in Surviving Corporation Taxes
described in clause (ii) of SECTION 7.6(A) hereof, Surviving Corporation
shall indemnify, protect, save, and keep harmless Chevron and its
Subsidiaries and their respective officers, directors, employees, agents
and Affiliates from and against (i) any and all Surviving Corporation Taxes
directly incurred by any of them, (ii) any and all Chevron Taxes payable
for taxable periods ending on or after the Closing Date, but only to the
extent (if any) of the amount of any such Chevron Tax that is caused by or
arising from a breach or other violation of, or inaccuracy or
incompleteness of, any of the covenants, warranties, or representations of
NGC set forth in the last sentence of SECTION 7.1(A) AND IN SECTION 7.2
hereof, (iii) provided that SECTION 7.5(D) has been complied with, any and
all Chevron Taxes payable for the taxable period
33
that includes the Closing Date that is caused by or arises from the
inaccuracy of any of the representations of NGC set forth in SECTION 7.1(B)
hereof; and (iv) all reasonable costs and expenditures (including, without
limitation, court costs and professional fees) incurred by Chevron (or its
Subsidiaries) in connection with any indemnity provided in this SECTION
7.6(B).
(c) Any payments required to be made pursuant to this SECTION 7.6 (a
"TAX INDEMNITY PAYMENT") shall be made, whether or not the amount is
contested under SECTION 7.6(D), on the latest of (i) twenty (20) Business
Days after written demand by the indemnified party, which written demand
shall include a statement (the "INDEMNITY STATEMENT") setting forth in
reasonable detail the good faith computations of the indemnification
hereunder and the procedure for contesting the amount (including the timing
of the written notice thereof) set forth in SECTION 7.6(D) hereof, (ii)
five (5) Business Days before the last day prescribed by law on which the
payment of the indemnified Tax in question may be made to the relevant
taxing authority without the imposition of any penalty, interest, addition
to Tax, or other late charge by the taxing authority, or (iii) in the case
of an Indemnity Payment under clause (iii) of SECTION 7.6(B) or clause (iv)
of SECTION 7.6(B) to the extent it relates to an Indemnity Payment under
such clause (iii), the later of ten days after (A) if Chevron and the
Surviving Corporation agree that a Tax Indemnity Payment is required under
SECTION 7.6(B)(III), the date judgment by a Circuit Court of Appeals or the
Supreme Court of the United States becomes final and unappealable, or (B)
otherwise, after the decision of the Arbitrator pursuant to the procedures
in SECTION 7.6(D) as to whether an Indemnity Payment is required pursuant
to SECTION 7.6(B)(III).
(d) Chevron or Surviving Corporation may contest the amount of any
Tax Indemnity Payment set forth on an Indemnity Statement within 120
Business Days of the receipt of the Tax Indemnity Statement by written
notice; PROVIDED, HOWEVER, to the extent that any Tax Indemnity Payment set
forth on an Indemnity Statement relates to SECTION 7.6(B)(III) or SECTION
7.6(B)(IV) (as it relates to an Indemnity Payment under SECTION
7.6(B)(III), such 120 day period for contesting an amount on a Tax
Indemnity Statement shall begin on the later of the date of a final
settlement with the U.S. Government or the date judgment by a trial court,
a Circuit Court of Appeals or the Supreme Court of the United States
becomes final and unappealable, unless otherwise agreed by Chevron and
Surviving Corporation. If Surviving Corporation or Chevron contests such
amount during the 120 day period, Chevron and Surviving Corporation, at
their joint expense, shall select and engage an independent nationally-
recognized public accounting or law firm (an "ARBITRATOR") (which shall
in no event be the auditors for or representatives of either Chevron or
Surviving Corporation at the time of selection) to redetermine the amount
of the Chevron Tax or Surviving Corporation Tax so contested, which
redetermination shall be binding and conclusive. If Chevron and Surviving
Corporation cannot agree on one (1) jointly chosen Arbitrator, then each
shall select one (1) Arbitrator at its own cost and expense. Such two (2)
Arbitrators selected by Chevron and Surviving Corporation shall then select
a third Arbitrator (other than themselves) to redetermine the amount of the
Chevron Tax or Surviving Corporation Tax so contested, which
redetermination shall be binding and conclusive. If such Arbitrator
redetermines that the amount of the Tax Indemnity Payment is less than the
amount shown in the Indemnity Statement so contested, then (i) the
indemnified party shall refund such difference (together with any interest
on such difference that the indemnified party has collected from the
indemnifying party) to the indemnifying party within fifteen (15) days
after the indemnified party has received written notice of the amount
determined by said Arbitrator or (ii) in the case of a Tax Indemnity
Payment required under SECTION 7.6(B)(III), Surviving Corporation shall pay
Chevron the lesser of (A) the amount shown on the Indemnity Statement with
respect to such Tax Indemnity Payment or (b) the amount determined by the
Arbitrator.
(e) If any amount payable pursuant to this SECTION 7.6 is not paid
when due, then such amount shall bear interest at the lesser of (i) the
highest lawful rate for the period of time that the amount remains unpaid,
or (ii) the rate of interest accruing under Section 6621(a)(2) of the Code
for the period of time that the amount remains unpaid.
34
(f) Any Tax Indemnity Payment required to be made pursuant to this
SECTION 7.6, other than Tax Indemnity Payments required to be made pursuant
to SECTION 7.6(B)(III), shall be increased or reduced, as appropriate, to
take into account the tax consequences to the payee, if any, of (i) such
Tax Indemnity Payment to the indemnified party and (ii) expenditures made
by the indemnified party that are being reimbursed by such Tax Indemnity
Payment.
(g) Any Tax Indemnity Payment required to be made pursuant to SECTION
7.6(B)(III) at the time stated in SECTION 7.6(C)(III) shall be increased by
an amount of interest at Chevron's effective borrowing rate as in effect
from time-to-time from the date on which Chevron actually paid the Tax for
which the Tax Indemnity Payment is made until the date when payment is due
pursuant to SECTION 7.6(C)(III).
7.7 SURVIVAL. Notwithstanding any other provisions of this Agreement, all
of the warranties, representations, covenants and agreements set forth in this
ARTICLE 7 with respect to each Tax liability and any and all Tax Returns,
audits, examinations, and proceedings relating thereto shall survive the Closing
for a period ending 90 days after the latest of (i) the lapse of the applicable
period for assessment, imposition, or refund of Tax (as the same may be
extended) with respect thereto, (ii) receipt of the notice described in SECTIONS
7.5(B)(II) or 7.5(C)(II) hereof, (iii) the lapse of the applicable period for
assessment, imposition or refund of Tax (as the same may be extended) relating
to the taxable year or period in which any Tax savings are actually realized
pursuant to SECTION 7.6(F) or (iv) the determination by the Arbitrator referred
to in SECTION 7.6(D). This SECTION 7.7 shall not prejudice the survival of any
other warranty, representation or covenant under this Agreement.
7.8 INDEMNITY FOR NGC TAX LOSSES.
(a) Surviving Corporation shall pay to Chevron the amount of any NGC Tax
Loss (an "NGC TAX LOSS PAYMENT"). The term "NGC Tax Loss" shall mean the
"Unadjusted NGC Tax Loss" (defined in SECTION 7.8(B)) adjusted as provided in
SECTION 7.8(C).
(b) The term "Unadjusted NGC Tax Loss" shall mean the excess, if any, of
(i) any and all NGC Taxes paid by Surviving Corporation on or after the Closing
Date (other than (x) Taxes paid with final returns or statements for taxable
periods ending in or after 1995 that are filed after the Closing Date (other
than amended returns or amended statements) or (y) Taxes for tax periods ending
on or after the Closing Date) ("RELEVANT NGC TAXES"), over (ii) the present
value (as of the date of the payment of the Relevant NGC Taxes) of the tax
savings or refunds, if any, reasonably expected to the Surviving Corporation as
a result of the payment of the Relevant NGC Taxes or the adjustments resulting
in such Relevant NGC Taxes, in either case, for any taxable period of NGC (or
its Subsidiaries) or Surviving Corporation (or its Subsidiaries). This present
value shall be computed using NGC's effective borrowing rate as in effect from
time-to-time. Surviving Corporation shall prepare and provide to Chevron a
schedule setting forth the amount of the expected Tax savings or refunds and
shall update such schedule no less often than once each calendar year.
(c) The Unadjusted NGC Tax Loss shall be adjusted in the following manner
to compute the NGC Tax Loss. The Unadjusted NGC Tax Loss shall be reduced (but
not below zero) by up to $7.5 million (as agreed by the Parties), (which after
such reduction shall be referred to as the "GROSS TAX LOSS"). For purposes
hereof, an NGC Tax Loss will have occurred at each time that the amount of the
Gross Tax Loss increases, for example, without limitation, upon a decrease in
the present value of the reasonably expected Tax savings or refunds taken into
account in the previous determination of the Gross Tax Loss as a result of the
reasonable expectation of either a delay in achieving or a failure to achieve
such Tax savings or refunds. The amount of the NGC Tax Loss incurred at each
such time shall be the product of the increase in the Gross Tax Loss at such
time and the fraction described in SECTION 14.1(D)(II) as in effect at such
time. Notwithstanding the foregoing, if the amount of Relevant NGC Tax paid to a
taxing authority for a particular taxable period is less than $100,000, the
Relevant NGC Tax shall be considered to be $0.00.
(d) The NGC Tax Loss Payment shall be made within thirty (30) days after
the latest of (i) the settlement with the taxing authority of the claim for NGC
Taxes, (ii) the expiration of the period for appeal
35
of a final adjudication of the claim for NGC Taxes, (iii) the rendering of a
determination by the Arbitrator of the amount of the NGC Tax Loss, or (iv) the
expiration of the period for Surviving Corporation to give notice that it
contests the amount of the NGC Tax Loss Payment requested by Chevron in an NGC
Tax Loss Indemnity Statement. (The occurrence of an event described in SECTION
7.8(D)(I) OR (II) shall be referred to in this SECTION 7.8 as a "FINAL
DETERMINATION"). If an NGC Tax Loss Payment is not made when due, then the
amount thereof shall bear interest for the period of time that the amount
remains unpaid at the lesser of (i) the highest lawful rate, or (ii) the rate of
interest accruing under Section 6621(a)(2) of the Code. Any NGC Tax Loss Payment
shall be increased by an amount of interest at Chevron's effective borrowing
rate as in effect from time-to-time from the date on which Surviving Corporation
makes the payment of the Relevant NGC Tax for which such NGC Tax Loss Payment is
made, until the date the related NGC Tax Loss Payment is due.
(e) Surviving Corporation shall give prompt notice to Chevron of any Tax
adjustment proposed in writing pursuant to any Tax Audit controlled by Surviving
Corporation which adjustment could reasonably be expected to give rise to an NGC
Tax Loss Payment under SECTION 7.8(A) and prompt notice of the Final
Determination of such Tax Audit (the "FINAL DETERMINATION NOTICE"). The Final
Determination Notice shall set forth (i) in reasonable detail Surviving
Corporation's good faith computation of the amount of any NGC Tax Loss Payment
required under SECTION 7.8(A), (ii) the procedure (as described in SECTION
7.8(F) below) Chevron must follow to respond, and (iii) a reference to SECTION
7.8 of this Agreement.
(f) Within one hundred twenty (120) days of the Final Determination
Notice, Chevron shall notify Surviving Corporation in a written notice setting
forth in reasonable detail Chevron's good faith computations of the amount of
any NGC Tax Loss Payment required under SECTION 7.8(A), the basis of Chevron's
request for such payment, and the procedure (as described in SECTION 7.8(G)
below) by which Surviving Corporation may contest the amount (including the
timing of the written notice of contest).
(g) Within one hundred twenty (120) days of the receipt of the notice
given in SECTION 7.8(F), Surviving Corporation may contest by written notice to
Chevron the amount of the NGC Tax Loss Payment proposed by Chevron. After the
notice in this SECTION 7.8(G) has been given, Chevron and Surviving Corporation,
at their joint expense, shall select one (1) Arbitrator (as defined in SECTION
7.6(D)). If, within thirty (30) days after the notice in this SECTION 7.8(G) has
been given, Chevron and Surviving Corporation cannot agree on one (1) jointly
chosen Arbitrator, then each shall select one (1) Arbitrator at its own cost and
expense. Such two (2) Arbitrators selected by Chevron and Surviving Corporation
shall then select a third Arbitrator (other than themselves) to redetermine the
amount of the NGC Tax Loss Payment so contested, which redetermination shall be
binding and conclusive. If such third Arbitrator redetermines that the amount of
the NGC Tax Loss Payment is less than the amount shown in the notice of Chevron
so contested, the amount of the NGC Tax Loss Payment shall be such redetermined
amount. If such Arbitrator determines that the amount of the NGC Tax Loss
Payment was equal to or higher than the amount shown in the notice of Chevron,
the payment in such notice shall be the NGC Tax Loss Payment.
(h) Notwithstanding any other provisions of this Agreement, all of
Surviving Corporation's and Chevron's obligations under this Agreement relating
to the making of NGC Tax Loss Payments or Refund Payments and any and all Tax
Returns, audits, examinations, and proceedings relating thereto shall survive
the Closing for a period ending ninety (90) days after the latest of (i) the
lapse of the applicable period for assessment, imposition, or refund of Tax (as
the same may be extended) with respect thereto, (ii) receipt of the notice
described in SECTION 7.8(E) hereof or the Refund Payment Notice, (iii) the lapse
of the applicable period for assessment, imposition or refund of Tax (as the
same may be extended) relating to the taxable year or period in which any Tax
savings are actually realized pursuant to SECTION 7.8(B) or SECTION 7.8(I), or
(iv) the determination of the Arbitrator referred to in SECTION 7.8(G). This
SECTION 7.8(H) shall not prejudice the survival of any warranty, representation
or covenant under this Agreement.
(i) If the amount of the Gross Tax Loss decreases as the result of an
increase in the present value of the reasonably expected Tax savings or refunds
taken into account in the previous determination of the Gross Tax Loss as a
result of the reasonable expectation of either an acceleration in achieving Tax
Savings or refunds or the ability to achieve Tax Savings or refunds not
previously expected, then Chevron shall pay
36
to Surviving Corporation an amount equal to the product of the decrease in the
Gross Tax Loss at such time and the fraction described in SECTION 14.1(D)(II) as
in effect at such time, but in no event shall such payment (herein referred to
as the "Refund Payment") be in excess of the amount of NGC Tax Loss Payments
previously made to Chevron by Surviving Corporation. Any Refund Payment shall be
increased by an amount of interest at Chevron's effective borrowing rate as in
effect from time-to-time from the date on which the Refund Payment Notice is
received by Chevron until the date the Refund Payment is due. Upon such a
decrease in the Gross Tax Loss, Surviving Corporation shall give Chevron prompt
notice of the decrease in the Gross Tax Loss and a request for a Refund Payment
(the "Refund Payment Notice"). The Refund Payment Notice shall set forth (i)
in reasonable detail Surviving Corporation's good faith computation of the
amount of the Refund Payment required under this paragraph, (ii) the procedure
(as described below) Chevron must follow to respond, and (iii) a reference to
SECTION 7.8 of this Agreement. Within one hundred twenty (120) days of the
receipt of the Refund Payment Notice, Chevron may contest by written notice to
Surviving Corporation the amount of the requested Refund Payment, in which event
Chevron and Surviving Corporation shall follow the arbitration procedures set
forth in SECTION 7.8(G). If the Arbitrator redetermines that the amount of the
Refund Payment is less than the amount shown in the notice of Surviving
Corporation so contested, the amount of the Refund Payment shall be such
redetermined amount. If such Arbitrator determines that the amount of the Refund
Payment was equal to or higher than the amount shown on the Refund Payment
Notice, the payment requested in such notice shall be the Refund Payment. The
Refund Payment shall be made within thirty (30) days after the latest of (i) the
settlement with the taxing authority of the claim for NGC Taxes, (ii) the
expiration of the period for appeal of a final adjudication of the claim for NGC
Taxes, (iii) the rendering of a determination by the Arbitrator as to the amount
of the relevant Refund Payment or (iv) the expiration of the period for Chevron
to give notice that it contests the amount of a Refund Payment requested by
Surviving Corporation in a Refund Payment Notice. If the Refund Payment is not
paid when due, then it shall bear interest for the period that the amount
remains unpaid at the rate described in the penultimate sentence of SECTION
7.8(D).
(j) Notwithstanding any other provisions of this Agreement, the provisions
of this SECTION 7.8 shall apply exclusively to issues regarding NGC Tax Loss
Payments pursuant to SECTION 7.8(A) or Refund Payments pursuant to SECTION
7.8(I).
ARTICLE 8
EMPLOYEES AND BENEFITS MATTERS
8.1 REPRESENTATIONS AND WARRANTIES OF NGC.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 8.1(A) to this Agreement includes a
correct and complete list of all pension and welfare plans as defined in
Sections 3(1) and 3(2) of ERISA and all other employee benefit agreements or
arrangements, including but not limited to deferred compensation plans,
incentive plans, bonus plans or arrangements, savings plans, stock option plans,
stock purchase plans, golden parachute agreements, severance pay plans,
cafeteria plans, employee assistance programs, employment contracts and other
similar plans, agreements and arrangements that are currently in effect, or have
been approved before the date of this Agreement but are not yet effective, for
the benefit of directors, officers, employees or former employees (or their
beneficiaries) of NGC or any of its Subsidiaries. NGC has delivered or made
available to Chevron, as to each plan, agreement or arrangement, as applicable,
a true and correct copy of (i) the plan, agreement or arrangement, (ii) the
trust, group annuity contract or other document that provides the funding for
the plan, agreement or arrangement, if any, (iii) the three most recent annual
Form 990 and 1041 reports, if any, (iv) the Form 5500 returns that have been
prepared and filed for each fiscal year of the plan beginning in or after 1991,
if any, (v) the most recent actuarial report or valuation statement, if any,
(vi) the most current summary plan description, booklet, or other descriptive
written materials, if any, and each summary of material modifications prepared
after the last summary plan description, (vii) the most recent IRS determination
letter, if any, and all rulings or determinations requested from the IRS after
the date of any exemption letter, if any, and (viii) all other correspondence
from the IRS or the Department of Labor that relates to one or more of the
plans, agreements or arrangements which
37
could reasonably be expected to result in the disqualification of a plan for tax
purposes under Section 401(a) of the Code or a liability which would have a
Material Adverse Effect on NGC.
(b) Except as set forth on SCHEDULE 8.1(B), every employee welfare benefit
plan and every employee pension benefit plan as defined in Sections 3(1) and
3(2) of ERISA listed on SCHEDULE 8.1(A) (i) is in substantial compliance with
all material requirements of Parts 1 and 6 of Subtitle B of Title I of ERISA;
(ii) has had the appropriate Form 5500 filed, timely, for each year of its
existence, if required; (iii) has not engaged in any prohibited transaction
described in Sections 406 or 407 of ERISA or Section 4975 of the Code unless it
was exempt under Section 408 of ERISA or Section 4975 of the Code, as
applicable; (iv) has at all times complied with the bonding requirements of
Section 412 of ERISA; (v) has no issue pending (other than the payment of
benefits in the normal course) nor any issue resolved adversely to NGC or any of
its Subsidiaries that may subject NGC or any of its Subsidiaries in the future
to the payment of a penalty, interest or tax and (vi) can be unilaterally
terminated or amended on no more than 90 days' notice; except, in each such
case, where it would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on NGC. All voluntary employee
benefit associations maintained or contributed to by NGC or any of its
Subsidiaries have been submitted to and approved by the IRS as exempt from
federal income tax under Section 501(c)(9) of the Code. Except as set forth in
SCHEDULE 8.1(B), neither NGC nor any of its Subsidiaries provides employee
post-retirement medical or health coverage or contributes to or maintains any
employee welfare benefit plan that provides for health benefit coverage
following termination of employment except as is required by Part 6 of Subtitle
B of Title I of ERISA or Section 4980B of the Code. Except as set forth on
SCHEDULE 8.1(B), all employee pension benefit plans as defined in Section 3(2)
of ERISA listed on SCHEDULE 8.1(A) which are intended to qualify under Section
401(a) of the Code have been submitted to and approved as qualifying under
Section 401(a) of the Code by the IRS or the applicable remedial amendment
period will not have ended prior to the Closing Date; and to the knowledge of
NGC, no facts have occurred that if known by the IRS could cause
disqualification of those plans. All employee pension benefit plans listed on
SCHEDULE 8.1(A) to which Section 412 of the Code is applicable have fully
complied with the funding requirements of that Section and there is no
accumulated funding deficiency as defined in Section 302(a)(2) of ERISA (whether
or not waived) in any one or more of those plans. All premiums (and any
interest, charges and penalties for late payment of premiums) due the PBGC with
respect to each employee pension benefit plan listed on SCHEDULE 8.1(A) for
which premiums are required have been paid when due. No employee pension benefit
plan, whether or not listed on SCHEDULE 8.1(A), has been, or is reasonably
expected to be, terminated under circumstances that could result in a liability
by NGC or any of its Subsidiaries to the PBGC that would reasonably be expected
to have a Material Adverse Effect on NGC. There have been no "reportable
events" (as defined in Section 4043(b) of ERISA and the regulations under that
Section) with respect to any employee pension benefit plan subject to Title IV
of ERISA listed on SCHEDULE 8.1(A). Except as set forth on SCHEDULE 8.1(B),
neither NGC nor any of its Subsidiaries (i) has ceased operations at a facility
so as to become subject to the provisions of Section 4062(e) of ERISA, withdrawn
as a substantial employer so as to become subject to the provisions of Section
4063 of ERISA or ceased making contributions on or before the Closing Date to
any employee pension benefit plan subject to ERISA to which either NGC or any of
its Subsidiaries made contributions at any time during the six years before the
Closing Date or (ii) has made a complete or partial withdrawal from a
multiemployer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA. Either the applicable
plan document or SCHEDULE 8.1(B) contains a complete and accurate statement of
all actuarial assumptions applied to determine the present value of accrued
benefits under all employee benefit plans subject to actuarial assumptions. All
amounts owed under the deferred compensation arrangements described in SCHEDULE
8.1(A) are included as liabilities in the financial statements included in the
NGC SEC Documents. Neither NGC nor any of its Subsidiaries has incurred a
liability for any excise tax (whether or not yet assessed by the IRS) under
Section 4971, 4972, 4975, 4976, 4978B, 4979, 4979A or 4980B of the Code that
would reasonably be expected to have a Material Adverse Effect on NGC.
(c) LABOR MATTERS. Except as set forth on SCHEDULE 8.1(C), (i) there are
no agreements existing between any member of the NGC Group and any labor union
or association representing any employees of
38
the NGC Group; (ii) there is no material work stoppage against the NGC Group
with respect to its business or operations pending or, to the knowledge of NGC,
threatened and (iii) there is no material labor dispute, arbitration, lawsuit or
administrative proceeding threatened relating to labor matters with respect to
the business or operations of NGC or affect the ability of the Surviving
Corporation to perform its obligations under the Ancillary Agreements.
8.2 REPRESENTATIONS AND WARRANTIES OF CHEVRON.
(a) EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Prior to the Closing Date,
Chevron will provide any notification or notice required to be given to any
employee of a member of the Chevron Group pursuant to the provisions of the
Worker Adjustment and Retraining Notification Act (the "WARN ACT") in
connection with or arising out of the contribution of the Contributed Businesses
and the Contributed West Texas LPG Pipeline Business to Newco. With respect to
any "employee benefit plan" within the meaning of Section 3(3) of ERISA, which
is sponsored, maintained or contributed to, or has been sponsored, maintained or
contributed to within six years prior to the Closing Date, by Chevron or any
corporation, trade, business or entity under common control with Chevron, within
the meaning of Section 414(b), (c) or (m) of the Code or Section 4001 of the
ERISA ("COMMONLY CONTROLLED ENTITY"), (1) no withdrawal liability, within the
meaning of Section 4201 of ERISA, has been incurred, which withdrawal liability
has not been satisfied and could give rise to a Lien on any of the assets or
properties that comprise the Contributed Businesses or the Contributed West
Texas LPG Pipeline Business, (2) no liability to the PBGC has been incurred by
Chevron or any Commonly Controlled Entity, which liability has not been
satisfied and could give rise to a Lien on the Contributed Businesses, (3) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred and (4) all
contributions (including installments) to such plan required by Section 302 of
the ERISA and Section 412 of the Code have been timely made. As of the Closing
Date, the Affected Employees will have a fully vested interest in their accrued
benefits under all plans maintained by the Chevron Group that are intended to be
qualified under Section 401(a) of the Code and in which Prospective Employees
participate.
(b) LABOR MATTERS. There are no agreements existing between any member of
the Chevron Group and any labor union or association representing any of the
employees of the Warren Petroleum Company, the employees of the NGBU or any
other employee of the Chevron Group who operates, is employed in connection
with, or otherwise supports the Contributed Businesses or the Contributed West
Texas LPG Pipeline Business. There is no material work stoppage against the
Chevron Group with respect to the business or operations of the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business pending or, to
the knowledge of Chevron, threatened. There is no material labor dispute,
arbitration, lawsuit or administrative proceeding threatened relating to labor
matters with respect to the business or operations of the Contributed Businesses
or the Contributed West Texas LPG Pipeline Business.
8.3 CONDUCT OF NGC PRIOR TO CLOSING RELATING TO EMPLOYEE BENEFIT
PLANS. During the period from the date of this Agreement through the earlier to
occur of the Effective Time or the Termination Date, except in the ordinary
course consistent with prior practices or as disclosed in NGC's proxy statement
relating to its 1996 annual meeting, NGC shall not, and shall not permit any
Subsidiary of NGC to, adopt or amend (other than amendments that reduce the
amounts payable by NGC or its Subsidiaries or amendments required by law to
preserve the qualified status of a plan or a contract) any collective bargaining
agreement or employee benefit plan or enter into any employment or severance
arrangement with any Person (including, without limitation, contracts with
management of NGC or its Subsidiaries that might require that payments be made
upon the consummation of the transactions contemplated hereby) or amend any
existing contracts to increase any amounts payable thereunder or benefits
provided thereunder. Neither NGC nor any of its Subsidiaries nor any plan listed
on SCHEDULE 8.1(A) will (a) engage in any nonexempt "prohibited transaction"
(as defined in Section 406 of ERISA and Section 4975(c) of the Code) that would
reasonably be expected to have a Material Adverse Effect on NGC, (b) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether
or not waived, (c) terminate any plan in a manner that could result in the
imposition of a lien on any property of NGC or any of its Subsidiaries pursuant
to Section 4068 of ERISA or (d) take any action that (1) could adversely affect
the qualification under the Code of any plan
39
or its compliance with the applicable requirements of ERISA or that might result
in any "reportable event" (as defined in Section 4043(b) of ERISA) and (2)
would reasonably be expected to have a Material Adverse Effect on NGC.
8.4 OFFERS OF EMPLOYMENT.
(a) The NGC Group and the Chevron Group shall jointly select the
Prospective Employees who shall receive offers of employment with the Surviving
Corporation and its Subsidiaries (the "NEWCO GROUP") and the employees of the
NGC Group who shall remain employed by the Newco Group. The term "PROSPECTIVE
EMPLOYEES" shall mean the employees of the Chevron Group who operate, are
employed in connection with, or otherwise are associated with the Contributed
Businesses.
(b) The NGC Group shall make offers of employment with the Newco Group
contingent and effective upon Closing to those employees of the Chevron Group
that are selected from among the Prospective Employees. Such employment offers
shall be on terms and conditions to be determined by the NGC Group, but not
inconsistent with the provisions of this ARTICLE 8. The NGC Group's offers of
employment to the selected Prospective Employees shall be made in writing.
Those employees of the Chevron Group who accept the NGC Group's employment
offers and become employees actively at work with the Newco Group as of Closing
(or at any time within 30 days thereafter or, if later, the day after the last
day of a Family and Medical Leave Act leave that started on or before the
Closing) are the "AFFECTED EMPLOYEES," and the first date an Affected Employee
is actively at work with the Newco Group on or after Closing is that Affected
Employee's "EMPLOYMENT DATE." The employees who operate, are employed in
connection with, or otherwise are associated with the Contributed Businesses and
who do not become Affected Employees are the "REMAINING EMPLOYEES."
Nothing in this Agreement shall affect the Newco Group's right to change
the terms and conditions of employment or terminate the employment of any
Affected Employee on or after his or her Employment Date, with or without cause,
provided that the Newco Group shall comply with (i) the terms of SECTION 8.7(A)
below and (ii) the service recognition provisions of this ARTICLE 8.
Any Prospective Employee selected by the NGC Group who was not actively at
work at Closing shall continue to be the responsibility of the Chevron Group
after such date and shall not become an employee of the Newco Group until such
Employee's Employment Date. The Newco Group shall have no obligation under this
Agreement to employ any Prospective Employee who has accepted its employment
offer but is not actively at work with the Newco Group at Closing or within the
later of 30 days after Closing or the day after the last day of a Family and
Medical Leave Act leave that started on or before the Closing.
(c) Chevron shall pay the relocation costs incurred in connection with the
first relocation by any Affected Employee who is required to relocate as a
condition to his or her employment offer with the Newco Group made pursuant to
paragraph (b) of this SECTION 8.4.
8.5 DEFINED BENEFIT PENSION PLANS.
(a) The Chevron Corporation Retirement Plan and related excess benefit
plan (the "CHEVRON PENSION PLAN") shall retain the liability for the Affected
Employees' pension benefits accrued before their Employment Dates, shall fully
vest as of the Closing Date the Affected Employees who are participants in the
Chevron Pension Plan, and shall permit distributions to any Affected Employee
who is eligible to elect an immediate distribution as of his or her Employment
Date based upon his or her service and accrued benefit as of such Employment
Date. Chevron shall cause the Chevron Pension Plan to recognize the Affected
Employees' service with the Newco Group on and after their Employment Dates and
before a distribution is received from the Chevron Pension Plan for purposes of
determining eligibility to receive a benefit (including, without limitation,
eligibility to receive subsidized early retirement benefits, Social Security
supplements and ancillary benefits), but not for the purpose of accruing
additional benefits.
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8.6 QUALIFIED DEFINED CONTRIBUTION PLANS.
(a) The Chevron Corporation Profit Sharing/Savings Plan shall fully vest
as of the Closing Date the account balances of the Affected Employees who are
participants in such plan, and Chevron shall take such actions, if any, as may
be necessary to provide for the distribution to or on behalf of the Affected
Employees of their vested account balances. To the extent permitted by
applicable law, Affected Employees with loans outstanding under the Profit
Sharing/Savings Plan as of the Closing may directly rollover any such loan to
the NGC Profit Sharing/401(k) Savings Plan provided the loan has not been
accelerated at the time of the rollover. Chevron shall use its best efforts to
(i) permit each prospective Affected Employee to elect prior to the Closing Date
(with such election to be contingent upon the Closing and such individual
actually becoming an Affected Employee) a direct rollover of his or her
rolloverable Chevron Corporation Profit Sharing/Savings Plan account balance to
the NGC Profit Sharing/401(k) Savings Plan and (ii) cause the Chevron
Corporation Profit Sharing/Savings Plan to deliver to the NGC Profit
Sharing/401(k) Savings Plan on the Closing Date (or as soon thereafter as
reasonably practicable) the promissory notes and other loan documentation, if
any, of the Affected Employees who have elected such a direct rollover in
accordance with the procedures prescribed by Chevron.
(b) The NGC Profit Sharing/401(k) Savings Plan shall accept the direct
rollover as provided in Code section 401(a)(31) of electing Affected Employees'
benefits in cash and, if applicable, promissory notes that are not accelerated
from the Chevron Corporation Profit Sharing/Savings Plan and the Chevron
Corporation Retirement Plan.
8.7 SEVERANCE PLANS.
(a) If, within twelve months after his or her Employment Date, any of the
Affected Employees is terminated by the Newco Group for reasons other than
cause, or is required to transfer to a job location that is more than fifty (50)
miles from his or her current job location (other than a transfer that was a
condition of the original employment offer with the Newco Group) or to take a
reduction in base rate of pay, but refuses such transfer or reduction and
terminates his or her employment with the Newco Group within 10 days of notice
of such transfer or reduction, then the Newco Group shall (i) pay the Affected
Employee one-half of a month of his or her base rate of pay for each completed
or partial year of service with the Chevron Group and the Newco Group, subject
to a minimum of two (2) months and a maximum of 12 months of such pay; and (ii)
provide for the continuation of the Newco Group's active employee medical
coverage for three months after termination of employment with the same employee
contribution amounts that apply to the Newco Group's similarly situated active
employees. Service used for this purpose shall be the service recognized by the
Newco Group pursuant to SECTION 8.12 below.
(b) NGC and the Newco Group shall pay and be responsible for any and all
severance costs and expenses incurred by NGC or the Newco Group and the Chevron
Group shall pay and be responsible for any and all severance costs and expenses
incurred by any member of the Chevron Group with respect to any of the
Prospective Employees (including the relocation costs described in SECTION
8.4(C)). If the aggregate amount of severance costs and expenses paid and to be
paid by NGC and the Newco Group as a result of actions taken to give effect to
the transactions contemplated by this Agreement (excluding the amount paid and
to be paid pursuant to SECTION 8.7(A)), with respect to terminations that occur
during the period beginning on January 21, 1996, and ending on the date that is
90 calendar days after the Effective Time is less than $8,400,000, then, within
30 calendar days after the end of such period, the Surviving Corporation shall
pay an amount to Chevron equal to the sum of $8,400,000, less such severance
costs and expenses; provided, however, that the amount of such payment shall not
exceed the aggregate amount of severance costs and expenses paid and to be paid
during such period by the Chevron Group with respect to the Prospective
Employees who are terminated by the Chevron Group during such period.
8.8 VACATION PAY. Due to differences between Newco's vacation policies
relating to salaried employees and hourly employees, Chevron and NGC agree that
the parties shall take the following actions relating to accrued and unused
vacation time of the Affected Employees. As of the Closing, Chevron shall
41
pay all Affected Employees who are classified as salaried employees under
Newco's system of classification for their unused and accrued vacation. The
Newco Group shall give all such Affected Employees the right to take a vacation
before December 31, 1996, representing a pro rata amount of vacation earned
under the Newco Group vacation policy, and calculated by dividing the number of
full calendar months remaining in 1996 after the Closing by twelve and
multiplying the result by the number of weeks of vacation to which the Affected
Employee normally would be entitled under the Newco Group's vacation policy.
With respect to Affected Employees who are classified as hourly employees under
Newco's system of classification, the Newco Group shall assume responsibility
for such Affected Employees' accrued vacation as of their respective Employment
Dates, and such Affected Employees' vacation entitlements based on their
respective service after such Employment Dates shall be determined with
reference to Newco's vacation policy.
8.9 MEDICAL AND DENTAL PLANS. Each Affected Employee shall be eligible to
enroll in a medical and dental plan of the Newco Group as of his or her
Employment Date. If such Affected Employee was enrolled in the corresponding
plan of the Chevron Group immediately before his or her Employment Date, the
Surviving Corporation shall cause the Newco Group's medical and dental plans to
waive any preexisting condition limitations and to recognize each such Affected
Employee's expenditures under the corresponding Chevron medical, mental health,
substance abuse and dental plans (and those of his or her dependents who were
covered under such plans) for the calendar year in which the Employment Date
occurs toward any applicable deductible and annual out-of-pocket limit for such
calendar year.
8.10 POST-RETIREMENT WELFARE BENEFITS.
The Chevron Group shall be responsible for all post-retirement medical,
dental, life insurance coverage and all other benefits for the Remaining
Employees. The Chevron Group also shall make available its post-retirement
medical, dental and life insurance benefit coverage to any Affected Employee who
as of his or her Employment Date is eligible to receive and enroll in such
Chevron post-retirement welfare benefit coverage (the "ELIGIBLE AFFECTED
EMPLOYEES"). The Eligible Affected Employees shall be treated in the same
manner as other similarly situated employees of the Chevron Group who retired as
of the applicable Employment Date (and shall be subject to the rights of the
Chevron Group to amend or terminate such coverage with respect to such
employees).
8.11 THE NEWCO GROUP'S LIFE INSURANCE COVERAGE.
NGC agrees that as of an Affected Employee's Employment Date, the Affected
Employee may elect the Newco Group's supplemental life insurance coverage on his
or her life and dependent life insurance coverage without evidence of
insurability; provided, however, that supplemental life insurance coverage with
respect to an Affected Employee's spouse shall be made available without
evidence of insurability up to a maximum amount equal to the greater of (a)
$50,000 or (b) the level of insurance coverage in effect with respect to such
spouse under the corresponding plan of the Chevron Group immediately prior to
such Employment Date.
8.12 THE NEWCO GROUP'S OTHER EMPLOYEE BENEFITS; SERVICE RECOGNITION.
Except as otherwise specifically provided in this ARTICLE 8, NGC agrees
that as of their respective Employment Dates, the Affected Employees will be
eligible to participate in the employee benefit plans and programs of the Newco
Group that are maintained as of the Closing Date and are generally applicable to
employees of the Newco Group, and each Affected Employee's years of service for
eligibility and vesting (but not benefit accrual) purposes recognized under the
benefit plans and programs maintained by the Chevron Group for the period
preceding such Affected Employee's Employment Date shall be recognized for such
purposes under any comparable benefit plan or program maintained by the Newco
Group as of the Closing Date. If any employee benefit plan or program
established by the Newco Group after the Closing Date will recognize service
with the NGC Group for eligibility, vesting, benefit eligibility or benefit
accrual purposes, then such plan or program shall likewise recognize for such
purpose(s) the service with the Chevron Group for each similarly situated
Affected Employee.
42
8.13 GENERAL EMPLOYEE PROVISIONS. (a) The parties shall give any notices
required by law and take whatever other actions with respect to the plans,
programs and policies described in this ARTICLE 8 as may be necessary to carry
out the arrangements described in this ARTICLE 8.
(b) The parties shall provide each other with such plan documents and
descriptions, employee data or other information as may be reasonably required
to carry out the arrangements described in this ARTICLE 8.
(c) At Closing, Chevron will provide to the Surviving Corporation a list
of all Affected Employees' service in a form that shall be sufficient to permit
the Newco Group to fulfill its obligations under SECTION 8.12.
(d) If any of the arrangements described in this ARTICLE 8 are determined
by the IRS or other applicable governmental authority, or by a court of
competent jurisdiction, to be prohibited by law, Chevron and the Surviving
Corporation shall modify such arrangements to as closely as possible retain the
intent and economic benefits and burdens of the parties as reflected herein in a
manner which is not prohibited by law.
(e) In the event that the Newco Group knowingly hires any Remaining
Employee within six months after Closing, the Newco Group will notify Chevron of
such event as soon as possible after the hire date.
8.14 WARN ACT COMPLIANCE. Chevron shall provide to NGC and the Surviving
Corporation such information relating to any terminations by the Chevron Group
of employees made in respect of the Contributed Businesses or the Contributed
West Texas LPG Pipeline Business (other than Affected Employees) as is necessary
for the Surviving Corporation to comply with the provisions of the WARN Act.
8.15 SURVIVAL. Notwithstanding any other provisions of this Agreement,
all of the warranties and representations set forth in this ARTICLE 8 shall
survive the Closing for a period ending 90 days after the lapse of the
applicable limitations period for bringing a claim or otherwise filing a
complaint under applicable state or federal law, and all covenants and
agreements set forth in this ARTICLE 8 shall survive the Closing indefinitely.
This SECTION 8.15 shall not prejudice the survival of any other warranty,
representation or covenant under this Agreement.
ARTICLE 9
CERTAIN COVENANTS OF NGC, CHEVRON AND NEWCO
9.1 ACCESS TO INFORMATION. From the date of this Agreement through the
earlier of the Effective Time or the Termination Date, Chevron and NGC shall
(and each shall cause each of its Affiliates to) afford their respective
accountants, counsel and other representatives reasonable access to the
properties, books, Contracts, commitments, and records of the other necessary to
evaluate the Combination. Chevron will afford the Surviving Corporation's
accountants, counsel and other representatives reasonable access to the
properties, books, Contracts, commitments and records of Chevron relating to the
Contributed Businesses and the Contributed West Texas LPG Pipeline Business as
is reasonable and necessary for the Surviving Corporation to prepare and file
all reports, schedules and other information required pursuant to the
requirements of the NYSE, the federal securities laws, any applicable state
securities laws or any other Governmental Entity. All information obtained will
be subject to the Confidentiality Agreement, except to the extent that such
information is required to be disclosed pursuant to the immediately preceding
sentence.
9.2 PREPARATION OF THE PRELIMINARY PROXY STATEMENT AND THE DEFINITIVE
PROXY STATEMENT/PROSPECTUS. As promptly as practicable after the execution of
this Agreement, NGC shall prepare and file with the SEC the Preliminary Proxy
Statement and such other registration statements as NGC shall deem necessary in
connection with the transactions contemplated by this Agreement. The parties
shall cooperate with each other in providing any information that NGC or Chevron
may reasonably request to aid in the preparation of the Preliminary Proxy
Statement and the Definitive Proxy Statement/Prospectus. The parties will use
all reasonable efforts to respond to the comments of the SEC on the Preliminary
Proxy Statement and will make any further filings (including amendments and
supplements) in connection therewith that may be necessary, proper, or
advisable, and will use all reasonable efforts to cause the registration
statement of which the Definitive Proxy Statement/Prospectus is a part to be
declared effective by the SEC as soon as reasonably practicable. NGC will
provide Chevron, and Chevron will provide NGC, with whatever
43
information and assistance in connection with the foregoing filings that the
other may reasonably request. The form, substance, timing and necessity of any
such filings shall be as determined by NGC in its reasonable discretion;
provided, however, that NGC will provide Chevron a reasonable opportunity to
review and comment on the form, substance, timing and necessity of the proposed
filing prior to filing or distribution. NGC, Chevron and Newco will take all
actions that may be necessary, proper, or advisable under state securities laws
or regulations in connection with the public offerings for sale and issuance of
the Surviving Corporation Stock and other securities of the Surviving
Corporation as contemplated herein (other than qualifying to do business as a
foreign corporation in any jurisdiction or executing a general consent to
service of process in any jurisdiction). After taking such necessary actions and
immediately after the SEC declares the registration statement of which the
Definitive Proxy Statement/Prospectus is a part effective under the Securities
Act and/or NGC responds to all comments of the SEC on the Preliminary Proxy
Statement, NGC shall promptly distribute the Definitive Proxy
Statement/Prospectus to the NGC stockholders as required by the SEC, NYSE and
the DGCL. NGC shall call a meeting of its stockholders to be held as promptly as
practicable after the date of this Agreement for the purpose of voting on the
transactions contemplated by this Agreement and obtaining the NGC Stockholder
Approval. NGC shall, through its board of directors, recommend to its
stockholders approval of the Agreement and the transactions contemplated hereby.
Newco, NGC and Chevron will take all actions that may be necessary to list on
the NYSE the shares of Surviving Corporation Common Stock.
9.3 TAKING OF NECESSARY ACTION. Subject to the terms and conditions of
this Agreement and to applicable law, each of NGC and the Chevron shall use all
reasonable efforts promptly to take or cause to be taken all action and promptly
to do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
each of NGC and Chevron shall, and shall cause each of its Affiliates to, use
all reasonable efforts to obtain and make all consents, approvals, assurances or
filings of or with third parties and Governmental Entities necessary for the
consummation of the transactions contemplated by this Agreement, including,
without limitation, providing any and all information requested by the Federal
Trade Commission pursuant to its letter dated March 8, 1996; provided that
neither NGC nor Chevron shall be obligated hereby to divest itself of any asset,
property or operation in order to obtain any Requisite Regulatory Approval. It
is agreed that the listing of specific consents on SCHEDULE 12.3(E) shall not
affect the covenant of the parties contained herein to take all actions required
under this section regarding other consents. Each party shall cooperate with the
other in good faith to help the other satisfy its obligations in this SECTION
9.3. Each of NGC and Chevron shall execute and deliver and cause each of their
respective Subsidiaries and Affiliates to execute and deliver all such
instruments of conveyance, assignments, and other documents as may be required
or desirable to transfer and assign the assets and properties comprising the
Contributed Businesses and the Contributed West Texas LPG Pipeline Business to
Newco and to effect the transactions contemplated of this Agreement and the
Ancillary Agreements. If at any time after the Effective Time any further action
is necessary or desirable to vest the Surviving Corporation with the assets and
properties that comprise the Contributed Businesses, the Contributed West Texas
LPG Pipeline Business or the NGC Assets, the proper officers or directors of
each party to this Agreement shall take that necessary action.
9.4 EXPENSES. Whether or not the Combination is consummated, (i) NGC
shall pay all costs and expenses that it incurs in connection with this
Agreement and the transactions contemplated hereby, including without limitation
the fees and expenses of its counsel, accountants, Lehman Brothers and other
advisors (it being understood and agreed that NGC's costs shall include all
costs and expenses for the printing, filing and distribution of the Preliminary
Proxy Statement, and any amendments or supplements thereto, the Definitive Proxy
Statement/Prospectus and related materials) and (ii) Chevron shall pay all costs
and expenses that Chevron incurs in connection with this Agreement and the
transactions contemplated hereby, including without limitation the fees and
expenses of its counsel, accountants, Goldman Sachs & Co. and other advisors.
9.5 NOTICE OF CERTAIN CHANGES. Each party hereto shall give prompt
written notice to the other party hereto of the occurrence, or non-occurrence,
of any event which would be likely to cause any representation
44
or warranty herein to be untrue or inaccurate, or any covenant, condition or
agreement herein not to be complied with or satisfied and, upon written consent
of the second party, the first party shall be entitled to update, modify, amend
or replace any schedule hereto in order to rectify any such inaccuracy or
breach.
9.6 PRESS RELEASES. Attached as EXHIBIT 9.6 is a joint press release
which shall be issued promptly after the execution of this Agreement, without
any material modification. NGC and Chevron shall consult with each other as to
the form and substance of any other press release or other public disclosure of
matters related to this Agreement or any of the transactions contemplated by
this Agreement; provided, however, that nothing in this SECTION 9.6 shall be
deemed to prohibit any party to this Agreement from making any disclosure that
is required to fulfill that party's disclosure obligations imposed by law or
stock exchange requirements.
9.7 OPERATION OF CHEVRON FACILITIES. Commencing on the date hereof,
Chevron shall use all reasonable efforts promptly to obtain such consents,
amendments or other modifications to (i) joint operating agreements under which
any Contributing Party currently serves as an operator of a Chevron Facility
that are necessary to cause Newco and, upon consummation of the Combination, the
Surviving Corporation, to become the operator of each such Chevron Facility and
(ii) Joint Operating Agreements relating to the Contributed Businesses that are
necessary for Newco and, upon consummation of the Combination, the Surviving
Corporation, to be credited for Chevron's current share of production under such
Joint Operating Agreements for the purposes of profit distribution.
9.8 INFORMATION SUPPLIED BY NGC. The information in the Definitive Proxy
Statement/Prospectus relating to NGC and its Subsidiaries, as of the date of its
distribution to holders of NGC Corporation Stock, will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
9.9 INFORMATION SUPPLIED BY CHEVRON. The information in the Definitive
Proxy Statement/Prospectus provided by Chevron on the Contributed Businesses or
Chevron and its Subsidiaries and Affiliates at the date of the distribution of
the Definitive Proxy Statement to holders of NGC Corporation Stock, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 10
CONDUCT OF THE BUSINESS BY CHEVRON
During the period from the date of this Agreement through the earlier to
occur of the Effective Time or the Termination Date, Chevron agrees (except to
the extent NGC shall otherwise consent in writing, which consent shall not be
unreasonably withheld, and except as otherwise contemplated by this Agreement)
that:
10.1 ORDINARY COURSE. Chevron shall, and shall cause each of its
Subsidiaries and Affiliates to, (a) carry on the business relating to the
Contributed Businesses in the usual, regular and ordinary course and consistent
with past practices, (b) use its commercially reasonable best efforts to
preserve its business organization, maintain its rights and franchises, and
preserve its relationships with customers, suppliers and others having business
dealings with the Contributed Businesses and the Contributed West Texas LPG
Pipeline Business and (c) use its commercially reasonable efforts, consistent
with the terms of this Agreement, to keep available the services of sufficient
officers and employees to operate the Contributed Businesses and the Contributed
West Texas LPG Pipeline Business.
10.2 INCONSISTENT AGREEMENTS. Chevron shall not, and shall not permit any
of its Subsidiaries or Affiliates to, enter into any agreement or incur any
obligation, the terms of which would be violated by the consummation of the
transactions contemplated by this Agreement.
10.3 NO OTHER BIDS. From the date hereof, until the Termination Date,
Chevron shall not, nor shall it authorize or knowingly permit any officer,
director or employee of, or any investment banker, attorney, accountant or other
representative retained by, Chevron or any Subsidiary of Chevron to solicit,
initiate or
45
encourage the submission or communication of any Alternative Transaction or
Significant Disposition, or participate in any negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person with respect to an Alternative
Transaction or Significant Disposition. Chevron shall promptly notify NGC in
writing upon receipt of a proposal for an Alternative Transaction or Significant
Disposition, such notice to include a description of the material terms and
conditions of such Alternative Transaction or Significant Disposition and the
identity of the Person proposing the Alternative Transaction or Significant
Disposition.
10.4 PROHIBITED DISPOSITIONS. Except for sales of inventory in the
ordinary course of business or sales of other assets or properties which Chevron
reasonably determines, after consultation with NGC, are necessary or advisable
to obtain a Requisite Regulatory Approval, Chevron shall not, and shall not
permit any Subsidiary or Affiliate of Chevron to, sell, lease or otherwise
dispose of any of the assets or properties that comprise the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business having a market
value in excess of $1 million in any one transaction or in excess of $5 million
in the aggregate.
10.5 NEWCO. From the date hereof until immediately prior to the
contribution described in SECTION 2.1, Newco shall be and remain a shell
company, with no assets (other than minimal organizational capital),
liabilities, business or operations. Prior to the Effective Time, Chevron shall
not permit Newco to (a) hire or otherwise employ any individual or (b) adopt,
maintain, contribute to, or assume an obligation to adopt, maintain or
contribute to, any employee benefit plan, policy, program, agreement or
arrangement. Newco shall have three individuals, and no more, serving on its
board of directors at the Effective Time.
10.6 ISSUANCE AND SALE OF NEWCO SECURITIES. During the period commencing
on the date hereof and continuing through and including the Effective Time,
Newco shall not issue, deliver, sell or authorize or otherwise agree to the
issuance, delivery or sale of any stock appreciation rights or of any shares of
its capital stock or any class of securities convertible into, or rights,
warrants or options to acquire any shares of its capital stock, except as
contemplated by ARTICLE 2.
10.7 CAPITAL EXPENDITURES. During the Adjustment Period, neither Chevron
nor its Subsidiaries or Affiliates shall make any capital expenditures in
respect of the Contributed Businesses in an amount that exceeds $1 million for
any single transaction or with respect to any single asset or property
comprising a part of the Contributed Businesses or $5 million in the aggregate,
except for capital expenditures for which Newco or Chevron has received the
prior written consent of NGC, or except as set forth in SCHEDULE 10.7.
ARTICLE 11
CONDUCT OF BUSINESS BY NGC
During the period from the date of this Agreement through the earlier to
occur of the Effective Time or the Termination Date, NGC agrees (except to the
extent Chevron shall otherwise consent in writing, which consent shall not be
unreasonably withheld, and except as otherwise contemplated by this Agreement)
that:
11.1 ORDINARY COURSE. NGC shall, and shall cause each of its Subsidiaries
to, (a) carry on its businesses in the usual, regular and ordinary course and
consistent with past practices, (b) use its commercially reasonable best efforts
to preserve its business organization, maintain its rights and franchises, and
preserve its relationships with customers, suppliers and others having business
dealings with it, except where the failure to so act would not result in a
Material Adverse Effect on NGC, and (c) use its commercially reasonable efforts
to keep available the services of sufficient officers and employees to carry on
the business of NGC.
11.2 DIVIDENDS AND ISSUANCE AND SALE OF SECURITIES. NGC shall not (a)
except for its regularly scheduled quarterly dividends of $0.0125 per share,
declare or pay any dividend on or make any other distribution in respect of any
of its capital stock, (b) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of, its capital stock, (c) repurchase,
redeem or otherwise acquire any shares of its capital stock, except from
employees or their accounts under the Savings Plan upon the termination of their
employment, (d) issue, deliver, sell or authorize the issuance, delivery or sale
of any stock appreciation rights or of any shares of its
46
capital stock of any class or any securities convertible into, or rights,
warrants or options to acquire, any shares, except for (i) Options granted under
the NGC Plans as of the date hereof or options relating to an aggregate 100,000
shares which may be granted in the ordinary course of business hereafter and
(ii) the issuance, delivery or sale of shares of NGC Corporation Stock (A) upon
the exercise of Options granted under the NGC Plans as of the date hereof, in
accordance with their terms, or granted subsequently as permitted by clause (i)
above) (B) pursuant to the Savings Plan, (C) pursuant to the Purchase Plans or
(D) upon exercise of the Warrant, or enter into any agreement or understanding
with respect to the matters referred to in this SECTION 11.2. Neither NGC nor
any of its Subsidiaries shall sell or otherwise dispose of any securities of any
Subsidiary, or enter into any agreement or understanding with respect thereto,
except to the extent otherwise permitted hereunder.
11.3 GOVERNING DOCUMENTS; INCONSISTENT AGREEMENTS. NGC shall not (a)
amend its certificate of incorporation or bylaws, or (b) enter into, or permit
any Subsidiary to enter into, any agreement or incur any obligation, the terms
of which would be violated by the consummation of the transactions contemplated
by this Agreement.
11.4 SUBSTANTIVE ACTIONS; CHEVRON DIRECTORS. To the extent that under the
Certificate of Incorporation or Bylaws of NGC as in effect on the date hereof,
the affirmative vote of eight members of Board of Directors of the Corporation
or unanimous approval of the Executive Committee of NGC would be required in
order to take particular actions, enter into agreements or conduct operations
("SUBSTANTIVE ACTIONS"), from and after the date of this Agreement NGC shall
not take any such Substantive Actions without receiving the consent of Chevron.
In making its determination regarding the granting of such consent, Chevron
shall act in the same manner and with the same fiduciary responsibilities to the
stockholders of NGC as if it were a member of the Board of Directors considering
whether to grant approval to such Substantive Actions.
11.5 PROHIBITED DISPOSITIONS. Except for sales of inventory in the
ordinary course of business and except for sales of other assets and properties
which NGC reasonably determines, after consultation with Chevron, are necessary
or advisable to obtain a Requisite Regulatory Approval, NGC shall not, and shall
not permit any Subsidiary of NGC to, sell, lease or otherwise dispose of any of
its assets having a market value in excess of $5 million in any one transaction
or in excess of $10 million in the aggregate.
11.6 LINES OF BUSINESS. NGC will not and will not permit any Subsidiary
of NGC to enter into any new line of business.
11.7 ACCOUNTING METHODS. NGC will not change in any material respect its
methods of accounting (a) in effect at December 31, 1995, except as required by
law, IRS regulation or changes in generally accepted accounting principles with
which Arthur Andersen LLP, its current independent auditor (or any successor
thereto), concurs, or (b) for income and deductions for federal income tax
purposes from those employed in the preparation of the consolidated federal
income tax return of NGC for the taxable year ending December 31, 1995, except
as required by law or IRS regulation. NGC will not change its fiscal year.
11.8 NO OTHER BIDS. From the date hereof, until the Termination Date, NGC
shall not, nor shall it authorize or knowingly permit any officer, director or
employee of, or any investment banker, attorney, accountant or other
representative retained by, NGC or any Subsidiary of NGC to solicit, initiate or
encourage the submission or communication of any Alternative Transaction or
Significant Disposition, or participate in any negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person with respect to an Alternative
Transaction or Significant Disposition. NGC shall promptly notify Chevron in
writing upon receipt of a proposal for an Alternative Transaction or Significant
Disposition, such notice to include a description of the material terms and
conditions of such Alternative Transaction and the identity of the Person
proposing the Alternative Transaction or Significant Disposition.
47
ARTICLE 12
CONDITIONS
12.1 CONDITIONS TO ALL PARTIES' OBLIGATIONS REGARDING THE MERGER. The
obligations of all the parties to this Agreement to effect the Merger shall be
subject to the fulfillment of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or restraint issued by any court of competent
jurisdiction, no order, decree, restraint or pronouncement by any
Governmental Entity, and no other legal restraint or prohibition that would
prevent or have the effect of preventing the consummation of the
Combination shall be in effect; PROVIDED, HOWEVER, that no party hereto may
invoke this condition unless such party shall have complied fully with its
obligations under SECTION 9.3 hereof and, in addition shall have used all
reasonable efforts to have any such order, injunction, decree or other
restraint vacated.
(b) The Requisite Regulatory Approvals referenced in SECTION 4.4 and
SECTION 5.3 shall have been obtained and shall be in full force and effect,
other than any Requisite Regulatory Approvals that, if not obtained, would
not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Surviving Corporation. In addition,
no notice shall have been issued under the Exon-Florio Amendment by the
President of the United States or his designee stating an intention to
commence an investigation of any of the transactions contemplated hereby.
(c) The Definitive Proxy Statement/Prospectus shall have become
effective under the Securities Act, and no stop order suspending its
effectiveness shall have been issued.
(d) The NYSE shall have confirmed in writing that the Surviving
Corporation Common Stock has been accepted for listing, subject to official
notice of issuance.
(e) No action, suit, or proceeding by the U.S. Department of Justice
or the Federal Trade Commission shall be pending or threatened which would
materially and adversely affect the right of British Gas, NOVA and certain
other of the Clearinghouse Owners and Chevron, collectively, following
consummation of the Merger, to control the Surviving Corporation and its
Subsidiaries or for the Surviving Corporation and its Significant
Subsidiaries to own their respective assets and to operate their respective
businesses, including, without limitation, the Contributed Businesses.
(f) The NGC Stockholder Approval shall have been obtained.
12.2 CONDITIONS TO THE OBLIGATIONS OF CHEVRON REGARDING THE
COMBINATION. The obligation of Chevron to effect the Combination shall be
subject to the prior satisfaction of the following conditions (each of which may
be waived by Chevron in its sole discretion):
(a) The representations and warranties of NGC contained in this
Agreement shall have been true and correct on the date of this Agreement
and at and on the Closing Date as though such representations and
warranties were made at and on such date, other than such breaches of such
representations and warranties which in the aggregate would not reasonably
be expected to have a Material Adverse Effect on NGC in an aggregate amount
exceeding $25 million (including, without duplication, the effect of any
Casualty Loss suffered by NGC); provided, however, that in evaluating
whether there has been a breach of any representation or warranty for the
purposes of this SECTION 12.2(A), any provision of the applicable
representation or warranty limiting it to matters within the "knowledge"
or "best knowledge" of a party or having a Material Adverse Effect or
otherwise containing a limitation or exception relating to materiality
shall be disregarded and shall not be taken into account in determining the
existence or magnitude of such a breach.
(b) NGC shall have performed and complied in all material respects
with all agreements, obligations and conditions required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
(c) Chevron shall have received an opinion of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., counsel for NGC, in substantially the form of EXHIBIT
12.2(C).
48
(d) Chevron shall have received tax representations in substantially
the form attached hereto as EXHIBIT 12.2(D) from British Gas, NOVA and C.
L. Watson and Steve Bergstrom so that, upon consummation of the
Combination, not less than 80% of the aggregate issued and outstanding
shares of Surviving Corporation Common Stock are covered by such tax
representations (assuming that all of Chevron's shares of Surviving
Corporation Common Stock are covered by such tax representation).
(e) Each Ancillary Agreement to which NGC or any of its Subsidiaries
or Affiliates is a party shall have been executed and delivered by NGC and
such Subsidiaries and Affiliates (as applicable).
12.3 CONDITIONS TO THE OBLIGATIONS OF NGC REGARDING THE COMBINATION. The
obligations of NGC to effect the Combination shall be subject to the prior
satisfaction of the following conditions (each of which may be waived by NGC in
its sole discretion):
(a) The representations and warranties of Chevron contained in this
Agreement shall have been true and correct on the date of this Agreement
and at and on the Closing Date as though such representations and
warranties were made at and on such date, other than such breaches of such
representations and warranties which in the aggregate would not reasonably
be expected to have a Material Adverse Effect on or with respect to the
Contributed Businesses and the Contributed West Texas LPG Pipeline
Business, taken as a whole, in an aggregate amount exceeding $25 million
(including, without duplication, the effect of any Casualty Loss suffered
by Chevron and the fair value of any Retained Assets, as described in
SECTION 2.4); provided, however, that in evaluating whether there has been
a breach of any representation or warranty for the purposes of this SECTION
12.3(A), any provision of the applicable representation or warranty
limiting it to matters within the "knowledge" or "best knowledge" of a
party having a Material Adverse Effect or otherwise containing a limitation
or exception relating to materiality shall be disregarded and shall not be
taken into account in determining the existence or magnitude of such a
breach.
(b) Chevron shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) NGC shall have received an opinion of Pillsbury Madison & Sutro
LLP, counsel for Chevron, in substantially the form of EXHIBIT 12.3(C).
(d) Chevron and Newco shall have each executed and delivered the
Contribution and Assumption Agreement.
(e) Chevron shall have received all of the material consents from
third parties listed on SCHEDULE 12.3(E) hereto, in form and substance
reasonably satisfactory to NGC, prior to or on the Closing Date.
(f) Chevron shall have caused each officer of Newco to resign
effective as of the Effective Time, unless any such officer is named in
SCHEDULE 2.2(E), in which case such officer shall remain as an officer of
the Surviving Corporation and shall serve until his successor is duly
elected and qualified.
(g) NGC shall have received tax representations in substantially the
form attached hereto as EXHIBIT 12.3(G)(I) from Chevron, and shall have
received the Code Section 1445 Affidavit attached hereto as EXHIBIT
12.3(G)(II) from Chevron.
(h) Each Ancillary Agreement to which Chevron or any of its
Subsidiaries or Affiliates is a party shall have been executed and
delivered by Chevron and such Subsidiaries and Affiliates (as applicable).
49
ARTICLE 13
TERMINATION
13.1 TERMINATION. This Agreement may be terminated, with the effect set
forth in SECTION 13.3, at any time before the Effective Time:
(a) by written consent of Chevron and NGC, which termination shall be
approved by the board of directors of NGC and Chevron, respectively;
(b) by either NGC or Chevron, if the Effective Time shall not have
occurred by 5:00 p.m., Houston, Texas time, on September 30, 1996,
PROVIDED, HOWEVER, that the right to terminate this Agreement under this
SECTION 13.1(B) shall not be available to any party whose failure to
fulfill any covenant under SECTION 9.3 under this Agreement has been the
cause of or resulted in the failure of the Combination to occur on or
before such date;
(c) by either NGC or Chevron, if a Governmental Entity shall have
issued an order, decree, or ruling or taken any other action, in each case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Combination;
(d) by NGC, upon a breach of any representation, warranty or covenant
(other than SECTION 10.3) on the part of Chevron set forth in this
Agreement, or if any representation or warranty of Chevron shall have
become untrue, in either case, such that the conditions set forth in
SECTIONS 12.1 OR 12.3 would not be satisfied (a "TERMINATING CHEVRON
BREACH"), provided, that if such Terminating Chevron Breach is cured by
Chevron within 30 calendar days after notice thereof through the continuous
exercise of its reasonable best efforts, then NGC may not terminate this
Agreement under this SECTION 13.1(D);
(e) by Chevron, upon a breach of any representation, warranty or
covenant (other than SECTION 11.8) on the part of NGC set forth in this
Agreement, or if any representation or warranty of NGC shall have become
untrue, in either case, such that the conditions set forth in SECTIONS 12.1
OR 12.2 would not be satisfied (a "TERMINATING NGC BREACH"), provided,
that if such Terminating NGC Breach is cured by NGC within 30 calendar days
after notice thereof through the continuous exercise of its reasonable best
efforts, then Chevron may not terminate this Agreement under this SECTION
13.1(E);
(f) by NGC, if Chevron is in breach of SECTION 10.3; or
(g) by Chevron, if NGC is in breach of SECTION 11.8.
Termination of this Agreement pursuant to this SECTION 13.1 shall be effected by
written notice by the party terminating the Agreement to the other party setting
forth the basis for such termination. The date such notice is received shall be
deemed the "TERMINATION DATE."
13.2 TERMINATION DUE TO TITLE MATTERS.
(a) During the period prior to and including June 15, 1996, each party
may, to the extent it deems appropriate, conduct, at its sole cost, such
additional title examination or investigation as it may choose to conduct with
respect to the Facilities of the other party to determine if the representations
set forth in SECTIONS 4.16 and 5.18 (as applicable) are true and correct. Each
party shall confine its title examination and investigation of the other party's
Facilities to public records, the files and records of the other party and
abstracts and other title information in the possession of or prepared by third
parties in the business of investigating or examining title. In connection with
such examination and investigation, each of NGC and Chevron shall make available
to the other party all title opinions, supplemental title opinions and other
title information in their possession relating to the NGC Facilities and the
Chevron Facilities (the "FACILITIES"), as applicable. During the course of
each party's investigation, each party shall confer with the other party
concerning any Defects or potential Defects identified during such
investigation. At the close of business on June 15, 1996, each party shall cease
its title investigation and examination and shall prepare a schedule (a "DEFECT
SCHEDULE") setting forth in reasonable detail each Defect in title to the other
party's Facilities that were identified as a result of the first party's
examination or otherwise. A party's Defect Schedule shall be
50
delivered to the other party by no later than the close of business on June 21,
1996. In the event that a party does not provide a Defect Schedule to the other
party on or before June 21, 1996, then such party has no right to terminate this
Agreement pursuant to paragraph (b) below and such party shall be precluded from
counting any Defect detected, discovered or otherwise brought to such party's
attention towards the $25 million Material Adverse Effect threshold set forth in
SECTION 12.2(A) and SECTION 12.3(A), as applicable; provided, however, that the
failure to so provide a Defect Schedule shall in no way prejudice any rights
that either party might have under ARTICLE 14 after the Closing Date.
(b) If either party reasonably believes that the defects identified in its
Defect Schedule would cause a diminution in the value of the other party's
Facilities of $10 million or more (in the aggregate), then the first party shall
set forth in its Defect Schedule such party's best estimate of the diminution in
value in the applicable Facility caused by each Defect and the aggregate
diminution in value of the applicable Facilities caused by all of the Defects
listed in the schedule. After receipt of the Defect Schedule, the parties shall
confer and may mutually agree for the second party to take such actions as the
first party deems reasonably necessary to cure any such Defects, including, in
the case of Chevron, retaining such asset and its value as a Retained Asset
pursuant to SECTION 2.4 hereof. In the event the parties are unable to so agree,
then the first party may terminate this Agreement without liability to either
party.
(c) If a party provides the other party with a Defect Schedule but does
not believe that the Defects listed thereon would cause a diminution in the
value of the other party's Facilities of $10 million or more (in the aggregate),
then the first party shall not be entitled to terminate this Agreement as a
result of such Defects but shall be entitled to (i) count any Defect listed on
such schedule, along with other losses for breaches of representations,
warranties, covenants and agreements, towards the $25 million Material Adverse
Effect threshold set forth in SECTION 12.2(A) and SECTION 12.3(A) and (ii)
assert a claim for indemnification relating to each such Defect pursuant to
ARTICLE 14, but only to the extent that such Defect results in a Loss pursuant
to SECTION 14.1(C).
(d) Each party's rights under this Section shall be in addition to, and
not in limitation of, any rights of access or inspection which such party may
otherwise have under this Agreement.
13.3 EFFECT OF TERMINATION.
(a) If this Agreement is terminated by either Chevron or NGC as provided
in SECTION 13.1(A), 13.1(B), 13.1(C), or 13.2 of this Agreement, then this
Agreement shall become void and there shall be no liability or obligation with
respect to the terminated provisions of this Agreement on the part of Chevron or
NGC, or their respective officers or directors; provided, however, that in the
event that this Agreement is terminated pursuant to SECTION 13.1(B), then the
terms of SECTION 13.3(D) shall survive the termination of this Agreement in
accordance with its terms.
(b) If this Agreement is terminated by NGC pursuant to SECTION 13.1(F),
then Chevron shall pay to NGC, on the first Business Day following such
termination, the amount of $30 million by wire transfer of immediately available
funds to an account designated by NGC, as liquidated damages, but not as a
penalty. NGC agrees that said cash payment shall be its sole and total damages
and relief hereunder in the event of such a breach. The parties to this
Agreement acknowledge and agree that NGC's actual damages, in the event of a
termination pursuant to SECTION 13.1(F), would be difficult to ascertain because
of the uncertainties of estimating the value of NGC's expenses and management
time in pursuing the Combination and its lost opportunity costs. Because of this
uncertainty and the differences of opinion with relating thereto, NGC agrees
that such amount is reasonable as liquidated damages; provided, however, that in
no event shall Chevron be obligated to pay NGC $30 million in liquidated damages
under this SECTION 13.3(B) if NGC, at the time it terminated this Agreement,
could not satisfy the conditions set forth in SECTIONS 12.2(A) and 12.2(B).
(c) If this Agreement is terminated by Chevron pursuant to SECTION
13.1(G), then NGC shall pay to Chevron, on the first Business Day following such
termination, the amount of $30 million by wire transfer of immediately available
funds to an account designated by Chevron, as liquidated damages, but not as a
penalty. Chevron agrees that said cash payment shall be its sole and total
damages and relief hereunder in
51
the event of such a breach. The parties to this Agreement acknowledge and agree
that Chevron's actual damages, in the event of a termination pursuant to SECTION
13.1(G), would be difficult to ascertain because of the uncertainties of
estimating the value of Chevron's expenses and management time in pursuing the
Combination and its lost opportunity costs. Because of this uncertainty and the
differences of opinion with relating thereto, Chevron agrees that such amount is
reasonable as liquidated damages; provided, however, that in no event shall NGC
be obligated to pay Chevron $30 million in liquidated damages under this SECTION
13.3(C) if Chevron, at the time it terminated this Agreement, could not satisfy
the conditions set forth in SECTIONS 12.3(A) and 12.3(B).
(d) If within six (6) months following the Termination Date, either
Chevron or NGC (an "ACTING PARTY") signs a definitive agreement concerning, or
issues a public announcement contemplating consummation of, an Alternative
Transaction or a Significant Disposition with any Person or Affiliate of such
Person who, prior to the Termination Date, has made or caused to be made a
proposal to such Acting Party communicating price terms for an Alternative
Transaction or a Significant Disposition, then the Acting Party shall pay to the
other party, on the first Business Day following such action, the amount of $30
million in liquidated damages by wire transfer of immediately available funds to
an account designated by the other party; provided, however, that in no event
shall the Acting Party be obligated to pay $30 million in liquidated damages
under this SECTION 13.3(D) if this Agreement was terminated by the Acting Party
as a result of a failure by the other party to satisfy any of the conditions set
forth in SECTION 12.2 and 12.3, as applicable.
(e) The parties hereto acknowledge and agree that (i) in no event shall
more than $30 million in liquidated damages be paid under the provisions of
paragraphs (b), (c) or (d) above and (ii) in the event that either party pays or
is obligated to pay $30 million in liquidated damages under such sections, each
party hereto shall thereafter be free to effect an Alternative Transaction or
Significant Disposition at any time without recourse by any other party.
(f) No termination of this Agreement pursuant to SECTIONS 13.1(D) OR
13.1(E) shall relieve any party hereto of any liability for any breach or
default by such party hereunder and the parties shall have such rights, if any,
against each other in respect of any breach or default as may exist at law or in
equity.
(g) The termination of this Agreement shall not relieve any party of its
obligation to pay costs and expenses as provided under SECTION 9.4 or its
obligations under this SECTION 13.3 of this Agreement.
ARTICLE 14
INDEMNIFICATION
14.1 GENERAL PROVISIONS.
(a) This ARTICLE 14 reflects the parties' agreement to limit potential
recoveries from and after the Closing for breaches of representations or
warranties, or express indemnities made in this Agreement. Nothing in this
Article restricts any party from enforcing other covenants or other agreements
made in this Agreement.
(b) The parties hereto agree that the sole recourse, from and after the
Closing for breach of a representation or warranty made in this Agreement shall
be indemnities for Loss or Losses, or Net Loss or Losses, as provided for in
this ARTICLE 14, except as otherwise provided in ARTICLE 7 hereof.
(c) As used in this Agreement, "LOSS" or "LOSSES" shall mean with
respect to a specific Discrete Claim (and regardless of whether one or more of
the following pertain to a particular matter), (A) in the case of a Third-Party
Claim (hereinafter defined), the sum of all actual and reasonable out-of-pocket
costs and expenses incurred in connection with the investigation and defense
thereof, any judgments, fines or amounts paid in settlement thereof, and
additional losses, costs or expenses reasonably incurred to comply with any
settlement, judgment or order imposed thereby, or otherwise resulting from such
Third Party Claim which has been finally adjudicated or settled, (B) in the case
of an Environmental Remediation Claim (hereinafter defined), all actual
out-of-pocket expenses incurred in connection with the clean-up or
52
remediation of the affected property in accordance with the terms of the
Clean-up Plan but, in all cases, subject to the limitations set forth in SECTION
14.6(G), and (C) in the case of any complete or partial absence or loss (or
impairment) of use of any property or asset which is the subject of a
representation or warranty in this Agreement and which absence or loss (or
impairment) of use results from or relates to a breach of such representation or
warranty, an amount equal to the lesser of the damages proximately caused by
such partial or complete absence or loss (or impairment) of use or the necessary
replacement cost of such asset. A Loss suffered by an Equity Affiliate of a
Person shall be deemed suffered by that Person to the extent of that Person's
equity ownership of the Equity Affiliate.
(d) As used in this Agreement, the term "NET LOSSES" shall be equal to
the product of (i) the cumulative amount of all Losses incurred, suffered or
paid by the Surviving Corporation under SECTIONS 6.2 AND 14.3 as of a particular
date, MULTIPLIED by (ii) the Chevron Casualty Loss Ratio; provided, however,
that at such time as the aggregate number of shares of Surviving Corporation
Common Stock and Series A Participating Preferred Stock beneficially owned by
the Contributing Parties represents less than 25% of the aggregate number of
shares of Surviving Corporation Common Stock and Series A Participating
Preferred Stock (on a fully diluted basis), thereafter the ratio used to
calculate Net Losses shall be equal to a fraction, (A) the numerator of which is
the aggregate number of shares of Surviving Corporation Common Stock and Series
A Participating Preferred Stock beneficially owned by the Contributing Parties
on the Closing Date or as of the date on which the notice covering such claim is
provided to the Surviving Corporation, whichever is less, and (B) the
denominator of which is the aggregate number of shares of Surviving Corporation
Common Stock and Series A Participating Preferred Stock, on a fully diluted
basis, on such date, less the number of shares included in the numerator.
(e) For the purposes of this Agreement, the term "DISCRETE CLAIM" shall
mean any (i) (x) discrete or single occurrence, site specific condition, act or
other event, whether a breach of a Contract, a Release of Hazardous Materials, a
violation of an Environmental and Safety Law or otherwise, that causes a Loss
specified in SECTION 14.1(C)(A)-(C) and (y) without limiting the scope of clause
(x) above, in the case of an Environmental Remediation Claim, one or more
Releases of the same or substantially the same Hazardous Material, from or at
the same location regardless of whether such Releases resulted from the same
event or from multiple events over time.
(f) Except as provided in ARTICLES 7 and 8, all representations and
warranties shall survive for a two year period following the Closing Date and
shall terminate at the expiration of such period except with respect to Discrete
Claims for which a valid notice has been given prior to the expiration of such
two year period. In order for a notice to be considered "valid" for the
purposes of the preceding sentence, such notice shall conform in all material
respects with the applicable requirements set forth in this Agreement,
including, without limitation, SECTION 14.5(A) (in the case of a notice covering
a Third-Party Claim), SECTION 14.6(A) (in the case of a notice covering an
Environmental Remediation Claim) and SECTION 14.7 (in the case of a notice
covering a Use Claim).
(g) Except with respect to matters which are assumed by an Indemnifying
Party pursuant to the provisions of SECTIONS 14.5 or 14.6 (and with respect to a
matter to which ARTICLE 7 applies), the Indemnifying Party shall in no event be
obligated to make any payments to the Indemnified Party with respect to a Loss
or Net Loss (as the case may be) resulting from a Discrete Claim covered by a
notice provided within the survival period of the applicable representation,
warranty, covenant or agreement unless and until an invoice or statement
describing in reasonable detail the costs incurred in respect of such Loss or
Net Loss has been provided by the Indemnified Party to the Indemnifying Party.
The contents of, and time frames prescribed for, the payment of such statements
or invoices are governed by SECTIONS 14.5(A), 14.6(A) and 14.7 hereof; provided,
however, that the date on which the Indemnifying Party provides the Indemnified
Party with such invoice or statement shall not have any effect on the survival
of the indemnities set forth herein but shall only govern the date on which the
Indemnified Party is entitled to payment for any Net Loss or Losses covered by
such indemnities.
14.2 INDEMNIFICATION BY CHEVRON. Subject to the limitations in SECTION
16.1 and SECTION 14.4 and the other provisions of this ARTICLE 14, Chevron
agrees to defend, indemnify and hold harmless the
53
Surviving Corporation and its Subsidiaries and Affiliates and their respective
officers, directors, employees, agents and Affiliates (the "NGC INDEMNITEES")
against any and all Losses suffered, incurred or paid by any of them caused by
or arising from a breach of any representation, warranty, covenant or agreement
made by Chevron and contained in this Agreement; provided, however, that in
evaluating whether there has been a breach of a representation, warranty,
covenant or agreement (each, a "REPRESENTATION") to which the indemnification
obligations contained in this section are applicable, any provision of the
applicable Representation limiting it to matters within the "knowledge" or
"best knowledge" of a party or matters having a Material Adverse Effect shall
be disregarded, it being intended that the limitations on the rights of the
parties contained in SECTION 14.4 below shall determine whether a matter
constitutes a breach of the applicable Representation which is properly a
subject of indemnification under this ARTICLE 14. This SECTION 14.2 shall not
apply to a breach by Chevron of any representations and warranties regarding
matters specifically covered by ARTICLE 7.
14.3 INDEMNIFICATION BY NGC. Subject to the limitations in SECTION 16.1
and SECTION 14.4 and the other provisions of this ARTICLE 14, NGC agrees to
defend, indemnify and hold harmless Chevron and its Subsidiaries and Affiliates
(other than Newco or, upon consummation of the Merger, the Surviving
Corporation), and their respective officers, directors, employees, agents and
Affiliates (the "CHEVRON INDEMNITEES") against any and all Losses suffered,
incurred or paid by any of them or the Surviving Corporation caused by or
arising from a breach of any representation, warranty, covenant or agreement
contained in this Agreement; provided, however, that in evaluating whether there
has been a breach of a Representation to which the indemnification obligations
contained in this section are applicable, any provision of the applicable
Representation limiting it to within the "knowledge" or "best knowledge" of
a party or matters having a Material Adverse Effect shall be disregarded, it
being intended that the limitations on the rights of the parties contained in
SECTION 14.4 below shall determine whether a matter constitutes a breach of the
applicable Representation which is properly a subject of indemnification under
this ARTICLE 14. This SECTION 14.3 shall not apply to a breach by NGC of any
representations and warranties regarding matters specifically covered by ARTICLE
7.
14.4 LIMITATION OF LIABILITY. Except for the indemnities provided in
ARTICLE 7 of this Agreement:
(a) Chevron shall not be obligated to indemnify the NGC Indemnitees
unless and until the cumulative amount of all Losses incurred, suffered or
paid by all of the NGC Indemnitees under SECTION 6.1 AND 14.2 exceeds $10
million in the aggregate or unless the cumulative amount of (i) all Losses
actually incurred, suffered or paid by all of the Chevron Indemnities
hereunder and (ii) all Net Losses indirectly suffered by the Chevron
Indemnities resulting from Losses suffered by the Surviving Corporation
under SECTIONS 6.2, AND 14.3 exceeds $10 million in the aggregate,
whereupon the NGC Indemnitees shall be entitled to indemnification
hereunder for the full amount of all such Losses and shall thereafter be
entitled to indemnification of Losses as such Losses are incurred (subject
to paragraph (c) below).
(b) The Surviving Corporation shall not be obligated to indemnify the
Chevron Indemnitees under SECTIONS 6.2, AND 14.3 and unless and until the
cumulative amount of (i) all Losses actually incurred, suffered or paid by
all of the Chevron Indemnitees hereunder and (ii) all Net Losses indirectly
suffered by the Chevron Indemnitees resulting from Losses suffered by the
Surviving Corporation under SECTIONS 6.2 AND 14.3 exceeds $10 million in
the aggregate, or unless the cumulative amount of all Losses actually
incurred, suffered or paid by the NGC Indemnities under SECTIONS 6.1 AND
14.2 exceeds $10 million, whereupon the Chevron Indemnitees shall be
entitled to indemnification hereunder for the full amount of all such
Losses and Net Losses and shall thereafter be entitled to indemnification
of Losses and Net Losses thereafter as such Losses and Net Losses are
incurred (subject to paragraph (c) below). In computing the amount of any
Net Loss arising from any Environmental Remediation Claim, there shall be
deducted from the amount of the applicable Loss relating to the assets
described in SCHEDULE 14.4 hereto, an amount up to the amount set forth in
such Schedule relating to such asset to take into account the accruals for
environmental purposes previously taken by NGC with respect to such assets.
54
(c) Neither Chevron nor the Surviving Corporation shall be obligated
to indemnify the NGC Indemnitees or the Chevron Indemnitees, respectively,
under SECTIONS 6.1, 6.2, 14.2 AND 14.3, as applicable, for a particular
Discrete Claim unless the collective Losses incurred, suffered or paid by
the NGC Indemnitees or the Chevron Indemnitees, as applicable, with respect
to such claim exceeds $200,000. If the amount of collective Losses
incurred, suffered or paid in connection with such Discrete Claim is less
than $200,000, such Losses shall not be counted in calculating the
aggregate amount of all Losses for purposes of sub-paragraphs (a) and (b)
above.
14.5 INDEMNIFICATION PROCEDURES: THIRD PARTY CLAIMS. A party claiming
indemnification under this Agreement (the "INDEMNIFIED PARTY") as a result of
a liability owed by a party hereto to a third party or a claim otherwise
advanced by a third party against a party hereto, either actual or asserted by
the third party, including any claims brought under ARTICLES 6, 8 AND 14 (but
specifically excepting any claim brought under ARTICLE 7) (each, a "THIRD-PARTY
CLAIM") against the Indemnified Party shall follow the following procedures to
assert and resolve such claims for indemnification:
(a) An Indemnified Party claiming indemnification under this
Agreement as a result of a Third-Party Claim shall (i) notify the Party
from whom indemnification is sought (the "INDEMNIFYING PARTY") of any
Third-Party Claim or Claims asserted against the Indemnified Party which
could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party a written notice ("CLAIM NOTICE")
describing in reasonable detail the nature of the Third Party Claim, a copy
of all papers served with respect to such Third-Party Claim (if any), an
estimate of the amount of damages attributable to the Third-Party Claim and
the basis of the Indemnified Party's request for indemnification under this
Agreement.
Within sixty (60) days after receipt of any Claim Notice (the "ELECTION
PERIOD"), the Indemnifying Party shall notify the Indemnified Party (i) whether
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this ARTICLE 14 with respect to such Third-Party Claim and (ii) whether
the Indemnifying Party desires to defend the Indemnified Party against such
Third-Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this SECTION 14.5(B) and
that the Indemnifying Party elects to assume the defense of the Third-Party
Claim, then the Indemnifying Party shall have the right to defend, at its
sole cost and expense, such Third-Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this SECTION 14.5(B). The
Indemnifying Party shall have full control of such defense and proceedings;
provided, however, that the Indemnifying Party may not settle a Third-Party
Claim (unless the settlement contains a full and complete release of the
Indemnified Party) without the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld. The Indemnified Party is
hereby authorized, at the sole cost and expense of the Indemnifying Party
(but only if the Indemnified Party is actually entitled to indemnification
hereunder or if the Indemnifying Party assumes the defense with respect to
the Third-Party Claim), to file, during the Election Period, any motion,
answer or other pleadings which the Indemnified Party shall deem necessary
or appropriate to protect its interests or those of the Indemnifying Party
and which are not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action
which is prejudicial and conclusively causes a final adjudication which is
adverse to the Indemnifying Party, the Indemnifying Party shall be relieved
of its obligations hereunder with respect to such Third-Party Claim). If
requested by the Indemnifying Party, the Indemnified Party agrees, at the
sole cost and expense of the Indemnifying Party, to cooperate with the
Indemnifying Party and its counsel in contesting any Third-Party Claim
which the Indemnifying Party elects to contest, including, without
limitation, the making of any related counterclaim against the Person
asserting the Third-Party Claim or any cross-complaint against any Person.
The Indemnified Party may participate in, but not control, any defense or
settlement of any Third-Party Claim controlled by the Indemnifying Party
pursuant to this SECTION 14.5(B) and shall bear its own costs and expenses
with respect to such participation.
55
(c) (i) If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to
defend the Indemnified Party pursuant to SECTION 14.5(B), (ii) if the
Indemnifying Party elects to defend the Indemnified Party pursuant to
SECTION 14.5(B) but fails to diligently and promptly prosecute or settle
the Third-Party Claim, or (iii) if the Indemnified Party shall have
reasonably concluded that there is a conflict of interest between the
Indemnifying Party and Indemnified Party such that joint representation in
the conduct of the defense or settlement of such Third-Party Claim is
inappropriate, then the Indemnified Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party, the Third-Party
Claim by all appropriate proceedings, which proceedings shall be promptly
and vigorously prosecuted by the Indemnified Party to a final conclusion or
settled. The Indemnified Party shall have full control of such defense and
proceedings; provided, however, that the Indemnified Party may not enter
into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld, any compromise or settlement of such Third-Party
Claim. Notwithstanding the foregoing, if the Indemnifying Party has
delivered a written notice to the Indemnified Party to the effect that the
Indemnifying Party disputes its potential liability to the Indemnified
Party under this ARTICLE 14 and if such dispute is resolved in favor of the
Indemnifying Party by final, nonappealable order of a court of competent
jurisdiction, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this
SECTION 14.5 or of the Indemnifying Party's participation therein at the
Indemnified Party's request and the Indemnified Party shall reimburse the
Indemnifying Party in full for all costs and expenses of such litigation.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this SECTION
14.5, and the Indemnifying Party shall bear its own costs and expenses with
respect to such participation.
(d) Payments of all amounts owing by the Indemnifying Party with
respect to a Third-Party Claim shall be made within thirty (30) days after
the latest of (i) the settlement of the Third-Party Claim, (ii) the
expiration of the period for appeal of a final adjudication of such
Third-Party Claim or (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
14.6 INDEMNIFICATION PROCEDURES: ENVIRONMENTAL REMEDIATION CLAIMS. An
Indemnified Party claiming indemnification under this Agreement for costs and
expenses necessary to take corrective action to remediate the assets comprising
the Chevron Facilities or the NGC Facilities or Former NGC Facilities, as
applicable, resulting from the indemnities provided in ARTICLE 6 (an
"ENVIRONMENTAL REMEDIATION CLAIM") shall follow the following procedures to
assert and resolve such claims for indemnification:
(a) An Indemnified Party claiming indemnification under this
Agreement as a result of a Environmental Remediation Claim shall (i) notify
the Indemnifying Party of such Environmental Remediation Claim or Claims
which could give rise to a right of indemnification under this Agreement
and (ii) transmit to the Indemnifying Party a written plan ("CLEAN-UP
PLAN") describing in reasonable detail (i) the nature of the Environmental
Remediation Claim, (ii) the scope and nature of remedial and clean-up
operations proposed to be undertaken by the Indemnified Party to correct
the Environmental Remediation Claim and (iii) an estimate of the amount of
damages attributable to the Environmental Remediation Claim that are
covered by ARTICLE 6 and the basis of the Indemnified Party's request for
indemnification under this Agreement.
Within sixty (60) days after receipt of any Clean-up Plan (the
"ENVIRONMENTAL ELECTION PERIOD"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this SECTION 14.6 with respect to
such Environmental Remediation Claim and (ii) whether the Indemnifying
Party (A) accepts the Clean-up Plan or (B) desires to take corrective
measures, at its sole cost and expense, to remediate the property
associated with the Environmental Remediation Claim.
(b) In the event that the Indemnifying Party notifies the Indemnified
Party within the Environmental Election Period that the Indemnifying Party
does not dispute its potential liability to the Indemnified Party under
this ARTICLE 14 and that the Indemnifying Party accepts the Indemnified
56
Party's Clean-up Plan, then the Indemnified Party shall have the right to
proceed in remediating the property or properties subject to the
Environmental Remediation Claims in accordance with the Clean-up Plan;
provided, however, that the Indemnified Party shall use its best efforts to
conduct such remedial and clean-up operations in conformity with the
Clean-up Plan.
(c) In the event that the Indemnifying Party fails to notify the
Indemnified Party within the Environmental Election Period regarding the
Clean-up Plan, then the Indemnifying Party shall be deemed to have
conclusively approved the Clean-up Plan and the costs associated with
implementing such plan and the Indemnified Party shall have the right to
proceed in remediating the property or properties subject to the
Environmental Remediation Claims in accordance with the Clean-up Plan;
provided, however, that the Indemnified Party shall use its best efforts to
conduct such remedial and clean-up operations in conformity with the
Clean-up Plan.
(d) Subject to the limitations set forth in SECTION 14.4, the
Indemnified Party shall invoice the Indemnifying Party as soon as
practicable following the end of a calendar month for any and all out-of-
pocket costs and expenses incurred by the Indemnified Party in implementing
its Clean-up Plan during such month and the Indemnifying Party shall
promptly reimburse the Indemnified Party for any and all such costs and
expenses immediately after receipt of such invoice.
(e) In the event that the Indemnifying Party notifies the Indemnified
Party within the Environmental Election Period that the Indemnifying Party
does not dispute its potential liability to the Indemnified Party under
this ARTICLE 14 but desires to take corrective action itself to remediate
the property subject to the Environmental Remediation Claim, then the
Indemnifying Party shall have the right to assume operations for the
remediation of the property and shall take any and all corrective measures,
at its sole cost and expense, to remediate such property and the
Indemnified Party shall provide the Indemnifying Party at the sole cost,
risk and expense of the Indemnifying Party (to the extent necessary) with
reasonable access to such property necessary to take any and all
appropriate actions and measures to remediate such property in accordance
with this SECTION 14.6; provided, however, that in the event that the
Indemnifying Party rejects the Clean-up Plan and undertakes to remediate
such property, then the Indemnifying Party shall indemnify and hold
harmless the Indemnified Party for any and all Losses suffered, incurred or
paid by the Indemnified Party arising out of any acts or omissions by the
Indemnifying Party in remediating such property pursuant to this SECTION
14.6(E), including, without limitation, any failure to fully remediate the
condition that was the subject of the Clean-up Plan; and provided further,
that the Indemnified Party shall have the right to monitor the progress of
the clean-up of the affected property by the Indemnifying Party and shall
have access to all personnel of the Indemnifying Party (whether employees,
agents or otherwise), records, plans and other information concerning the
clean-up of the affected property that the Indemnified Party deems
necessary and advisable under the circumstances. If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and
expense of the Indemnifying Party, to cooperate with the Indemnifying Party
and its experts and agents in conducting any remedial operations on the
property subject to the Environmental Remediation Claim.
(f) Regardless of whether the Indemnified Party or the Indemnifying
Party cleans-up the property that is subject to an Environmental
Remediation Claim, each party recognizes and acknowledges that it should
use its reasonable best efforts to cooperate with the other party to
implement the Clean-up Plan or to otherwise conduct the clean-up
operations.
(g) Regardless of whether the Indemnified Party or the Indemnifying
Party cleans up the property that is subject to the Environmental
Remediation Claim, the Indemnifying Party shall only be responsible for
Losses or costs of clean-up or remediation that are (i) required to bring
such property (as such property is used on the Closing Date) in compliance
with the minimum standards imposed by the Environmental and Safety Laws in
effect on the Closing Date or (ii) Losses arising from acts or omissions of
the Indemnifying Party under paragraph (e) above. NGC agrees, as a
predecessor in interest to the Surviving Corporation, that the Surviving
Corporation shall use commercially reasonable efforts to complete all
Clean-up Plans by the seventh anniversary of the Closing Date, except to
57
the extent that such efforts are not in accordance with good and prudent
industry standards or would cause the Surviving Corporation to breach any
of its representations, warranties, covenants or agreements under this
Agreement.
(h) In the event that the Surviving Corporation is expecting to
conduct a Clean-up Plan as of August 30, 2003, then the Surviving
Corporation shall, as soon as practicable after August 30, 2001, but in any
event within 90 calendar days prior to August 30, 2003, provide Chevron
with a schedule (the "ENVIRONMENTAL SCHEDULE") setting forth in
reasonable detail (i) each Clean-up Plan that it expects to still be
conducting on such date by the Surviving Corporation, (ii) an estimate of
the amount of time that will be required to complete each such Clean-up
Plan, (iii) what measures, if any, could be undertaken by the Surviving
Corporation to expedite any of such Clean-up Plans, even if such measures
are not the most economical or cost efficient measures that can be employed
to clean-up or remediate the affected property ("ADDITIONAL MEASURES")
and (iv) a reasonable estimate of the additional costs that would be
associated with implementing such Additional Measures. In order to expedite
any Clean-up Plan, Chevron may request in writing not later than 30 days
prior to August 30, 2003, (i) that the Surviving Corporation modify such
Clean-up Plan by implementing such Additional Measures which are reasonable
and appropriate under the circumstances and the Surviving Corporation shall
use commercially reasonable efforts to implement such Additional Measures
(and the implementation of such measures shall not diminish in any respect
Chevron's indemnification obligations hereunder) or (ii) to assume clean-up
obligations with respect to an affected property covered by such Clean-up
Plan (subject to the provisions of SECTION 14.6(E) above) and, in such
event, Chevron may implement such Additional Measures (at Chevron's sole
cost and expense) as Chevron deems appropriate under the circumstances. In
no event shall any Additional Measures be undertaken by Chevron or the
Surviving Corporation, if such Additional Measures would not be as
effective in cleaning up or remediating the affected property or would
expose their employees or other agents or contractors to increased risk.
This paragraph (h) shall in no way diminish Chevron's indemnification
obligations under this SECTION 14.6 but shall only provide Chevron with
certain limited rights with respect to clean-up operations and remediations
being conducted after August 30, 2003 which are covered by the indemnity of
this ARTICLE 14.
(i) All other environmental claims with regard to the Chevron
Facilities or NGC Facilities or Former NGC Facilities that do not involve
corrective or remedial operations shall be addressed under SECTION 14.5 or
SECTION 14.7, as applicable.
14.7 INDEMNIFICATION PROCEDURES: ABSENCE, LOSS OR IMPAIRMENT OF USE OF
PROPERTY. An Indemnified Party claiming indemnification under this Agreement
for Losses resulting from a complete or partial absence or loss (or impairment
of use) of any property or asset ("USE CLAIMS"), shall transmit to the
Indemnifying Party a written notice (the "USE NOTICE") describing in
reasonable detail the nature of the Use Claim, a non-binding estimate of the
Loss attributable to such Use Claim and the basis of the Indemnified Party's
request for indemnification under this Agreement. If the Indemnifying Party does
not notify the Indemnified Party within sixty (60) days from its receipt of the
Use Notice that the Indemnifying Party disputes such Use Claim, the Use Claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed to be
an admission of liability of the Indemnifying Party hereunder in at least the
amount specified in the Indemnity Notice. If the Indemnifying Party has timely
disputed the validity or amount of such Use Claim, as provided above, then the
parties shall attempt to resolve through any manner that they deem reasonable
under the circumstances, failing which the Indemnified Party may institute
appropriate legal action. Payments of all amounts owing by the Indemnifying
Party with respect to any Use Claim shall be made within thirty (30) days after
the later of (i) the expiration of the sixty-day (60-day) Indemnity Notice
period or (ii) the expiration of the period for appeal of a final adjudication
of the Indemnifying Party's liability to the Indemnified Party under this
Agreement.
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ARTICLE 15
POST-CLOSING MATTERS
15.1 CORPORATE NAMES. NGC expressly acknowledges and agrees that the name
"Chevron," and any derivation thereof shall not constitute a Contributed Asset
and shall remain the exclusive property of Chevron. Neither NGC nor any
Affiliate of NGC shall, in any way, infringe upon Chevron's use or rights to
such name (and any derivation thereof). Within six months after Closing, NGC
shall remove all trademarks and tradenames containing the name Chevron or the
Chevron logo from any of the assets or properties comprising the Contributed
Businesses. Chevron expressly acknowledges and agrees that the name "Warren
Petroleum Company" and any derivation thereof constitutes a part of Contributed
Businesses and shall become the exclusive property of the Surviving Corporation
upon consummation of the transactions contemplated hereby. Neither Chevron nor
any Affiliate of Chevron (except Newco or the Surviving Corporation or its
Subsidiaries) shall, in any way, infringe upon Surviving Corporation's use or
rights to such name (and any derivation thereof).
15.2 OPTIONS. NGC and the Surviving Corporation shall, in accordance with
the procedures set forth in Paragraph IX(d) of the NGC Corporation EEP, Section
13 of the NGC Option Plan and Section 3(a) of the Warrant, cause the number and
class of shares of NGC Corporation Stock covered by each Option outstanding as
of the Effective Time to be amended so that immediately after the Effective Time
such Option shall cover the same number and class of shares of Surviving
Corporation Common Stock to which the holder of such Option would have been
entitled pursuant to the terms of this Agreement if, immediately prior to the
Effective Time, such holder had been the holder of record of the number of
shares of NGC Corporation Stock then covered by such Option.
15.3 DEFINITIVE CONSIDERATION ADJUSTMENT.
(a) As promptly as practicable but in no event later than 90 calendar
days after the Closing Date, Chevron shall deliver to Surviving Corporation
(after consultation with Surviving Corporation), a schedule (the
"PRELIMINARY ADJUSTMENT SCHEDULE") setting forth in reasonable detail the
calculation of the actual Consideration Adjustments contemplated by
paragraphs (a) through (h) of SECTION 2.3, but shall use the actual values
and quantities on the Closing Date for the calculations to be made at
Closing pursuant to the applicable provisions of SECTION 2.3 and shall use
the same procedures included in SECTION 2.3(H) for the calculation relating
to the Contributed Warren Business provided in such section. In the event
NGC and Chevron shall have reached agreement as to the Agreed Value of a
Retained Asset for which a Minimum Value was used for purposes of SECTION
2.4 or pursuant to the provisions of SECTION 15.4, then such adjustments
shall also be made in the Preliminary Adjustment Schedule.
(b) The Preliminary Adjustment Schedule shall be subject to review by
Surviving Corporation. In reviewing the Preliminary Adjustment Schedule,
Surviving Corporation shall have the right to communicate with, and to
review the work papers, schedules, memoranda and other documents prepared
or reviewed by Chevron during the preparation of the Preliminary Adjustment
Schedule (including, without limitation, the income statements used to
derive net income and depreciation and amortization included therein) and
thereafter shall have access to all relevant employees of Chevron and to
all relevant books and records, all to the extent reasonably required by
Surviving Corporation in order to complete its review of the Preliminary
Adjustment Schedule. Within 60 calendar days after its receipt of the
Preliminary Adjustment Schedule, Surviving Corporation shall advise Chevron
whether, based on such review, it has any exceptions to the Preliminary
Adjustment Schedule. Unless Surviving Corporation shall deliver to Chevron
within such 30 calendar day period a letter specifying in reasonable detail
any such exceptions, the Preliminary Adjustment Schedule shall be
conclusive and binding on Chevron and the Surviving Corporation. If
Surviving Corporation shall submit a letter detailing any exceptions to the
Preliminary Exception Schedule, then the Surviving Corporation and Chevron
shall mutually agree on which exceptions shall result in adjustments to the
Preliminary Consideration Adjustment. The "DEFINITIVE CONSIDERATION
ADJUSTMENT" shall mean the Preliminary Consideration Adjustment, with any
adjustment required by the immediately preceding sentence.
59
(c)(i) If the Definitive Consideration Adjustment is greater than the
Estimated Consideration Adjustment, Chevron shall pay the Surviving
Corporation the difference, together with interest thereon at a rate of 6%
per annum during the period commencing on the Closing Date and continuing
through and including the day preceding the payment date.
(ii) If the Definitive Consideration Adjustment is less than the
Estimated Consideration Adjustment, the Surviving Corporation shall pay
Chevron the difference, together with interest thereon at a rate of 6% per
annum during the period commencing on the Closing Date and continuing
through and including the day preceding the payment date.
(iii) Any payment required by paragraph (a) or (b) of this SECTION
15.3 shall be made on the third Business Day after the Definitive
Consideration Adjustment is determined via wire transfer to an account
designated by the party to whom the payment is owed. Such account shall be
designated by such party on the date the Definitive Consideration
Adjustment is made.
15.4 TRANSFERS OF RETAINED ASSETS DURING THE INTERIM PERIOD. During the
period commencing on the Closing Date and continuing through and including the
first anniversary thereof (the "INTERIM PERIOD"), Chevron shall use its best
efforts to transfer to the Surviving Corporation any Retained Asset or
reasonably equivalent economic value therefor that is reasonably acceptable to
the Surviving Corporation. In the event that Chevron is able to transfer the
Retained Asset to the Surviving Corporation during the Interim Period, the
Surviving Corporation shall make a cash payment to Chevron equal to (i) the sum
of the Minimum Value or Agreed Value (as the case may be) of the Retained Asset
plus interest thereon at a rate of 6% per annum from the Closing Date through
and including the date on which the Retained Asset is transferred to the
Surviving Corporation, LESS (ii) any net operating cash flow attributable to
such Retained Asset during such period. Any payment made by the Surviving
Corporation pursuant to this SECTION 15.4 shall be made on the third Business
Day after the Retained Asset is transferred to the Surviving Corporation and
shall be made to a bank account designated by Chevron in writing no later than
the date on which such asset is transferred.
15.5 FINAL ADJUSTMENT FOR RETAINED ASSETS.
(a) If NGC and Chevron shall have disagreed as to the fair value of a
Retained Asset pursuant to SECTION 2.4 and such asset was not transferred during
the Interim Period or the value of such asset was not resolved pursuant to
SECTION 15.3, then within five Business Days after the first anniversary of the
Closing Date, the Surviving Corporation shall refer the matter for resolution by
an investment banking firm without a conflict of interest (the "INDEPENDENT
VALUE EXPERT") to be selected by Lehman Brothers and Goldman Sachs (the "VALUE
EXPERTS") in accordance with the provisions of this SECTION 15.5, by giving
notice to Chevron of its election to do so. If the Surviving Corporation fails
to provide Chevron with proper notice under this SECTION 15.5, then the Minimum
Value shall be conclusively deemed to be the fair value of the Retained Asset
and shall be final and binding on the parties.
(b) Within ten Business Days after referring a matter to the Value Experts
in accordance with paragraph (a) of this SECTION 15.5, the Value Experts shall
select the Independent Value Expert. Within five Business Days thereafter, each
party shall deliver to the other party and to the Independent Value Expert a
notice setting forth in reasonable detail the fair value such party ascribes to
each Retained Asset and the basis of such valuation (the "DECISION NOTICE").
Within five Business Days after receiving the Decision Notices, the Independent
Value Expert shall choose the fair value of the Retained Asset as set forth in
one party's Decision Notice and shall be in no way empowered to choose a
different value. The Independent Value Expert shall adopt the Decision Notice
that, in the best judgment of such Independent Value Expert, is the closer of
the two Decision Notices to the fair value of the Retained Asset. In making such
determination the Independent Value Expert shall apply the valuation principles
utilized by the parties in connection with the transactions contemplated by this
Agreement.
(c) The decision of the Independent Value Expert shall be in writing and
shall be final and binding upon the parties, and may be entered in any court of
competent jurisdiction upon the application of either party. If applicable, the
expenses of the Independent Value Expert shall be borne by the party whose
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Decision Notice is not chosen. Each party shall bear the costs of its own
counsel, witnesses (if any) and employees.
(d)(i) If the Minimum Value is less than the value chosen by the
Independent Expert with respect to such Retained Asset (the "DEFINITIVE
VALUE"), Chevron shall pay the Surviving Corporation the difference, together
with interest thereon at a rate of 6% per annum during the period commencing on
the Closing Date and continuing through and including the day preceding the
payment date.
(ii) If the Minimum Value is greater than the Definitive Value, the
Surviving Corporation shall pay Chevron the difference, together with interest
thereon at a rate of 6% per annum during the period commencing on the Closing
Date and continuing through and including the day preceding the payment date.
(iii) Any payment required by this SECTION 15.5 shall be made on the third
Business Day after the Definitive Value is determined via wire transfer to an
account designated by the party to whom the payment is owed. Such account shall
be designated by such party on the date the Definitive Value is established.
15.6 ADJUSTMENT REGARDING LONDON OPERATIONS.
(a) Chevron agrees, as a contingent reduction to the Consideration due to
Chevron hereunder, that if the London Earnings for the 1997, 1998 and 1999
calendar years (the "OPERATIVE YEARS"), shall equal at least a total of $54
million, as reflected in the calculations contained in a notice sent by
Surviving Corporation to Chevron (the "LONDON NOTICE"), Chevron shall pay to
Surviving Corporation, as an additional adjustment to the Consideration payable
hereunder, the sum of $33 million plus an amount equal to interest on such sum
from the Closing Date to the date of payment at a rate of 6% per annum,
compounded semi-annually. If the London Earnings for the Operative Years are
less than $30 million, there shall be no payment under this section. If the
London Earnings for the Operative Years are more than $30 million but less than
$54 million (as reflected in the London Notice), Chevron shall pay to Surviving
Corporation an amount determined by multiplying $33 million by a fraction, the
numerator of which shall be the total London Earnings for the Operative Years in
excess of $30 million and the denominator of which shall be $24 million, plus an
amount equal to interest on such sum from the Closing Date to the date of
payment at a rate of 6% per annum, compounded semi-annually. As used herein, the
term "London Earnings" shall mean the amounts contributed to NGC's net income
from the London Operations determined on a basis consistent with generally
accepted accounting principles (including reductions for the effect of any
appropriate income taxes); provided, however, that such earnings shall exclude
all earnings (a) derived from or attributable to the presently existing
contracts comprising a part of the Contributed Warren Business, (b) attributable
to any interest in Accord in addition to NGC's present 49% interest therein, (c)
attributable to contributions made by NGC to Accord or NGC International (other
than the return of earnings distributed after the Closing by Accord or NGC
International to NGC plus an amount equal to interest thereon at 6% per annum
from the time of such distribution to the time of such return) and (d) derived
from or attributable to any project, whether an acquisition of properties or a
project requiring capital expenditures, which is financed with funds other than
internal cash of Accord, NGC International and their respective Subsidiaries (i)
to the extent the amount so financed exceeds 50% of the total cost of such
project (in which case, London Earnings shall be adjusted by the decreasing the
earnings derived from such project by multiplying such earnings by a fraction,
the numerator of which shall be 50 and the denominator of which shall be the
percentage to which such project has been financed), or (ii) if there are
guarantees given or collateral supplied in connection with such financing by
parties other than Accord, NGC International and their respective subsidiaries.
In addition, earnings from acquisitions or capital investments shall constitute
London Earnings only to the extent such expenditures are made to facilitate the
application and leverage of NGC's core competencies and sources of competitive
advantage related to marketing and trading energy commodity products and
services. For purposes of this provision, NGC's international investment
philosophy generally will be to minimize its equity participation and capital
projects consistent with establishing a sufficient position to optimize its
trading and marketing businesses. Chevron shall have a period of 90 days after
any such London Notice to audit the calculation of the adjustments contemplated
hereunder. The payment of the amounts due with respect to the London Notice
shall be made within 15 days after the expiration of such ninety day period.
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(b) If Chevron does not agree with the computation of payment due
regarding London Earnings, it shall promptly provide notice to a Surviving
Corporation, and in any event prior to the expiration of such 90 days period set
forth in paragraph (a) above. The Parties shall thereafter negotiate in a good
faith attempt to resolve their differences. If the Parties are unable to resolve
such differences, either Party may elect to refer the matter for resolution by
an Arbitrator, who shall be a partner reasonably acceptable to each Party of a
nationally recognized accounting firm without a conflict of interest. If the
Parties are unable to agree on an Arbitrator under the provisions of the
preceding sentence within 90 additional days after the expiration of such 90 day
period, either Party may file an action in a court of law seeking judicial
resolution of such dispute.
15.7 INSURANCE.
(a) Chevron, Newco and NGC acknowledge that Chevron Corporation has
maintained worldwide programs of property and liability insurance coverage for
itself and its Affiliates, including with respect to the Contributed Businesses
and the Contributed West Texas LPG Pipeline Business. Such programs have been
designed to achieve a cost-effective, coordinated risk-management package for
the entire corporate group. All of the insurance policies through which such
worldwide programs of coverage are presently or have previously been provided
are herein called the "CHEVRON CORPORATION POLICIES."
(b) It is the understanding and intention of Chevron, Newco and NGC that
subject to SECTION 15.7(D) below:
(i) from and after the Closing, no insurance coverage shall be
provided under the Chevron Corporation Policies relating to the Contributed
Businesses and the Contributed West Texas LPG Pipeline Business; and
(ii) from and after the Closing, no claims regarding any matter
whatsoever, whether or not arising from events occurring prior to the
Closing, shall be made against or with respect to the Chevron Corporation
Policies by the Surviving Corporation.
(c) Subject to SECTION 15.7(D) below, Newco, NGC and the Surviving
Corporation, on behalf of itself, its successors and assigns, hereby releases,
to the extent permitted by applicable law, Chevron and its Affiliates from any
claim made after the Closing against or with respect to any of the Chevron
Corporation Policies by or through Newco, NGC or the Surviving Corporation. Such
release shall cover, without limitation, any claim by an insurer for
reinsurance, retrospective premium payment or prospective premium increases
attributable to any such claim.
(d) Nothing contained in the foregoing provision of this SECTION 15.7
shall in any way limit, impair or constitute a release or discharge of any right
of Surviving Corporation or obligation of Chevron with respect to any
representation, warranty, covenant, agreement, indemnity or other obligation of
Chevron contained in this Agreement (regardless of whether the same was, is or
may be covered by any insurance described herein), all of which rights and
obligations shall continue in full force and effect notwithstanding any other
provision of this SECTION 15.7.
(e) To the best of Chevron's knowledge, neither Chevron nor any prior
owner of Warren Petroleum Company, or any of the assets comprising Warren
Petroleum Company, has purchased Third Party Insurance Policies specifically
covering Warren Petroleum Company or certain of the assets that comprise Warren
Petroleum Company. In the event that Chevron locates or otherwise identifies any
such Third Party Insurance Policies, Chevron shall promptly notify the Surviving
Corporation and shall use all commercially reasonable efforts to provide the
Surviving Corporation with any benefits that Chevron may have under such
insurance policies; provided, however, that Surviving Corporation shall
reimburse Chevron for any out-of-pocket costs incurred by Chevron in assisting
the Surviving Corporation in deriving any such benefits; and provided further,
that in no event shall Chevron be obligated to provide the Surviving Corporation
with any such benefits in the event that such insurance policies cover assets
other than the Contributed Warren Business or could be included in a
comprehensive settlement that is being contemplated by Chevron as of the date
hereof.
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15.8 INDEMNIFICATION PRINCIPLES. NGC acknowledges that upon consummation
of the Combination the Surviving Corporation will assume certain indemnification
obligations to Chevron hereunder as the successor in interest to NGC after the
Combination and that such obligations have been negotiated on the Surviving
Corporation's behalf by NGC to provide recourse to Chevron for breaches of
representations, warranties and agreements of NGC in lieu of Chevron having such
recourse against the stockholders of NGC as of immediately prior to the Closing.
Newco, NGC and Chevron agree (i) that the principles of reciprocal
indemnification under this Agreement are fair to the stockholders of NGC and to
Chevron, and, will be fair, upon consummation of the Combination to the
stockholders of the Surviving Corporation and (ii) that the Surviving
Corporation should be charged to administer such indemnities impartially.
Accordingly NGC and Newco, on their own behalf and as predecessors in interest
to the Surviving Corporation, agree with Chevron that, from and after the
Closing, the Surviving Corporation shall exercise stewardship of its assets and
affairs without regard to the existence, nature or extent of any indemnity to or
from Chevron arising under this Agreement, and in this regard, the Surviving
Corporation will assume a duty to Chevron that is equal to the duty it owes to
its stockholders as a whole; provided however, that the Surviving Corporation
may make claims against Chevron to the extent permitted under this Agreement.
The Surviving Corporation shall make and keep good records of potential claims
for indemnification to or from Chevron, and provide Chevron with access thereto
at all times. Newco and NGC, on their own behalf and as predecessors in interest
to the Surviving Corporation, further agree with Chevron that neither Newco or
NGC nor the Surviving Corporation (upon consummation of the Combination) will
induce or persuade a third party or Governmental Entity to bring, or disclose or
notify or otherwise bring to the attention of a third party or Governmental
Entity, any claim that any such third party or Governmental Entity may have
against the Surviving Corporation if such claim would be subject to
indemnification by Chevron under this Agreement or the Contribution and
Assumption Agreement, except in instances where contractual obligations or
duties or applicable law require or obligate the Surviving Corporation to make
such disclosure or notification, or, if the Board of Directors of the Surviving
Corporation determines in good faith, for reasons unrelated to the provisions of
this Agreement, that it would be in the best interest of the Surviving
Corporation to do so.
15.9 ASSUMPTION OF SENIOR NOTES. As promptly as practicable after the
consummation of the Combination, the Surviving Corporation shall take any and
all actions necessary to assume (a) the 6 3/4% Senior Notes of NGC due December
15, 2005, and (b) all obligations under the Credit Agreement dated as of March
14, 1995 by and among NGC, The First National Bank of Chicago, individually and
as agent, and the institutions which are parties thereto.
15.10 REGISTRATION OF CERTAIN SECURITIES. If the issuance of the shares
of Newco Common Stock issued to the PEP Individuals in connection with the
Merger is not registered under the Securities Act pursuant to the registration
statement including the Definitive Information Statement/Prospectus, as soon as
practicable after the Effective Time the Surviving Corporation shall file a
registration statement on the appropriate form to register such shares for
resale under the Securities Act and shall make such other state blue sky filings
as are necessary to register such shares, in each case in accordance with the
Registration Rights Agreement, dated as of October 21, 1994, among NGC (as
successor to Trident Holding), British Gas, NOVA and the PEP Individuals.
ARTICLE 16
GENERAL PROVISIONS
16.1 EFFECT OF DUE DILIGENCE. No investigation by any party to this
Agreement into the business, operations and condition of any other party shall
diminish in any way the effect of any representations or warranties made by such
other party in this Agreement or shall relieve such other party of any of its
obligations under this Agreement. Notwithstanding the foregoing, neither Chevron
nor NGC shall be deemed to be in breach of its representations and warranties
contained herein if and to the extent that the other had actual knowledge on the
date hereof that any such representation or warranty was inaccurate; provided,
however, that such knowledge shall have no effect on any indemnification
obligation hereunder
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(other than for indemnification for the breach of such representation or
warranty) in the absence of fraud or bad faith. The parties agree that any item
specifically disclosed on any schedule to this Agreement shall be deemed to be
disclosed for all purposes of this Agreement, notwithstanding the fact that such
item was not disclosed on any other schedule to this Agreement.
16.2 SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of
and be binding upon the parties to this Agreement and their respective
successors and assigns, and no other Person will have any obligations hereunder;
provided, however, that no party hereto may assign any of its rights or
obligations hereunder without the prior written consent of all other parties
hereto.
16.3 NOTICES. All notices and other communications hereunder shall be
deemed given on the date delivered personally or confirmed as received by
facsimile, or two business days after mailed by registered or certified mail
(return receipt requested) at the number indicated below at the following
addresses:
(a) If to NGC, Newco or the Surviving Corporation:
Mr. Kenneth E. Randolph
Senior Vice President and General Counsel
NGC Corporation
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Facsimile No. (713) 507-6808
With a copy to:
Mr. Robert B. Allen
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100 Dallas, Texas 75201-4618
Facsimile No. (214) 969-4343
Mr. David S. Peterman
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place -- South Tower
711 Louisiana
Houston, Texas 77002
Facsimile No. (713) 236-0822
(b) If to Chevron or Newco:
Chevron U.S.A. Inc.
1301 McKinney
Houston, Texas 77010
Attention: Mr. David Stevenson
Facsimile No: (713) 754-3366
With a copy to:
Mr. Terry Michael Kee
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Facsimile No: (415) 983-1200
16.4 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same Agreement, and shall become effective
when counterparts have been signed by
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each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
16.5 MISCELLANEOUS. This Agreement and the documents and instruments to
which it refers (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral (other than the
Confidentiality Agreement), among any of the parties with respect to the subject
matter of this Agreement, including, without limitation, the Exclusivity
Agreement dated January 21, 1996 between NGC and Chevron; provided, however,
that the Exclusivity Agreement shall survive to the extent, but only to the
extent, that the Exclusivity Agreement modifies, supplements or amends the
Confidentiality Agreement. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW.
16.7 NO RECOURSE. Notwithstanding any of the terms or provisions of this
Agreement to the contrary, each of the parties hereto agrees that neither it nor
any person acting on its behalf may assert any claim or cause or action against
any officer or director of any other party hereto in connection with or arising
out of this Agreement or any of the transactions contemplated hereby.
16.8 BULK SALES LAWS. Chevron and NGC hereby waive compliance with all
requirements of applicable bulk sales laws.
16.9 NO REMEDY IN CERTAIN CIRCUMSTANCES. To the extent that a party
hereto takes any action pursuant to an order, injunction, decree, judgment or
other restraint of a Governmental Entity of competent authority, which is
inconsistent with this Agreement or failed to take action consistent with or
required under this Agreement, such party shall not incur any liability or
obligation unless such party breached its obligations under SECTION 9.3 hereof
or did not in good faith use reasonable efforts to resist or object to the
imposition or entering of such order, injunction, decree, judgment or other
restraint.
16.10 RECORDING FEES AND SIMILAR COSTS. Chevron and the Surviving
Corporation shall each bear one-half of any recording fees and similar costs
incurred and imposed upon, or with respect to, the Contributed Businesses to be
transferred hereunder.
16.11 AMENDMENT. This Agreement, to the extent permitted by law, may be
amended by the parties to this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties to
this Agreement; PROVIDED that Section 15.10 may not be amended without the
consent of the PEP Individuals.
16.12 WAIVER. Any term or provision of this Agreement may be waived in
writing at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. Any waiver of any term or condition of this Agreement by
any party shall not be construed as a waiver of any subsequent breach or failure
of the same term or condition, or a waiver of any other term or condition of
this Agreement.
16.13 NO THIRD PARTY BENEFICIARIES. Notwithstanding any other provision
of this Agreement, except for the PEP Individuals (which are intended
beneficiaries only for purposes of SECTIONS 15.10 AND 16.11) and the Chevron
Indemnitees or NGC Indemnitees that are not parties hereto, this Agreement shall
not create benefits on behalf of any Person who is not a party to this Agreement
or to the Contribution and Assumption Agreement (including, without limitation,
any broker or finder or any Prospective Employee or Affected Employee,
notwithstanding any provisions to the contrary contained herein), and this
Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns.
16.14 REAL PROPERTY DISCLOSURES. In connection with the transfer of real
property constituting part of the Contributed Businesses or the Contributed West
Texas LPG Pipeline Business located in the State of Texas, the Contributing
Parties hereby make the disclosures set forth in EXHIBIT 16.14 to this
Agreement. NGC and Newco represent that they are aware that the disclosures
contained in EXHIBIT 16.14 may be incomplete and agree that Chevron may amend
such disclosures from time to time prior to Closing to
65
comply with disclosure generally applicable to the transfer of real estate in
the state of Texas ("GENERAL DISCLOSURES"). NGC and Newco further waive any
rights they may have arising out of the incompleteness of any General Disclosure
given in this Agreement or the Contribution and Assumption Agreement or the
failure to give any additional General Disclosure required to be given by and
state or local law, statute or ordinance including, but not limited to, Section
230.005 of the Texas Local Government Code, Section 257.004 of the Texas
Transportation Code, Section 61.025 of the Texas Natural Resources Code, Section
33.135 of the Texas Natural Resources Code and Section 49.452 of the Texas Water
Code. No Uniform Vendor and Purchaser Risk Act enacted by any state in which any
part of the real property being transferred hereunder is located, including,
without limitation, the Texas Vendor and Purchaser Risk Act in Section 5.007 of
the Texas Property Code, shall be applicable with respect to this Agreement, and
NGC, Chevron and Newco hereby voluntarily waive the provisions of, and any
rights under, any such Vendor and Purchaser Risk Act.
16.15 WAIVER OF CONSUMER RIGHTS. EACH OF NGC, NEWCO, AND CHEVRON HEREBY
WAIVES ITS RESPECTIVE RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES--CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS AND COMMERCE CODE, A LAW
WHICH GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS SELECTION, EACH OF NGC, NEWCO AND CHEVRON VOLUNTARILY CONSENT TO
THIS WAIVER. EACH OF NGC AND NEWCO REPRESENTS AND WARRANTS TO CHEVRON AND
CHEVRON WARRANTS TO NGC AND NEWCO, THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED UNDER THIS
AGREEMENT, THAT IT IS REPRESENTED BY LEGAL COUNSEL IN SEEKING OR ACQUIRING THE
GOODS OR SERVICES HEREUNDER, AND THAT ITS LEGAL COUNSEL WAS NOT DIRECTLY OR
INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER PARTIES OR AN AGENT
OF SUCH OTHER PARTIES.
(The remainder of this page is intentionally left blank)
66
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be signed as of the date first above written by its duly authorized officer.
NGC CORPORATION
By: __________________________________
Printed Name: ________________________
Title: _______________________________
CHEVRON U.S.A. INC.
By: __________________________________
Printed Name: ________________________
Title: _______________________________
MIDSTREAM COMBINATION CORP.
By: __________________________________
Printed Name: ________________________
Title: _______________________________
67
APPENDIX III
LEHMAN BROTHERS
May 20, 1996
Board of Directors
NGC Corporation
13430 Northwest Freeway
Houston, Texas 77040
Members of the Board:
We understand that NGC Corporation ("NGC" or the "Company") and Chevron USA
Inc. ("Chevron") plan to pursue a transaction (the "Proposed Transaction")
pursuant to which Chevron's Warren Petroleum Company division ("Warren"), the
Natural Gas Business Unit of the Chevron USA Production Company division
("NGBU") and certain assets and operations of affiliates of Chevron (the "Other
Assets", collectively with Warren and the NGBU, the "Chevron Operations") will
be combined with the assets and operations of NGC into a newly formed entity
("Newco"). The terms and conditions of the Proposed Transaction are set forth in
more detail in the Combination Agreement and Plan of Merger and the various
Exhibits and Schedules thereto (collectively, the "Agreement"). Pursuant to the
Agreement, (i) each share of NGC will be exchanged for one share of Newco; (ii)
Chevron will transfer the Chevron Operations to Newco in exchange for (a)
38,623,210 shares of Newco Common Stock, (b) 7,815,363 shares of Newco Series A
Participating Preferred Stock, (c) the assumption by Newco of $155 million of
assumed indebtedness (subject to adjustment pursuant to the terms of the
Agreement) and (d) the issuance of a promissory note by Newco to Chevron in the
principal amount of $141 million (subject to adjustment pursuant to the terms of
the Agreement); and (iii) Chevron and Newco (or affiliates of each), will enter
into certain supply, sales and service agreements with respect to natural gas,
natural gas liquids and electricity.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company of the consideration to be paid by the Company for the Chevron
Operations in the Proposed Transaction. We have not been requested to opine as
to, and our opinion does not in any manner address, the Company's underlying
business decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (i) the Agreement and
the specific terms of the Proposed Transaction, (ii) the proposed Preliminary
Proxy Statement to be used in connection with the Proposed Transaction and such
other publicly available information concerning the Company and Chevron that we
believe to be relevant to our inquiry, (iii) historical and projected financial
and operating information with respect to the business, operations and prospects
of the Company and the Chevron Operations furnished to us by the Company and
Chevron, respectively, (iv) a trading history of the Company's common stock from
March 14, 1995 to the present and a comparison of that trading history with
those of other companies that we deemed relevant, (v) a comparison of the
historical financial results and present financial condition of the Company and
the Chevron Operations with those of other companies that we deemed relevant,
(vi) a comparison of the financial terms of the Proposed Transaction with the
financial terms of certain other recent transactions that we deemed relevant;
(vii) historical and projected pro forma financial and operating results for
Newco, including a comparison with historical and projected information for NGC
on a stand alone basis; (viii) the relative contribution of the Chevron
Operations and NGC to the historical and projected financial and operating
results of Newco; (ix) certain projections of cost savings and operating
synergies expected to result from a combination of the businesses of the Company
and the Chevron Operations; (x) the pro forma ownership profile of Newco; and
(xi) the proposed accounting treatment for the Proposed Transaction, as
described to us by the Company and its accountants. In addition, we have had
discussions with the management of the Company and of Chevron, in each case
concerning their respective businesses, operations, assets, financial condition
and prospects and the business, operations, assets, financial condition and
prospects of Newco, and we undertook such other studies, analyses and
investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of the Company, upon
advice of the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company and that the Company would perform substantially in
accordance with such projections. With respect to the financial projections of
the Chevron Operations, we have reviewed such projections with Chevron and have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Chevron as to the future financial performance of the Chevron
Operations. However, for purposes of our analysis, we have made certain
adjustments to the projections of Chevron. We have discussed these adjusted
projections with the management of the Company and they have agreed with the
appropriateness of the use of such adjusted projections in performing our
analysis. With respect to the pro forma financial projections of Newco, we have
relied on the Company projections, the adjusted Chevron projections and certain
assumptions regarding cost savings, financing, accounting treatment and other
items. We have discussed these assumptions regarding cost savings, financing,
accounting treatment and other items with the management of the Company and they
have agreed with the appropriateness of the use of such assumptions in
performing our analysis. In arriving at our opinion we have assumed that Newco
will perform substantially in accordance with such pro forma projections. In
arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company or of the Chevron Operations and have
not made or obtained any evaluations or appraisals of the assets or liabilities
of the Company or the Chevron Operations. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be paid
by the Company for the Chevron Operations in the Proposed Transaction is fair to
the Company.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company and Chevron in the past, and are currently engaged to
perform investment banking services for Chevron which are unrelated to the
Proposed Transaction, and have received and will receive customary fees for such
services. In the ordinary course of our business, we actively trade in the debt
and equity securities of the Company and Chevron for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
2
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
By:/s/ H.E. MCGEE III
H.E. McGee III
Managing Director
3
APPENDIX IV
CERTIFICATE OF INCORPORATION
OF
NGC CORPORATION
FIRST: The name of the corporation is NGC CORPORATION (the
"Corporation").
SECOND: The registered office of the Corporation in the State of Delaware
is located at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH:
A. CAPITAL STOCK. The total number of shares of stock which the
Corporation shall have authority to issue is 450,000,000 shares, divided into
two classes as follows: (i) 50,000,000 shares of Preferred Stock, par value
$0.01 per share ("Preferred Stock"); and (ii) 400,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock of the
Corporation are as follows:
B. PROVISIONS RELATING TO THE PREFERRED STOCK.
1. The Preferred Stock may be issued from time to time in one or more
series, the shares of each series to have such designations and powers,
preferences, and rights, and qualifications, limitations, and restrictions
thereof as are stated and expressed herein and in the resolution or resolutions
providing for the issuance of such series adopted by the board of directors of
the Corporation as hereafter prescribed.
2. Authority is hereby expressly granted to and vested in the board of
directors of the Corporation to authorize the issuance of the Preferred Stock
from time to time in one or more series, and with respect to each such series of
the Preferred Stock, to fix and state by the resolution or resolutions from time
to time adopted providing for the issuance thereof the following:
(i) whether or not such series is to have voting rights, full,
special, or limited, or is to be without voting rights, and whether or not
such series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other series or class of stock;
(ii) the number of shares to constitute such series and the
designations thereof;
(iii) the preferences, and relative, participating, optional, or other
special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any such series;
(iv) whether or not the shares of any such series shall be redeemable
at the option of the Corporation or the holders thereof or upon the
happening of any specified event, and, if redeemable, the redemption price
or prices (which may be payable in the form of cash, notes, securities, or
other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of such series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such retirement or
sinking fund or funds are to be established, the annual amount thereof, and
the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, stock
of the Corporation, or other property, or a combination thereof, the
conditions upon which and the times when such dividends are payable, the
preference to or the relation to the payment of dividends payable on any
other class or classes or series of stock, whether such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
1
(vii) the preferences, if any, and the amounts thereof which the
holders of any such series shall be entitled to receive upon the voluntary
and involuntary dissolution of, or upon any distribution of the assets of,
the Corporation;
(viii) whether or not the shares of any such series, at the option of
the Corporation or the holder thereof or upon the happening of any
specified event, shall be convertible into or exchangeable for the shares
of any other class or classes or of any other series of the same or any
other class or classes of stock, securities, or other property of the
Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and provisions with respect to any such
series as may to the board of directors of the Corporation seem advisable.
3. The shares of each series of the Preferred Stock may vary from the
shares of any other class or series thereof in any or all of the foregoing
respects. The board of directors of the Corporation may increase the number of
shares of the Preferred Stock designated for any existing series by a resolution
adding to such series authorized and unissued shares of the Preferred Stock not
designated for any other series. The board of directors of the Corporation may
decrease the number of shares of the Preferred Stock designated for any existing
series by a resolution, subtracting from such series unissued shares of the
Preferred Stock designated for such series, and the shares so subtracted shall
become authorized, unissued and undesignated shares of the Preferred Stock.
C. PROVISIONS RELATING TO THE SERIES A PARTICIPATING PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The shares of such series of Preferred Stock
shall be designated as "Series A Participating Preferred Stock" (the "Series
A Preferred"), $0.01 par value per share, and the number of shares of Preferred
Stock constituting such series shall be 8,000,000.
2. DIVIDENDS AND DISTRIBUTION. Subject to the provision for adjustment
hereinafter set forth, the holders of the Series A Preferred shall be entitled
to receive dividends or distributions equal per share in amount and kind to any
dividend or distribution payable on shares of Common Stock, when and as the same
are declared by the Board of Directors out of any funds legally available
therefor and paid to the holders of Common Stock, and no dividend may be
declared and paid on Common Stock unless an identical dividend or distribution
is declared and paid concurrently on Series A Preferred. If, however, at any
time after the date of original issuance of Series A Preferred, the Corporation
shall subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in each such case, the amount to which holders of the Series A
Preferred were entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of the Common Stock outstanding immediately after such event, and the
denominator of which is the number of shares of the Common Stock outstanding
immediately prior to such event. The Corporation will have the right to issue
shares of capital stock that are senior or junior to or on a parity with the
Series A Preferred with respect to dividends without the approval or consent of
the holders of Series A Preferred.
3. VOTING RIGHTS. Except as provided by law, the holders of the Series A
Preferred shall have no voting rights on any matter.
4. REDEMPTION. The shares of the Series A Preferred shall not be
redeemable.
5. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, no
distribution shall be made to the holders of Common Stock or any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred unless, prior thereto, the holders of the Series A
Preferred shall have received $1.00 per share. All assets of the Corporation
available for distribution after the liquidation preferences are fully met of
the Series A Preferred and any shares senior to or on a parity with the Series A
Preferred with respect to liquidation preferences shall be distributed ratably
among the holders of the Series A Preferred and Common Stock in proportion to
the number of shares of Series A Preferred and Common Stock outstanding
2
at the time of such liquidation, dissolution or winding up of the Corporation.
The Corporation will have the right to issue shares of capital stock that are
senior or junior to or on a parity with the Series A Preferred with respect to
the liquidation, winding-up or dissolution of the Corporation without the
approval or consent of the holders of the Series A Preferred.
6. CONVERSION. The Series A Preferred may be converted at the option of
the holder thereof, or shall be converted automatically without any action on
the part of the holder thereof, into shares of Common Stock, on the terms and
conditions set forth in this Section 6. For purposes of this section 6, the term
"affiliate" shall mean any corporation, partnership or other entity that is an
"affiliate" within the meaning of the regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), as such regulations
are in effect on the date hereof, and the term "Person" shall mean any
individual, firm, corporation, partnership, association, trust, joint venture,
legal entity, political subdivision or instrumentality or other organization.
(A) RIGHT TO CONVERT. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A Preferred shall be
convertible, at the option of the holder, at any time after the date of issuance
of such share, into one share of Common Stock as follows:
(i) To the extent necessary (a) to avoid dilution of the holder's
percentage ownership of the issued Common Stock, provided that, with
respect to dilution resulting from the issuance of additional compensatory
options as approved by not less than eighty-five percent (85%) of the
entire Board of Directors, the holder would have no such conversion right
so long as its ownership of Common Stock would still be greater than twenty
percent (20%) of the issued Common Stock, assuming for this purpose that
all shares of Common Stock subject to currently exercisable options and
warrants were issued and outstanding, or (b) to maintain a percentage
ownership of the issued Common Stock at least equal to that of the then
largest other stockholder of the Corporation;
(ii) To the extent necessary, if any Person other than the holder of
Series A Preferred or an affiliate of such holder makes a tender offer for
Common Stock and such holder desires to tender the shares of the Series A
Preferred in the same proportion as it tenders Common Stock;
(iii) Upon approval by the stockholders of the Corporation of any
merger or recapitalization proposal in which the Series A Preferred would
be treated differently than Common Stock; and
(iv) Upon approval by the Corporation's stockholders of any (a) sale
of all or substantially all of the assets of the Corporation or (b)
liquidation, dissolution or winding up of the Corporation.
(B) AUTOMATIC CONVERSION. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A Preferred shall be
automatically converted into one share of Common Stock upon a sale or other
transfer (by operation of law, merger or otherwise) by the holder of such shares
to any Person other than an affiliate of the holder.
(C) CONVERSION RATE ADJUSTMENTS. The Conversion Rate of the Series A
Preferred shall be subject to adjustment as hereinafter set forth. If at any
time the Corporation shall subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares of Common Stock or combine or
reclassify the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, and in each such case, the number of shares of
Common Stock into which each share of the Series A Preferred is convertible
shall be adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of Common Stock which
the holder of a share of the Series A Preferred would have been entitled to
receive after the happening of any and all of the events described above had
such share been converted into Common Stock immediately prior to the happening
of such event or the record date therefor, whichever is earlier.
(D) MECHANICS OF CONVERSION. The holder of any shares of the Series A
Preferred may exercise its option to convert such shares into shares of Common
Stock by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation for that
purpose, a certificate or certificates representing the shares of the Series A
Preferred to be converted accompanied by a written notice stating that such
holder elects to convert all or a specified whole number of
3
such shares in accordance with the provisions of this Section 6 and specifying
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. In case such notice shall specify a
name or names other than that of such holder, such notice shall be accompanied
by payment of all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names. As promptly as practicable, and in any event within
five business days after the surrender of such certificates and the receipt of
such notice relating thereto and, if applicable, payment of all transfer taxes,
the Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable shares
of Common Stock of the Corporation to which the holder of the Series A Preferred
so converted shall be entitled (and/or any other consideration to which the
holders of such shares of Common Stock would then be entitled) and (ii) if less
than the full number of shares of the Series A Preferred evidenced by the
surrendered certificate or certificates are being converted, a new certificate
or certificates, for the number of shares evidenced by such surrendered
certificate or certificates less the number of shares converted. Such
conversions shall be deemed to have been made upon receipt by the Corporation of
such notice and such surrendered certificate or certificates representing the
shares of the Series A Preferred to be converted, so that the rights of the
holder thereof shall cease except for the right to receive Common Stock of the
Corporation in accordance herewith (and/or any other consideration to which the
holders of such shares of Common Stock would then be entitled), and such holder
shall be treated for all purposes as having become the record holder of such
Common Stock of the Corporation at such time.
D. PROVISIONS RELATING TO THE COMMON STOCK.
1. Except as otherwise required by law, and subject to any special voting
rights which may be granted any series of Preferred Stock in the board of
directors resolution which creates such series, each holder of Common Stock
shall be entitled to one vote for each share of Common Stock standing in such
other holder's name on the records of the Corporation on each matter submitted
to a vote of the stockholders.
2. Subject to the rights of the holders of the Preferred Stock, the
holders of the Common Stock shall be entitled to receive when, as, and if
declared by the board of directors of the Corporation, out of funds legally
available therefor, dividends payable in cash, stock, or otherwise.
3 Upon any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, and after the holders of the Preferred Stock
and the holders of any bonds, debentures, or other obligations of the
Corporation shall have been paid in full the amounts to which they shall be
entitled (if any), or a sum sufficient for such payment in full shall have been
set aside, the remaining net assets of the Corporation shall be distributed pro
rata to the holders of the Common Stock and the holders of Series A Preferred in
accordance with their respective rights and interest, to the exclusion of the
holders of any other series of the Preferred Stock and any bonds, debentures, or
other obligations of the Corporation.
4. Without the consent of the holders of eighty-five percent (85%) of the
outstanding Common Stock, the Corporation may (and may permit any subsidiary of
the Corporation over which it has control to) sell the following products:
(i) crude oil;
(ii) other products usually and normally refined as petroleum products
from crude oils; and
(iii) natural gas liquids or liquefied petroleum gases;
irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:
(i) the United States or any of its territories or possessions;
(ii) any country wholly located in the Western Hemisphere and/or
Europe or surrounded by the Mediterranean Sea;
(iii) any country all of the territory of which was formerly contained
within the Union of Soviet Socialist Republics;
4
(iv) any country whose territory is contained within the territories
constituting as of the date hereof the countries known as Algeria, Angola,
Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Cote
D'Ivoire, Equatorial Guinea, Gabon, Gambia, Ghana, Greenland, Guinea,
Guinea Bissau, Iceland, Liberia, Libya, Mali, Mauritania, Mongolia,
Morocco, Niger, Nigeria, Rio Muni, Senegal, Sierra Leone, Togo, Tunisia,
Turkey, Western Sahara and/or Zaire;
(v) Antarctica; and
(vi) international waters;
unless (a) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between the Corporation and Chevron Corporation,
as the same may from time to time be amended in accordance with the terms
thereof, or (b) such Scope of Business Agreement is terminated pursuant to its
terms, upon which termination the provisions of this paragraph 4 shall be of no
further force and effect. A copy of such Scope of Business Agreement, as the
same may be amended, shall be available for inspection by any stockholder of the
Corporation at the principal offices of the Corporation. Except as indicated
above or as may otherwise be provided in this Certificate of Incorporation or by
Delaware law, stockholders shall have no right to approve specific business
activities of the Corporation, and the above provisions shall not otherwise
affect corporate powers and purposes as stated in Article III.
E. GENERAL.
1. Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (in any form, but not less
in value than the par value thereof) as may be fixed by the board of directors
of the Corporation, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing conditions. Shares
so issued for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
2. The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase or otherwise acquire shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors of
the Corporation shall be empowered to set the exercise price, duration, times
for exercise, and other terms of such options or rights; PROVIDED, HOWEVER, that
the consideration to be received (which may be in any form) for any shares of
capital stock subject thereto shall have a value not less than the par value
thereof.
FIFTH: No contract or transaction between the Corporation and one or more
of its directors, officers, or stockholders or between the Corporation and any
person (as used herein "person" means any other corporation, partnership,
association, firm, trust, joint venture, other legal entity, political
subdivision, or instrumentality or other organization) in which one or more of
its directors, officers, or stockholders are directors, officers, or
stockholders, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board or committee which authorizes the
contract or transaction, or solely because his, her, or their votes are counted
for such purpose, if (i) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board of directors, a committee thereof
(to the extent permitted by applicable law), or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
5
SIXTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he (i) is or was a director or officer of the Corporation or
(ii) while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, to the fullest extent permitted
under the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. Such right shall be a contract right and shall include the
right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense are not permitted under the General Corporation Law of Delaware, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its board of directors or any committee or
directors thereof, independent legal counsel, or stockholders) to have made its
determination prior to the commencement of such action that indemnification of,
or advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors or any committee or directors thereof, independent legal
counsel or stockholders) that such indemnification or advancement is not
permissible shall be a defense to the action or create a presumption that such
indemnification or advancement is not permissible. In the event of the death of
any person having a right of indemnification under the foregoing provisions,
such right shall inure to the benefit of his heirs, executors, administrators,
and personal representatives. The rights conferred above shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, bylaw, resolution of stockholders or directors, agreement, or
otherwise. The Company shall be required to indemnify an indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if the initiation of such proceeding (or part thereof) by the indemnitee was
authorized by the board of directors of the Company.
The Corporation's obligation, if any, to indemnify or advance expenses to
any person who was or is serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise shall be reduced by any amount such person may collect as
indemnification or advancement from such other foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
Any repeal or amendment of this Article SIXTH shall be prospective only and
shall not affect the rights of any such director or officer or the obligations
of the Corporation with respect to any claim arising from or related to the
services of such director or officer in any of the foregoing capacities prior to
any such repeal or amendment to this Article SIXTH.
SEVENTH: The board of directors shall have the power to make, adopt,
alter, amend, and repeal from time to time the Bylaws of the Corporation and to
make from time to time new Bylaws of the Corporation (subject to the right of
the stockholders entitled to vote thereon to adopt, alter, amend, and repeal
Bylaws made by the board of directors or to make new Bylaws) to the extent and
in the manner provided in the Bylaws; PROVIDED, HOWEVER, that the stockholders
of the Corporation shall be entitled to
6
adopt, alter, amend, or repeal Bylaws made by the board of directors or to make
new Bylaws solely upon the affirmative vote of the holders of a majority of the
outstanding shares of the Common Stock.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or it stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article EIGHTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article EIGHTH, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the General Corporation
Law of Delaware.
NINTH: The number of directors constituting the board of directors shall
be fixed by, or in the manner provided in, the Bylaws of the Corporation. Each
director of the Corporation shall hold office until the next annual meeting of
stockholders or until his or her successor shall have been duly elected and
qualified. Directors need not be elected by written ballot.
TENTH: The incorporator of the Corporation is Shannon M. Hernandez, whose
mailing address is 235 Montgomery Street, San Francisco, California 94104. The
power of the incorporator shall terminate upon the filing of this Certificate of
Incorporation, and the names and mailing addresses of the persons who are to
serve as directors until the first annual meeting and until their successors are
elected and qualified are:
NAME ADDRESS
- ---------------- -------------------------------------------------
R. E. Galvin 1301 McKinney St., Houston, TX 77010
D. L. Paul 1301 McKinney St., Houston, TX 77010
D. R. Dunn 1301 McKinney St., Houston, TX 77010
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly, have hereunto set my hand this 22nd day of May, 1996.
/s/ Shannon M. Hernandez
INCORPORATOR
7
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Certificate of Incorporation of Midstream Combination Corp., a
Delaware corporation (the "Company"), as amended, contains a limitation of
liability provision under which a director will not be personally liable to
Newco or its stockholders for monetary damages resulting from breaches of his
fiduciary duty of care as a director, including breaches which constitute gross
negligence. As a result, the rights of Newco and its stockholders to obtain
monetary damages for acts or omissions of directors will be more limited than
they would be in the absence of the limitation of liability provision. The
limitation of liability provision does not limit or affect a stockholder's
ability to seek and obtain relief under the federal securities law.
Section 145 of the DGCL permits indemnification upon a determination that
an officer or director has met the applicable standard of conduct. Such officer
or director is required to have acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of a corporation and,
with respect to any criminal action, without reasonable cause to believe his
conduct was unlawful. Section 145 does not authorize indemnification in actions
brought by or in the right of a corporation with respect to any claim, issue or
matter as to which a director or officer is adjudged to be liable to the
corporation, unless specifically authorized by the Delaware Court of Chancery or
the court in which such action is brought. Newco's Certificate of Incorporation
provides for the mandatory indemnification of officers and directors to the
fullest extent permitted under the DGCL. Section 145 also expressly provides
that the power to indemnify authorized thereby is not exclusive of any rights
granted under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
The above discussion of Newco's Certificate of Incorporation and of
Sections 102 and 145 of the DGCL is not intended to be exhaustive and is
qualified in its entirety by such Certificate of Incorporation and the DGCL.
Upon consummation of the Combination, Newco, as the surviving corporation
in the Combination (in such capacity, "New NGC") will carry purchased liability
insurance policies covering its directors and officers to insure against losses
that are not covered by the indemnification of directors and officers by Newco,
as discussed above. Covered losses include those arising from any breach of
duty, neglect, error, misstatement, misleading statement, omission or other act
done or wrongfully attempted by the directors or officers in their respective
capacities as such. It is also contemplated that New NGC will also be insured
against losses incurred as a result of indemnity payments to any director or
officer.
ITEM 21. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON 8-K
The following instruments and documents are included as exhibits to this
Form S-4.
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------
2.1 -- Combination Agreement and Plan of Merger, dated October 21, 1994,
among Trident NGL Holding, Inc., Natural Gas Clearinghouse, British
Gas General Partner Inc., British Gas Limited Partner Inc., British
Gas NGC L.P., NOVA NGC, Inc., Participating Employee Partners, C. L.
Watson, Inc., Stephen W. Bergstrom, Inc., Gilbert Burciaga, Inc., A.
R. Cipriani, Jr., Inc., David C. Feldman, Inc., James T. Hackett,
Inc., H. Keith Kaelber, Inc., Kenneth E. Randolph, Inc., Donald R.
Sinclair, Inc. and Jacob S. Ulrich, Inc.(11)
+2.2 -- Combination Agreement and Plan of Merger, dated May 22, 1996 by and
among NGC Corporation, Chevron U.S.A., Inc. and Midstream Combination
Corp.
+2.3 -- Form of Amendment to Combination Agreement by and among NGC
Corporation, Chevron U.S.A., Inc. and Midstream Combination Corp.
S-1
3.1 -- Certificate of Incorporation of NGC Corporation.(5)
3.2 -- Amended and Restated By-Laws of NGC Corporation.(15)
+3.3 -- Certificate of Incorporation of Midstream Combination Corp.
+3.4 -- By-Laws of Midstream Combination Corp.
+3.5 -- Certificate of Incorporation of New NGC Corporation (as successor
in interest in the Combination).
+3.6 -- Form of By-Laws of NGC Corporation (as successor in interest in the
Combination).
4.1 -- Indenture, dated as of September 9, 1993, between Trident NGL, Inc.
and Ameritrust Texas National Association, as Trustee.(6)
4.2 -- Form of 14% Senior Subordinated Note of Trident NGL, Inc. due 2001
(included in Exhibit 4.1).
4.3 -- Note Purchase Agreement, dated as of August 30, 1991, by and among
Trident NGL, Inc. and the Purchasers named therein.(2)
4.4 -- Indenture, dated as of April 15, 1993, between Trident NGL, Inc.
and First National Bank of Boston, as Trustee.(4)
4.5 -- Form of 10.25% Subordinated Note of Trident NGL, Inc. due 2001
(included in Exhibit 4.4).
4.6 -- Waiver and Agreement, dated as of October 31, 1993, by and among
Trident NGL Holding, Inc. and the other parties signatory thereto.(5)
4.7 -- Terms of the Contingent Right of Certain Trident stockholders to
receive the Contingent Shares.(12)
4.8 -- Terms of the NGC Partners Right to receive the Contingent
Shares.(12)
4.9 -- Credit Agreement dated as of March 14, 1995, among NGC Corporation
and The First National Bank of Chicago, individually and as agent, The
Chase Manhattan Bank National Association and NationsBank of Texas
N.A., individually and as co-agent, and certain other lenders named
therein.(14)
4.10 -- Indenture, dated as of December 11, 1995, between NGC Corporation
Subsidiary Guarantors named therein and The First National Bank of
Chicago, as Trustee.(13)
4.11 -- Form of Senior Notes (included in Exhibit 4.10).
+5.1 -- Opinion and Consent of Pillsbury Madison & Sutro L.L.P., as to the
validity of the securities being registered hereby.
+7.1 -- Opinion and consent of Richards Layton & Finger regarding the
Series A Participating Preferred Stock.
+8.1 -- Tax Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
10.1 -- Stock Purchase Agreement, dated as of August 30, 1991, among
Trident NGL Holding, Inc., Trident NGL Holding Subsidiary, Inc.,
HM/Trident, L.P., OXY NGL Inc. and the other purchasers listed on
Schedule I thereto.(1)
10.2 -- Amended and Restated Stockholders Agreement, dated as of April 15,
1993, among Trident NGL Holding, Inc., HM/Trident, L.P. and the other
parties listed on Schedule I thereto.(9)
10.3 -- Agreement of Sale and Purchase of Assets, dated as of May 15, 1991, as
amended on June 6, 1991 and August 30, 1991, by and between OXY USA
Inc. and Trident Energy, Inc.(1)
10.4 -- Master Agreement on Gas Processing, dated as of May 5, 1991, by and
between OXY USA Inc. and Trident NGL, Inc.(1)
10.5 -- Agreement on Employment, Employee Benefits and Wages, dated as of
August 30, 1991, by and between OXY USA Inc. and Trident NGL, Inc.(1)
10.6 -- Product Sale and Delivery Agreement between Trident NGL, Inc., OXY
NGL Pipeline Company and OXY Petrochemicals, Inc. dated as of August
30, 1991.(1)
10.7 -- Right of First Refusal Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc. (Lake Charles
facilities and Trident NGL Pipeline).(1)
S-2
10.8 -- Right of First Refusal Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc. (Hackberry storage
facilities and terminal).(1)
10.9 -- Amended and Restated Gulf Coast Fractionators Partnership
Agreement.(7)
10.10 -- Employment Agreement, dated as of July 9, 1991, by and between
Bruce M. Withers, Jr. and Trident NGL, Inc.(1)
10.11 -- Amendment to Employment Agreement, dated as of April 28, 1994, by
and between Bruce M. Withers, Jr., Trident NGL Holding, Inc. and
Trident NGL, Inc.(8)
10.12 -- Second Amendment, dated as of October 21, 1994, to Employment
Agreement, dated as of July 9, 1991, as amended, by and between Bruce
M. Withers, Jr. and Trident NGL, Inc.
10.13 -- Employment Agreement, dated as of May 19, 1992, between C.L. Watson
and Natural Gas Clearinghouse.(12)
10.14 -- Employment Agreement, dated as of May 19, 1992, between Stephen W.
Bergstrom and Natural Gas Clearinghouse.(12)
+10.15 -- NGC Corporation Amended and Restated 1991 Stock Option Plan.
10.16 -- NGC Corporation Employee Equity Option Plan.(12)
+10.17 -- NGC Corporation Amended and Restated Non-Employee Director
Compensation Plan.
10.18 -- Agreement for the Construction, Ownership and Operation of the Mont
Belvieu I Fractionation Facility between Trident NGL, Inc. and Union
Pacific Fuels, Inc. dated November 17, 1993.(7)
10.19 -- The Amended and Restated Natural Gas Clearinghouse Deferred
Compensation Plan, dated February 28, 1992.(14)
10.20 -- Natural Gas Clearinghouse Above Base Incentive Compensation Plan,
as amended and restated, effective as of January 1, 1994.(14)
10.21 -- Unanimous Shareholder Agreement, dated February 25, 1994, among
Novacorp International Inc., (formerly NOVA Gas Services, Ltd.), NGC
Canada Inc. and Novagas Clearinghouse, Ltd.(14)
10.22 -- First Amendment to Unanimous Shareholders Agreement, dated May 20,
1994, among Novacorp International Inc. (formerly NOVA Gas Services,
Ltd.), NGC Canada, Inc. and Novagas Clearinghouse, Ltd.(14)
10.23 -- Limited Partnership Agreement, dated February 25, 1994, among
Novacorp International Inc. (formerly Nova Gas Services, Ltd.), NGC
Canada, Inc., and Novagas Clearinghouse, Ltd.(14)
10.24 -- Amended and Restated Lease Agreement entered into June 3, 1992
between Cypress Crossing Venture, as Landlord, and Natural Gas
Clearinghouse, as Tenant.(14)
10.25 -- First Amendment to Amended and Restated Lease Agreement, dated
effective as of November 1, 1992, between Cypress Crossing Venture and
Natural Gas Clearinghouse.(14)
10.26 -- Second Amendment to Amended and Restated Lease Agreement, dated
effective as of May 1, 1994, between Cypress Crossing Venture and
Natural Gas Clearinghouse.(14)
10.27 -- Amended Contract for Processing Gas, dated January 1, 1995, by and
between Amoco Production Company and Trident NGL, Inc.(5)
10.28 -- Lock-up Agreement, dated as of October 21, 1994, executed by BG
Holdings, Inc., in favor of Trident NGL Holding, Inc.(12)
10.29 -- Lock-up Agreement, dated as of October 21, 1994, executed by NOVA
Gas Services (U.S.) Inc. in favor of Trident NGL Holding, Inc.(12)
10.30 -- Lock-up Agreement, dated as of October 21, 1994, executed by C.L.
Watson, Stephen W. Bergstrom, Gilbert Burciaga, A. R. Cipriani, Jr.,
David C. Feldman, Inc., James T. Hackett, H. Keith Kaelber, Kenneth E.
Randolph, Donald R. Sinclair, and Jacob S. Ulrich in favor of Trident
NGL Holding, Inc.(12)
S-3
10.31 -- Indemnification Agreements dated as of October 21, 1994, between
Trident NGL Holding, Inc. and BG Holdings, Inc.(12)
10.32 -- Indemnification Agreement, dated as of October 21, 1994, among
Trident NGL Holding, Inc., NOVA Gas Services (U.S.) Inc. and NOVA
Investments (U.S.) Inc.(12)
10.33 -- Indemnification Agreements, dated as of October 21, 1994, between
Trident NGL Holding, Inc. and each of C. L. Watson, Stephen W.
Bergstrom, Gilbert Burciaga, A. R. Cipriani, Jr., James T. Hackett, H.
Keith Kaelber, Kenneth E. Randolph, Donald R. Sinclair, and Jacob S.
Ulrich, respectively.(12)
10.34 -- Indemnification Agreement, dated as of October 21, 1994, among
Trident NGL Holding, Inc. and David C. Feldman, Inc. and David C.
Feldman.
10.35 -- Administrative Services Agreement, dated as of October 21, 1994,
between Trident NGL Holding, Inc. and NOVAGAS Clearinghouse Limited
Partnership.(12)
10.36 -- Master Services Contract, dated as of October 21, 1994, between
Accord Energy Limited and Trident NGL Holding, Inc.(12)
10.37 -- Stockholders Agreement, dated as October 21, 1994, among Trident
NGL Holding, Inc. and certain of its Stockholders.(12)
10.38 -- Stockholders Agreement, dated as of October 21, 1994, among Trident
NGL Holding, Inc., HMTF, BG Holdings, Inc., NOVA Gas Services (U.S.)
Inc. and certain other stockholders named therein.(12)
10.39 -- Registration Rights Agreement, dated as of October 21, 1994, among
Trident NGL Holding, Inc., BG Holdings, Inc., NOVA Gas Services (U.S.)
Inc. and each of C. L. Watson, Stephen W. Bergstrom, Gilbert Burciaga,
A. R. Cipriani, Jr., David C. Feldman, Inc., James T. Hackett, H.
Keith Kaelber, Kenneth E. Randolph, Donald R. Sinclair, and Jacob S.
Ulrich.(12)
+10.40 -- Form of Contribution and Assumption Agreement, dated as of , 1996,
among Chevron U.S.A. Inc., Chevron Pipe Line Company, Chevron Chemical
Company and Midstream Combination Corp.
+10.41 -- Form of Midstream Combination Corp. Note, dated as of , 1996, among
Chevron U.S.A. Inc. and Midstream Combination Corp.
+10.42 -- Form of Voting Agreement dated May 22, 1996 between Chevron U.S.A.
Inc. and BG Holdings, Inc.
+10.43 -- Scope of Business Agreement dated May 22, 1996 between Chevron
Corporation and NGC Corporation.
+10.44 -- Stockholders Agreement, dated May 22, 1996, among BG Holdings,
Inc., NOVA Gas Services (U.S.) Inc. and Chevron U.S.A. Inc.
+10.45 -- Form of Registration Rights Agreement, dated as of , 1996, among
NGC Corporation, BG Holdings, Inc., NOVA Gas Services (U.S.) Inc. and
Chevron U.S.A. Inc.
+10.46 -- Form of Master Alliance Agreement, dated as of , 1996, among
Chevron U.S.A. Inc., Chevron Chemical Company, Chevron Pipe Line
Company, and other Chevron U.S.A. Inc. affiliates, NGC Corporation,
Natural Gas Clearinghouse, Warren Petroleum Company Limited
Partnership, Electric Clearinghouse, Inc. and other NGC Corporation
affiliates.
*+10.47-- Form of Natural Gas Purchase and Sale Agreement, dated as of ,
1996, among Chevron U.S.A. Inc. and Natural Gas Clearinghouse.
*+10.48-- Form of Master Natural Gas Processing Agreement, dated as of ,
1996, among Chevron U.S.A. Inc. and Warren Petroleum Company Limited
Partnership.
*+10.49-- Form of Master Natural Gas Liquid Purchase Agreement, dated as of ,
1996, among Warren Petroleum Company Limited Partnership and Chevron
U.S.A. Inc.
S-4
*+10.50-- Form of Gas Supply and Service Agreement, dated as of , 1996, among
Chevron Products Company and Natural Gas Clearinghouse.
+10.51 -- Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron U.S.A. Production Company.
+10.52 -- Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Chemical Company.
+10.53 -- Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Products Company.
*+10.54-- Form of Feedstock Sale and Refinery Product Purchase Agreement
dated as of , 1996, among Chevron Products Company and Warren
Petroleum Company Limited Partnership.
*+10.55-- Form of Refinery Product Sale Agreement (Hawaii), dated as of ,
1996, among Warren Petroleum Company Limited Partnership and Chevron
Products Company.
*+10.56-- Form of Feedstock Sale and Refinery Product Master Services
Agreement, dated as of , 1996, among Chevron Products Company and
Warren Petroleum Company Limited Partnership.
*+10.57-- Barge Co. Term Sheet, dated as of , 1996, among Chevron U.S.A. Inc.
and NGC Corporation.
*+10.58-- CCC Product Sale and Purchase Agreement dated as of , 1996, among
Warren Petroleum Company Limited Partnership and Chevron Chemical
Company.
*+10.59-- CCC/WPC Services Agreement, dated as of , 1996, among Chevron
Chemical Company and Warren Petroleum Company Limited Partnership.
*+10.60-- Operating Agreement, dated as of , 1996, among Warren Petroleum
Company Limited Partnership and Chevron Pipe Line Company.
+10.61 -- Galena Park Service Agreement, dated as of , 1996, among Chevron
Products Company and Midstream Combination Corp.
*+10.62-- Venice Complex Operating Agreement, dated as of August 1, 1996,
among Chevron U.S.A. Inc. and Warren Petroleum Company Limited
Partnership.
*+10.63-- Product Storage Lease and Terminal Access Agreement, dated as of
August 1, 1996, among Chevron U.S.A. Inc. and Warren Petroleum Company
Limited Partnership.
+10.64 -- Lone Star Swap Transaction Confirmation Term Sheet, dated as of ,
1996, among Chevron U.S.A. Inc. and NGC Corporation.
*+10.65-- Form of West Texas LPG Pipeline Partnership Agreement by and
between Chevron Pipe Line Company, or an affiliate thereof, and an
affiliate of NGC Corporation.
*+10.66-- Form of West Texas LPG Pipeline Operating Agreement by and between
Chevron Pipe Line Company, or an affiliate thereof, and the West Texas
LPG Pipeline Partnership.
+10.67 -- Employment Agreement dated April 2, 1996 by and between NGC
Corporation and Mr. Stephen A. Furbacher.
+10.68 -- Employment Agreement dated March 15, 1996 by and between NGC
Corporation and Mr. Mark L. Hazelwood.
+10.69 -- Lease Agreement entered into on June 12, 1996 between Metropolitan
Life Insurance Company and Metropolitan Tower Realty Company, Inc., as
landlord, and NGC Corporation, as tenant.
+10.70 -- First Amendment to Lease Agreement entered into on June 12, 1996
between Metropolitan Life Insurance Company and Metropolitan Tower
Realty Company, Inc., as landlord, and NGC Corporation, as tenant.
+13.1(i)- Annual Report on Form 10-K/A of NGC Corporation for the period
ending December 31, 1995.
S-5
+13.2(ii) Quarterly Report on Form 10-Q/A of NGC Corporation for the three
month period ending March 31, 1996.
+21.1 -- Subsidiaries of the Registrant.
+21.2 -- Subsidiaries of NGC Corporation.
+23.1 -- Consent of Arthur Andersen LLP, Independent Auditors.
+23.2 -- Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1)
+23.3 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 8.1)
+23.4 -- Consent of Lehman Brothers, Inc.
+23.5 -- Consents of nominees to the Registrant's Board of Directors.
+23.6 -- Consent of Richards Layton & Finger (included in Exhibit 7.1)
+23.7 -- Consent of Price Waterhouse, Chartered Accountants and Registered
Auditors.
+24.1 -- Power of Attorney (included on the signature page hereto).
+99.1 -- Form of Proxy Card.
- ------------
+ Filed herewith.
* Exhibit omits certain information which the Company has filed separately
with the Commission pursuant to a confidential treatment request pursuant
to Rule 406 promulgated under the Securities Act of 1933, as amended.
(1) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-43871.
(2) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-46416.
(3) Incorporated by reference to exhibits to the registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-59200.
(4) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 31, 1993 of Trident NGL, Inc.
Commission File No. 1-11156.
(5) Incorporated by reference to exhibits to the Annual Report on Form 10-K of
NGC Corporation for the year ended December 31, 1994, Commission File No.
1-11156.
(6) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL Holding, Inc. on Form S-1, Registration No. 33-68842.
(7) Incorporated by reference to exhibits to the Annual Report of Trident NGL
Holding, Inc. on Form 10-K for the Fiscal Year Ended December 31, 1993,
Commission File No. 1-11156.
(8) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 31, 1994 of Trident NGL Holding, Inc.,
Commission File No. 1-11156.
(9) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended June 30, 1994 of Trident NGL Holding, Inc.,
Commission File No. 1-11156.
(10) Incorporated by reference to exhibits to the Current Report on Form 8-K of
Trident NGL Holding, Inc., Commission File No. 1-11156, dated August 4,
1994.
(11) Incorporated by reference to exhibits to the Current Report on Form 8-K of
Trident NGL Holding, Inc., Commission File No. 1-11156, dated October 21,
1994.
(12) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL Holding, Inc. on Form S-4, Registration No. 33-88907.
(13) Incorporated by reference to the Registration Statement of NGC Corporation
on Form S-3, Registration No. 33-97368.
(14) Incorporated by reference to exhibits to the current report on Form 8-K of
NGC Corporation, Commission File 1-11156, dated March 14, 1995.
(15) Incorporated by reference to exhibits to the Annual Report of NGC
Corporation on Form 10-K for the Fiscal Year Ended December 31, 1995,
Commission File No. 1-11156.
S-6
(b) Financial Statement Schedules.
None
(c) Reports, Opinions and Appraisals -- Opinion of Lehman Brothers Inc. dated
May 22, 1996 relating to the fairness of the consideration to be received
by NGC in the Combination (See Appendix III of the Proxy
Statement/Prospectus).
ITEM 22. UNDERTAKINGS.
(a) Undertakings Required by Item 512 of Regulation S-K
RULE 415 OFFERING UNDERTAKING.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
PROVIDED, HOWEVER, That paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by 10.3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, PROVIDED that the
registrant includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the prospectus is
at least as current as the date of those financial statements. Notwithstanding
the foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or ^ 210.3-19 of this
chapter if such financial statements and information are contained in periodic
reports filed with or furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Form F-3.
S-7
UNDERTAKING RELATING TO INCORPORATING BY REFERENCE SUBSEQUENT EXCHANGE ACT
FILINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
UNDERTAKING REGARDING INCORPORATED ANNUAL OR QUARTERLY REPORTS.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
UNDERTAKINGS RELATING TO REGISTRATION ON FORM S-4.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
S-8
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
designates and appoints David R. Dunn, Darald W. Callahan, Donald L. Paul, and
Peter J. Robertson, and each of them, as its or his attorneys-in-fact (the
"Attorney-in-Fact") with full power to act in each capacity stated below, to
sign one or more amendments (including post-effective amendments) to this
Registration Statement on Form S-4 as any such Attorney-in-Fact deems
appropriate, and to file each such amendment to this Registration Statement on
Form S-4 together with all exhibits thereto and any and all documents in
connection therewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on July 31, 1996.
MIDSTREAM COMBINATION CORP.
By:/s/ DAVID R. DUNN
David R. Dunn,
President
Date: July 31, 1996
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ---------------------- ------------------------------- -------------------
/s/DAVID R. DUNN President (Principal Executive July 31, 1996
David R. Dunn Officer and Principal Financial
and Accounting Officer
/s/DARALD W. CALLAHAN Director July 31, 1996
Darald W. Callahan
/s/DONALD L. PAUL Director July 31, 1996
Donald L. Paul
/s/PETER J. ROBERTSON Director July 31, 1996
Peter J. Robertson
S-9
EXHIBIT 2.2
COMBINATION AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
NGC CORPORATION,
CHEVRON U.S.A. INC.
AND
MIDSTREAM COMBINATION CORP.
DATED AS OF MAY 22, 1996
<PAGE>
COMBINATION AGREEMENT
AND
PLAN OF MERGER
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS....................... 1
1.1 SPECIFIC DEFINITIONS....................................... 1
1.2 OTHER TERMS................................................ 13
1.3 OTHER DEFINITIONAL PROVISIONS.............................. 13
1.4 "KNOWLEDGE"................................................ 13
ARTICLE 2
THE CONTRIBUTIONS.................... 13
2.1 CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES. .... 13
2.2 THE MERGER AND PAYMENT OF THE NEWCO NOTE................... 14
2.3 CONSIDERATION ADJUSTMENT................................... 15
2.4 ADJUSTMENTS FOR RETAINED ASSETS. ......................... 18
ARTICLE 3
THE CLOSING....................... 18
3.1 CLOSING DATE............................................... 18
3.2 DELIVERIES OF ANCILLARY DOCUMENTS AT CLOSING............... 19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF NGC.......................... 21
4.1 CORPORATE STATUS........................................... 21
4.2 CAPITALIZATION............................................. 21
4.3 OTHER SUBSIDIARIES......................................... 22
4.4 NO GOVERNMENTAL APPROVALS.................................. 22
4.5 AUTHORITY.................................................. 23
4.6 NO CONFLICTS............................................... 23
4.7 SEC DOCUMENTS.............................................. 23
4.8 LITIGATION................................................. 24
4.9 COMPLIANCE WITH LAWS....................................... 24
4.10 MATERIAL AGREEMENTS........................................ 25
4.11 NO UNDISCLOSED MATERIAL LIABILITIES........................ 25
4.12 PUBLIC UTILITY............................................. 25
4.13 BROKERS OR FINDERS......................................... 25
4.14 FULL DISCLOSURE............................................ 26
4.15 TITLE TO PERSONAL PROPERTY ASSETS.......................... 26
i
4.16 NGC FACILITIES - TITLE AND OTHER MATTERS................... 26
4.17 MAJOR CUSTOMERS AND SUPPLIERS.............................. 27
4.18 BUILDINGS, VEHICLES, MACHINERY, EQUIPMENT, ETC............. 27
4.19 INVENTORY.................................................. 28
4.20 PREFERENTIAL RIGHTS........................................ 28
4.21 INTELLECTUAL PROPERTY, ETC................................. 28
4.22 JOA RELATED AGREEMENTS..................................... 28
4.23 INSURANCE.................................................. 28
4.24 ABSENCE OF CHANGES OR EVENTS............................... 28
4.25 ACQUISITIONS; CAPITAL EXPENDITURES......................... 30
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF CHEVRON........................ 30
5.1 CORPORATE STATUS........................................... 30
5.2 NEWCO STATUS AND CAPITALIZATION............................ 30
5.3 NO GOVERNMENTAL APPROVALS.................................. 30
5.4 AUTHORITY.................................................. 31
5.5 NO CONFLICTS............................................... 31
5.6 FINANCIAL STATEMENTS....................................... 31
5.7 FINANCIAL INFORMATION; INTERNAL CONTROL REPORTS............ 32
5.8 LITIGATION................................................. 33
5.9 COMPLIANCE WITH LAWS....................................... 33
5.10 INTENTIONALLY OMITTED...................................... 34
5.11 SUFFICIENCY OF ASSETS...................................... 34
5.12 MATERIAL AGREEMENTS........................................ 34
5.13 NO UNDISCLOSED MATERIAL LIABILITIES........................ 34
5.14 PUBLIC UTILITY............................................. 34
5.15 BROKERS OR FINDERS......................................... 35
5.16 FULL DISCLOSURE............................................ 35
5.17 TITLE TO PERSONAL PROPERTY ASSETS.......................... 35
5.18 CHEVRON FACILITIES - TITLE AND OTHER MATTERS............... 35
5.19 MAJOR CUSTOMERS AND SUPPLIERS.............................. 36
5.20 BUILDINGS, VEHICLES, MACHINERY, EQUIPMENT, ETC............. 36
5.21 INVENTORY.................................................. 37
5.22 PREFERENTIAL RIGHTS........................................ 37
5.23 INTELLECTUAL PROPERTY, ETC................................. 37
5.24 JOA RELATED AGREEMENTS..................................... 37
5.25 ABSENCE OF CHANGES OR EVENTS............................... 37
ARTICLE 6
ENVIRONMENTAL MATTERS.................. 39
6.1 CHEVRON'S ENVIRONMENTAL INDEMNITY.......................... 39
6.2 SURVIVING CORPORATION'S ENVIRONMENTAL INDEMNITY............ 40
6.3 FURTHER LIMITATION ON RECOVERY FOR LOSSES.................. 41
6.4 PREVIOUSLY GRANTED INDEMNITIES............................. 41
ii
6.5 SURVIVAL................................................... 41
ARTICLE 7
TAXES.............................. 41
7.1 TAX FILINGS AND REPRESENTATIONS............................ 41
7.2 TAX RESPONSIBILITIES....................................... 42
7.3 RECORDS AND ASSISTANCE..................................... 44
7.4 TAX SHARING AGREEMENTS..................................... 44
7.5 TAX AUDITS................................................. 44
7.6 TAX INDEMNITY.............................................. 46
7.7 SURVIVAL................................................... 48
7.8 INDEMNITY FOR NGC TAX LOSSES............................... 48
ARTICLE 8
EMPLOYEES AND BENEFITS MATTERS.............. 51
8.1 REPRESENTATIONS AND WARRANTIES OF NGC...................... 51
8.2 REPRESENTATIONS AND WARRANTIES OF CHEVRON.................. 53
8.3 CONDUCT OF NGC PRIOR TO CLOSING RELATING
TO EMPLOYEE BENEFIT PLANS................................ 54
8.4 OFFERS OF EMPLOYMENT....................................... 55
8.5 DEFINED BENEFIT PENSION PLANS.............................. 56
8.6 QUALIFIED DEFINED CONTRIBUTION PLANS....................... 56
8.7 SEVERANCE PLANS............................................ 56
8.8 VACATION PAY............................................... 57
8.9 MEDICAL AND DENTAL PLANS................................... 57
8.10 POST-RETIREMENT WELFARE BENEFITS........................... 58
8.11 THE NEWCO GROUP'S LIFE INSURANCE COVERAGE.................. 58
8.12 THE NEWCO GROUP'S OTHER EMPLOYEE BENEFITS;
SERVICE RECOGNITION...................................... 58
8.13 GENERAL EMPLOYEE PROVISIONS................................ 59
8.14 WARN ACT COMPLIANCE........................................ 59
8.15 SURVIVAL................................................... 59
ARTICLE 9
CERTAIN COVENANTS OF NGC, CHEVRON AND NEWCO....... 59
9.1 ACCESS TO INFORMATION...................................... 59
9.2 PREPARATION OF THE PRELIMINARY PROXY STATEMENT
AND THE DEFINITIVE PROXY STATEMENT/PROSPECTUS............ 60
9.3 TAKING OF NECESSARY ACTION................................. 60
9.4 EXPENSES................................................... 61
9.5 NOTICE OF CERTAIN CHANGES.................................. 61
9.6 PRESS RELEASES............................................. 61
9.7 OPERATION OF CHEVRON FACILITIES............................ 62
9.8 INFORMATION SUPPLIED BY NGC................................ 62
9.9 INFORMATION SUPPLIED BY CHEVRON............................ 62
iii
ARTICLE 10
CONDUCT OF THE BUSINESS BY CHEVRON............ 62
10.1 ORDINARY COURSE............................................ 62
10.2 INCONSISTENT AGREEMENTS.................................... 62
10.3 NO OTHER BIDS.............................................. 63
10.4 PROHIBITED DISPOSITIONS.................................... 63
10.5 NEWCO......................................................... 63
10.6 ISSUANCE AND SALE OF NEWCO SECURITIES......................... 63
10.7 CAPITAL EXPENDITURES.......................................... 63
ARTICLE 11
CONDUCT OF BUSINESS BY NGC................ 64
11.1 ORDINARY COURSE............................................ 64
11.2 DIVIDENDS AND ISSUANCE AND SALE OF SECURITIES.............. 64
11.3 GOVERNING DOCUMENTS; INCONSISTENT AGREEMENTS............... 64
11.4 SUBSTANTIVE ACTIONS; CHEVRON DIRECTORS..................... 64
11.5 PROHIBITED DISPOSITIONS.................................... 65
11.6 LINES OF BUSINESS.......................................... 65
11.7 ACCOUNTING METHODS......................................... 65
11.8 NO OTHER BIDS.............................................. 65
ARTICLE 12
CONDITIONS........................ 65
12.1 CONDITIONS TO ALL PARTIES' OBLIGATIONS
REGARDING THE MERGER..................................... 65
12.2 CONDITIONS TO THE OBLIGATIONS OF CHEVRON
REGARDING THE COMBINATION................................ 66
12.3 CONDITIONS TO THE OBLIGATIONS OF NGC
REGARDING THE COMBINATION................................ 67
ARTICLE 13
TERMINATION....................... 68
13.1 TERMINATION................................................ 68
13.2 TERMINATION DUE TO TITLE MATTERS........................... 69
13.3 EFFECT OF TERMINATION...................................... 70
ARTICLE 14
INDEMNIFICATION..................... 72
14.1 GENERAL PROVISIONS......................................... 72
14.2 INDEMNIFICATION BY CHEVRON................................. 74
14.3 INDEMNIFICATION BY NGC..................................... 74
14.4 LIMITATION OF LIABILITY.................................... 74
14.5 INDEMNIFICATION PROCEDURES: THIRD PARTY CLAIMS............. 75
14.6 INDEMNIFICATION PROCEDURES: ENVIRONMENTAL
REMEDIATION CLAIMS....................................... 77
14.7 INDEMNIFICATION PROCEDURES: ABSENCE, LOSS OR
IMPAIRMENT OF USE OF PROPERTY............................ 80
iv
ARTICLE 15
POST-CLOSING MATTERS................... 80
15.1 CORPORATE NAMES........................................... 80
15.2 OPTIONS................................................... 81
15.3 DEFINITIVE CONSIDERATION ADJUSTMENT........................ 81
15.4 TRANSFERS OF RETAINED ASSETS DURING THE INTERIM PERIOD..... 82
15.5 FINAL ADJUSTMENT FOR RETAINED ASSETS....................... 82
15.6 ADJUSTMENT REGARDING LONDON OPERATIONS..................... 83
15.7 INSURANCE.................................................. 85
15.8 INDEMNIFICATION PRINCIPLES................................. 86
15.9 ASSUMPTION OF SENIOR NOTES................................. 86
15.10 REGISTRATION OF CERTAIN SECURITIES......................... 87
ARTICLE 16
GENERAL PROVISIONS.................... 87
16.1 EFFECT OF DUE DILIGENCE.................................... 87
16.2 SUCCESSORS AND ASSIGNS..................................... 87
16.3 NOTICES.................................................... 87
16.4 COUNTERPARTS............................................... 88
16.5 MISCELLANEOUS.............................................. 88
16.6 GOVERNING LAW.............................................. 89
16.7 NO RECOURSE................................................ 89
16.8 BULK SALES LAWS............................................ 89
16.9 NO REMEDY IN CERTAIN CIRCUMSTANCES......................... 89
16.10 RECORDING FEES AND SIMILAR COSTS........................... 89
16.11 AMENDMENT.................................................. 89
16.12 WAIVER..................................................... 89
16.13 NO THIRD PARTY BENEFICIARIES............................... 89
16.14 REAL PROPERTY DISCLOSURES.................................. 90
16.15 WAIVER OF CONSUMER RIGHTS.................................. 90
v
SCHEDULES
Schedule 1.4 - Persons with Actual Knowledge
Schedule 2.1(C) - Adjustments to Newco Note
Schedule 2.2(e) - Initial Executive Officers of Newco
Schedule 2.3(a) - NGBU Fixed Book
Schedule 2.3(b) - Inventory Adjustment
Schedule 2.3(f) - NGBU Stored Gas
Schedule 2.3(g) - NUG Contract Adjustments
Schedule 4.2 - Options
Schedule 4.3 - NGC Other Subsidiaries
Schedule 4.6 - NGC No Conflicts
Schedule 4.8 - NGC Litigation
Schedule 4.9 - NGC Compliance with Laws
Schedule 4.10 - NGC Material Agreements
Schedule 4.15 - NGC Personal Property and Title Matters
Schedule 4.16(a)(1) - NGC NGL Fee Properties
Schedule 4.16(a)(2) - NGC Permitted Exceptions
Schedule 4.16(b) - NGC NGL Leased Properties
Schedule 4.16(c) - NGC Pipeline Properties
Schedule 4.16(d) - NGC NGL and Pipeline Facility Data
Schedule 4.17 - NGC Major Customers and Suppliers
Schedule 4.18 - NGC Buildings, Vehicles, Machinery, Equipment
Schedule 4.20 - NGC Preferential Rights
Schedule 4.21 - NGC Intellectual Property
Schedule 4.22 - NGC JOA Related Agreements
Schedule 4.24 - NGC Absence of Changes or Events
Schedule 4.25 - NGC Acquisitions, Capital Expenditures
Schedule 5.3 - Chevron Governmental Approvals
Schedule 5.5 - Chevron No Conflicts
Schedule 5.6 - Chevron Changes to Financial Statements
Schedule 5.8 - Chevron Litigation
Schedule 5.9 - Chevron Compliance with Laws
Schedule 5.12 - Chevron Material Agreements
Schedule 5.18(a)(1) - Chevron NGL Fee Properties
Schedule 5.18(a)(2) - Chevron Permitted Exceptions
Schedule 5.18(b) - Chevron Leased Properties
Schedule 5.18(c) - Chevron Pipeline Facilities
Schedule 5.18(d) - Chevron NGL Facility Data
Schedule 5.19 - Chevron Major Customers and Suppliers
Schedule 5.20 - Chevron Buildings, Vehicles and Major Equipment
Schedule 5.22 - Chevron Preferential Rights
Schedule 5.23 - Chevron Intellectual Property
Schedule 5.24 - Chevron JOA Related Agreements
Schedule 5.25 - Chevron Absence of Changes or Events
Schedule 8.1(a) - NGC Current Benefit Pension and Welfare Plans
Schedule 8.1(b) - NGC ERISA Violations, Non-Terminable Plans,
Post-Retirement Health Plans, Withdrawals From Plans
vi
Schedule 8.1(c) - NGC Union Contracts, Pending or Threatened Work Stoppages
or Labor Matters
Schedule 10.7 - Chevron Capital Expenditures
Schedule 12.3(e) - Chevron Material Consents
Schedule 14.4 - Description of Assets with Environmental Accruals
vii
EXHIBITS
Exhibit 2.1 Form of Contribution and Assumption Agreement
Exhibit 2.1(C) Form of Newco Note
Exhibit 2.2(a) Form of Certificate of Merger
Exhibit 2.2(d)(i) Form of Certificate of Incorporation
Exhibit 2.2(d)(ii) Form of Bylaws of Newco
Exhibit 3.2(b) Form of Stockholders Agreement
Exhibit 3.2(c) Form of Registration Rights Agreement
Exhibit 3.2(d) Master Alliance Agreement
Exhibit 3.2(e) Form of Natural Gas Purchase and Sale Agreement
Exhibit 3.2(f) Form of Gas Supply and Purchase Agreement (St. James)
Exhibit 3.2(g) Form of Gas Supply and Service Agreement (Oak Point Plant)
Exhibit 3.2(h) Form of Gas Supply and Service Agreement (Orange Plant)
Exhibit 3.2(i) Form of Gas Supply and Service Agreement (Cedar Bayou Plant)
Exhibit 3.2(j) Form of Gas Supply and Service Agreement
(Pascagoula Refinery)
Exhibit 3.2(k) Form of Gas Supply and Service Agreement
(Salt Lake City Refinery)
Exhibit 3.2(l) Form of Gas Supply and Service Agreement
(El Segundo Refinery)
Exhibit 3.2(m) Form of Gas Supply and Service Agreement
(Perth Amboy Refinery)
Exhibit 3.2(n) Form of Gas Supply and Service Agreement (Richmond Refinery)
Exhibit 3.2(o) Form of Master Natural Gas Processing Agreement
Exhibit 3.2(p) Form of Master Natural Gas Liquids Purchase Agreement
Exhibit 3.2(q) Form of Feedstock Sale and Refinery Product Purchase
Agreement (El Paso)
Exhibit 3.2(r) Form of Feedstock Sale and Refinery Product Purchase
Agreement (El Segundo)
Exhibit 3.2(s) Form of Refinery Product Sale Agreement (Hawaii)
Exhibit 3.2(t) Form of Feedstock Sale and Refinery Product Purchase
Agreement (Pascagoula)
Exhibit 3.2(u) Form of Feedstock Sale and Refinery Product Purchase
Agreement (Richmond)
Exhibit 3.2(v) Form of Feedstock Sale and Refinery Product Purchase
Agreement (Salt Lake City)
Exhibit 3.2(w) Form of Feedstock and Refinery Product Master Services
Agreement
Exhibit 3.2(x) Form of CCC Product Sale and Purchase Agreement
Exhibit 3.2(y) Form of CCC/WPC Services Agreement
Exhibit 3.2(z) Form of Operating Agreement between Newco and Chevron Pipe
Line Company (Mt. Belvieu Pipelines)
Exhibit 3.2(aa) Form of LPG System Loss/Gain Settlement Agreement
Exhibit 3.2(bb) Form of Transition Services Agreement
Exhibit 3.2(cc) Form of Master Power Agreement
(Chevron U.S.A. Production Company)
Exhibit 3.2(dd) Form of Master Power Service Agreement
(Chevron Chemical Company)
Exhibit 3.2(ee) Form of Master Power Service Agreement
(Chevron U.S.A. Products Company)
Exhibit 3.2(ff) Form of Galena Park Services Agreement
Exhibit 3.2(gg) Form of Venice Operating Agreement
Exhibit 3.2(hh) Form of Product Storage Lease and Terminal Access Agreement
(Venice)
Exhibit 3.2(ii) Form of Term Sheet regarding Fractionation Agreement
(Venice)
viii
Exhibit 3.2(jj) Form of Technical Services Agreement
Exhibit 3.2(kk) Form of Miscellaneous Master Services Agreement
Exhibit 3.2(ll) Form of Bargeco Term Sheet
Exhibit 3.2(mm) Form of Natural Gas Purchase and Sale Agreement
(Canadian - version #1)
Exhibit 3.2(nn) Form of Natural Gas Purchase and Sale Agreement
(Canadian - version #2)
Exhibit 3.2(oo) Form of Agency Agreement for Administration of Natural Gas
Purchase and Sale Contracts
Exhibit 3.2(pp) Form of Lone Star Swap Transaction Confirmation
(CUSA/NGC Master Swap Agreement)
Exhibit 3.2(qq) Form of Transportation Assignment and Valuation Agreement
Exhibit 3.2(rr) Form of Interstate Pipeline Capacity Release Agreement
Exhibit 3.2(ss) Form of West Texas LPG Pipeline Partnership Agreement
Exhibit 3.2(tt) Form of West Texas LPG Pipeline Operating Agreement
Exhibit 3.2(uu) Form of West Texas LPG Pipeline License Agreement
Exhibit 9.6 Form of Joint Press Release
Exhibit 12.2(c) Form of Akin Gump Opinion of Counsel
Exhibit 12.2(d) Form of NGC Stockholder Tax Representations
Exhibit 12.3(c) Form of Pillsbury Madison Opinion of Counsel
Exhibit 12.3(g)(i) Form of Chevron Tax Representations
Exhibit 12.3(g)(ii) Code Section 1445 Affidavit
Exhibit 16.14 Real Property Disclosures
ix
COMBINATION AGREEMENT
and
PLAN OF MERGER
This COMBINATION AGREEMENT AND PLAN OF MERGER, dated as of May 22,
1996, is by and among NGC Corporation, a Delaware corporation ("NGC"), Chevron
U.S.A. Inc. ("CHEVRON"), a Pennsylvania corporation, and Midstream Combination
Corp., a Delaware corporation ("NEWCO").
R E C I T A L S :
A. The Boards of Directors of NGC, Chevron and Newco have approved, and
deem it advisable and in the best interests of their respective companies and
stockholders to consummate, the transactions provided for herein pursuant to
which, among other things: (i) the Contributing Parties (as defined herein) will
contribute to Newco their right, title and interest in the Contributed
Businesses (as defined herein) and the Contributed West Texas LPG Pipeline
Business (as defined herein) in exchange for Newco's assumption of related
liabilities and obligations (including certain indebtedness), the issuance of
Newco stock to Chevron, and the issuance of the Newco Note (as defined herein)
to the Contributing Parties; (ii) Newco will acquire all of the assets and
liabilities of NGC through a merger of NGC with and into Newco; and (iii) Newco
and Chevron, or affiliates thereof, will enter into certain supply, sales and
service agreements with respect to natural gas, natural gas liquids and
electricity.
B. NGC, Chevron and Newco desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
"ACCORD" shall mean Accord Energy Ltd. and its Subsidiaries, if any.
"ACTING PARTY" shall have the meaning set forth in SECTION 13.3(D).
"ADJUSTMENT PERIOD" shall have the meaning set forth in SECTION 2.3(H).
"AFFECTED EMPLOYEES" shall have the meaning set forth in SECTION 8.4(B)
"AFFILIATE" shall mean any Person that is an "affiliate" within the
meaning of the regulations promulgated under the Securities Act, as such
regulations and Securities Act are in effect on the date of this Agreement. Each
Contributing Party (other than Chevron) is an Affiliate of Chevron. Newco shall,
with respect to all periods of time prior to and immediately before the Closing,
be deemed to be an Affiliate and a Subsidiary of Chevron.
"AGREED VALUE" shall have the meaning set forth in SECTION 2.4.
"AGREEMENT" shall mean this Combination Agreement and Plan of Merger,
as it may from time to time be amended, modified or supplemented by the parties
hereto.
"ALTERNATIVE TRANSACTION" means, as to any Person, any possible or
proposed transaction in North America substantially similar in nature and scope
to the Combination or involving the acquisition by NGC or Chevron of $250
million or more in value of interests in (a) assets substantially similar to the
assets owned as of the date hereof by NGC or (b) the Contributed Businesses.
"ANCILLARY AGREEMENTS" shall have the meaning set forth in SECTION 3.2.
"ARBITRATOR" shall have the meaning set forth in SECTION 7.6(D).
"ASSUMED INDEBTEDNESS" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"ASSUMED LIABILITIES" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"AUDIT ISSUES" shall have the meaning set forth in SECTION 7.5(D).
"BRITISH GAS" shall mean BG Holdings, Inc., a Delaware corporation.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or
legal holiday under the federal laws of the United States.
"CASUALTY LOSS" shall mean that a Chevron Facility, the Contributed
West Texas LPG Pipeline Business or an NGC Facility shall have been affected by
fire, explosion or other casualty such that the Losses resulting therefrom, as
adjusted by any insurance proceeds which Surviving Corporation will receive and
after taking into account the current effect of any repairs thereto or
replacements thereof, are reasonably expected to exceed $10 million.
"CERTIFICATE OF MERGER" shall have the meaning set forth in SECTION
2.2(A).
"CHEVRON" shall mean Chevron U.S.A. Inc., a Pennsylvania corporation.
"CHEVRON CASUALTY LOSS RATIO" shall have the meaning set forth in
SECTION 2.3(D).
"CHEVRON CORPORATION POLICIES" shall have the meaning set forth in
SECTION 15.7(A).
"CHEVRON FACILITIES" shall have the meaning set forth in SECTION
5.18(C).
2
"CHEVRON GROUP" shall mean Chevron Corporation, a Delaware corporation,
and its Subsidiaries that are part of an affiliated group of corporations (as
defined in Section 1504(a) of the Code) as of the date hereof.
"CHEVRON NGL FACILITIES" shall have the meaning set forth in SECTION
5.18(B).
"CHEVRON PENSION PLAN" shall have the meaning set forth in SECTION 8.5.
"CHEVRON PERMITTED EXCEPTIONS" shall have the meaning set forth in
SECTION 5.18(A).
"CHEVRON PIPELINE FACILITIES" shall have the meaning set forth in
SECTION 5.18(C).
"CHEVRON RETURNS" shall have the meaning set forth in SECTION 7.2(E).
"CHEVRON TAX" or "TAXES" shall have the meaning set forth in SECTION
7.2(A).
"CLEARINGHOUSE" shall mean Natural Gas Clearinghouse, a general
partnership organized under the laws of the State of Colorado.
"CLEARINGHOUSE OWNERS" shall mean the former beneficial owners of
Clearinghouse that received NGC Corporation Stock in exchange for their
beneficial ownership interests in Clearinghouse.
"CLOSING" shall have the meaning set forth in SECTION 3.1.
"CLOSING DATE" shall have the meaning set forth in SECTION 3.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMBINATION" shall mean (i) the contribution by the Contributing
Parties to Newco of the Contributed Businesses and the Contributed West Texas
LPG Pipeline Business, (ii) the Merger, (iii) the execution and delivery of the
Ancillary Agreements and (iv) the consummation of the other transactions
contemplated hereby.
"COMMONLY CONTROLLED ENTITY" shall have the meaning set forth in
SECTION 8.2(A).
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement dated as of November 21, 1995 by and between NGC and Chevron, as
modified by that certain Exclusivity Agreement dated January 21, 1996 between
NGC and Chevron, and as further amended by a letter agreement dated February 16,
1996.
"CONSIDERATION" shall have the meaning set forth in SECTION 2.1.
"CONSIDERATION ADJUSTMENT" shall have the meaning set forth in SECTION
2.3.
"CONTRACTS" shall mean any contract, agreement, commitment, arrangement
or instrument of any type whatsoever, whether oral or written, express or
implied, including, without
3
limitation, any mortgages, security agreements, deeds of trust, notes,
warranties, guaranties, leases, pledge agreements, license agreements,
non-competition agreements, conditional sales agreements or purchase and sales
orders to which the Person referred to is a party or by which any of its
properties or assets may be bound.
"CONTRIBUTED BUSINESSES" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"CONTRIBUTED NGBU BUSINESS" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"CONTRIBUTED WARREN BUSINESS" shall have the meaning set forth in the
Contribution and Assumption Agreement.
"CONTRIBUTED WEST TEXAS LPG PIPELINE BUSINESS" shall mean the undivided
49% interest in those assets which constitute the West Texas LPG Pipeline to be
contributed to Newco pursuant to the Contribution and Assumption Agreement, as
more particularly set forth therein.
"CONTRIBUTING PARTIES" shall mean Chevron, Chevron Pipe Line Company, a
Delaware corporation, and Chevron Chemical Company, a Delaware corporation.
"CONTRIBUTION AND ASSUMPTION AGREEMENT" shall mean the Contribution and
Assumption Agreement attached hereto as EXHIBIT 2.1.
"DEFECT" shall mean any single defect to title in any of the (i)
Chevron Facilities that results in Chevron breaching any of its representations
and warranties set forth in SECTION 5.18, or (ii) NGC Facilities that results in
NGC breaching any of its representations and warranties set forth in SECTION
4.16, but in each such case, only to the extent that such a title defect would
cause a diminution in value or potential loss of use of the applicable Facility
in an amount greater than $200,000.
"DEFECT SCHEDULE" shall have the meaning set forth in SECTION 13.2(A).
"DEFINITIVE CONSIDERATION ADJUSTMENT" shall have the meaning set forth
in SECTION 15.3(B).
"DEFINITIVE PROXY STATEMENT/PROSPECTUS" shall mean depending on whether
the following referenced registration statement is filed, either (i) the
definitive proxy statement relating to the transactions contemplated hereby
required to be filed with the SEC under Regulation 14A of the Exchange Act or
(ii) the combined proxy statement and prospectus relating to the transactions
contemplated hereby constituting a part of a registration statement on Form S-4,
at the time such registration statement is declared effective by the SEC.
"DISCRETE CLAIM" shall have the meaning set forth in SECTION 14.1(E).
"DGCL" shall mean the General Corporation Law of the State of Delaware.
4
"EASEMENTS" shall mean any easements, rights of way, servitudes or
other property rights on which any of the NGC Pipeline Facilities or the Chevron
Pipeline Facilities, as applicable, are located.
"EFFECTIVE TIME" shall have the meaning set forth in SECTION 2.2.(A).
"ELIGIBLE AFFECTED EMPLOYEES" shall have the meaning set forth in
SECTION 8.10.
"EMPLOYMENT DATE" shall have the meaning set forth in SECTION 8.4(B).
"ENVIRONMENTAL AND SAFETY LAWS" shall mean any applicable and valid
law, statute, code, ordinance, rule or regulation or other requirement of any
foreign country, the United States or any regional, state or local government,
pertaining to human health and safety and/or the environment and affecting the
Chevron Facilities or the NGC Facilities and Former NGC Facilities (as
applicable), as of the date hereof and as of the Closing Date (as applicable),
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ss.ss.9601 ET SEQ.
("CERCLA"); the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 ET
SEQ. ("RCRA"); the Clean Water Act, 33 U.S.C. ss.ss.1251 ET SEQ.; the Toxic
Substances Control Act, 15 U.S.C. ss.ss.2601 ET SEQ.; the Clean Air Act, 42
U.S.C. ss.ss.7401 ET SEQ.; the Hazardous Liquid Pipeline Safety Act, 49 U.S.C.
ss.ss.60101 ET SEQ.; the Occupational Safety and Health Act, 29 U.S.C. ss.ss.651
ET SEQ.; and the Natural Gas PipelINE Safety Act, 49 U.S.C. ss.ss.60101 ET SEQ.,
as such laws and regulations have been amended and as such laws and regulations
have been qualified and interpreted by publicly available, written guidelines,
in each case as of the date hereof and as of the Closing Date (as applicable).
"ENVIRONMENTAL PERMITS" shall mean any permits, licenses,
registrations, notices or approvals required by Environmental and Safety Laws to
operate the Chevron Facilities or NGC Facilities, as applicable.
"ENVIRONMENTAL REMEDIATION CLAIM" shall have the meaning set forth in
SECTION 14.6.
"ESTIMATED CONSIDERATION ADJUSTMENT" shall have the meaning set forth
in SECTION 2.3.
"EQUITY AFFILIATE" shall mean, with respect to any Person, any interest
in excess of 20% in the voting power, beneficial interest or earnings of any
corporation, association, joint venture, partnership or other similar business
entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EU MERGER REGULATION" shall mean Regulation 4064/89 of the Counsel of
the European Communities on the control of concentrations between undertakings,
as amended, and the rules and regulations promulgated thereunder.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXON-FLORIO AMENDMENT" shall mean Section 721 of Title VII of the
Defense Production Act of 1950, as amended.
5
"FACILITIES" shall have the meaning set forth in SECTION 13.2(A).
"FINAL DETERMINATION" shall have the meaning set forth in SECTION
7.8(D).
"FINAL DETERMINATION NOTICE" shall have the meaning set forth in
SECTION 7.8(E).
"FINANCIAL STATEMENTS" shall have the meaning set forth in SECTION 5.6.
"FIXED BOOK VALUE" shall have the meaning set forth in SECTION 2.3(A).
"FORMER NGC FACILITIES" shall have the meaning set forth in SECTION
4.16(C).
"GOVERNMENTAL ENTITY" shall mean any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign.
"GROSS TAX LOSS" shall have the meaning set forth in SECTION 7.8(C).
"HAZARDOUS MATERIAL" shall mean (a) any petroleum or petroleum
products, any chemical, material or substance which is, as of the date hereof or
the Closing Date (as applicable), defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "toxic
substances," "pollutants," "contaminants" or words of similar import, under any
Environmental and Safety Law and (b) any other chemical material, substance or
waste produced, generated or transported by the Chevron Facilities or the NGC
Facilities and the Former NGC Facilities which is now prohibited, limited, or
regulated under any Environmental and Safety Law.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"INCLUDED NUG CONTRACTS" shall mean the Contracts involving the sale of
gas to a non- utility power generator described in SCHEDULE 2.3(G).
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 14.5.
"INDEMNITY STATEMENT" shall have the meaning set forth in SECTION
7.6(C).
"INDEPENDENT VALUE EXPERT" shall have the meaning set forth in SECTION
15.5.
"INDUSTRY" shall mean the business of owning and operating facilities
for the purchase, sale, exchange, gathering, transporting, processing or
fractionating of natural gas or NGLs.
"INTELLECTUAL PROPERTY" shall mean patents, trademarks, tradenames,
service marks, service names, copyrights, applications therefor, or licenses or
other rights in respect thereof.
"INTERIM PERIOD" shall have the meaning set forth in SECTION 15.4.
"IRS" shall mean the United States Internal Revenue Service.
6
"JOA RELATED AGREEMENTS" shall mean the agreements entered into by and
in the name of the operator(s) by or on behalf of Chevron or NGC, as applicable,
as an owner, and the other owners of facilities covered by a Joint Operating
Agreement, relating to the purchase, sale, exchange, transportation, processing
or fractionating of natural gas or NGLs.
"JOINT OPERATING AGREEMENTS" shall mean the agreements governing the
construction, operation and/or relative ownership rights of any of the Chevron
Facilities or NGC Facilities, in each case which are less than wholly-owned, and
all other Contracts between or among Chevron or NGC (or their respective
Affiliates) (as applicable), on the one hand, and any of the parties to such
agreements with respect to the operation or ownership of any Joint Operation, on
the other hand.
"JOINT OPERATION" shall mean arrangements or agreements involving a
sharing of ownership or expenses of any of the Chevron Facilities or NGC
Facilities, as applicable.
"LIEN" shall mean any lien, mechanic's lien, materialman's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, Preferential Right,
right of third Person to prohibit assignment without such Person's consent,
claim, title imperfection, restrictive covenant, encroachment or other survey
defect, pledge, restriction, security interest or other adverse claim, whether
arising by Contract or under law or otherwise.
"LONDON OPERATIONS" shall mean the operations and businesses conducted
by Accord, NGC International and their respective Subsidiaries, in each case
from their respective London offices, wholly related to areas in, on islands
offshore of, or in waters offshore of and adjacent to, lands (i) located in
eastern or western Europe, (ii) which were formerly a part of the Soviet Union,
(iii) located in Africa, and (iv) located in the Middle East (including, without
limitation, the present nations of Turkey, Syria, Lebanon, Israel, Jordan, Iraq,
Iran, Saudia Arabia, Oman, Dubai, Qatar, United Arab Emirates, North and South
Yemen and Kuwait).
"LONDON NOTICE" shall have the meaning set forth in SECTION 15.6.
"LOSS" shall have the meaning set forth in SECTION 14.1(C).
"MATERIAL ADVERSE EFFECT" shall mean, in respect of the business,
assets, financial condition or results of operations of the Contributed
Businesses or NGC (as applicable), a loss and/or cost thereto of greater than
$10 million. With respect to a loss or cost suffered by an Equity Affiliate, NGC
or the Surviving Corporation shall be deemed to have suffered such loss or cost
thereof in proportion to NGC's or the Surviving Corporation's equity ownership
in such Equity Affiliate.
"MERGER" shall have the meaning set forth in SECTION 2.2.
"MINIMUM VALUE" shall have the meaning set forth in SECTION 2.4.
"NCL" shall mean Novagas Clearinghouse Limited Partnership and its
Subsidiaries, if any.
7
"NET LOSSES" shall have the meaning set forth in SECTION 14.1(D).
"NET OPERATING CASH FLOW" shall have the meaning set forth in SECTION
2.3(H).
"NEWCO" shall mean Midstream Combination Corp., a Delaware corporation.
"NEWCO COMMON STOCK" shall have the meaning set forth in SECTION 5.2.
"NEWCO GROUP" shall have the meaning set forth in SECTION 8.4(A).
"NEWCO NOTE" shall have the meaning set forth in SECTION 2.1.
"NGBU" shall mean the Natural Gas Business Unit of the Chevron U.S.A.
Production Company division.
"NGC" shall mean NGC Corporation, a Delaware corporation and successor
in interest to Trident Holding.
"NGC ASSETS" shall mean all assets and liabilities of NGC and its
Subsidiaries.
"NGC 1995 10-K" shall mean the Annual Report on Form 10-K of NGC for
the fiscal year ended December 31, 1995.
"NGC CORPORATION EEP" shall mean the NGC Corporation Amended and
Restated Employee Equity Option Plan, as the same may be amended from time to
time.
"NGC CORPORATION STOCK" shall mean the common stock, $0.01 par value,
of NGC.
"NGC FACILITIES" shall have the meaning set forth in SECTION 4.16(C).
"NGC GROUP" shall mean NGC and its Subsidiaries that are part of an
affiliated group of corporations (as defined in Section 1504(a) of the Code) as
of the date hereof.
"NGC INTERNATIONAL" shall mean NGC International, Inc., a Delaware
corporation.
"NGC NGL FACILITIES" shall have the meaning set forth in SECTION
4.16(B).
"NGC OPTION PLAN" shall mean the NGC Corporation Amended and Restated
1991 Stock Option Plan, as the same may be amended from time to time.
"NGC PERMITTED EXCEPTIONS" shall have the meaning set forth in SECTION
4.16(A).
"NGC PIPELINE FACILITIES" shall have the meaning set forth in SECTION
4.16(C).
"NGC PLANS" shall mean the NGC Corporation EEP and the NGC Option Plan,
collectively.
8
"NGC SEC DOCUMENTS" shall mean each report, schedule, registration
statement, definitive proxy statement and all other documents filed by Trident
Holding and NGC with the SEC during the period commencing on January 1, 1995,
and continuing through and including the date hereof and the Closing Date (as
applicable) including, without limitation, the Definitive Proxy
Statement/Prospectus and any documents incorporated by reference in any thereof.
"NGC STOCKHOLDER APPROVAL" shall mean the affirmative vote in favor of
this Agreement and the transactions contemplated hereby by the holders of at
least a majority of the outstanding shares of NGC Corporation Stock (in person
or in proxy) at a special meeting of the holders of NGC Corporation Stock to be
called and held in accordance with the DGCL.
"NGC STOCKHOLDERS" shall have the meaning set forth in SECTION 7.2(C).
"NGC STOCKHOLDER TAX" or "TAXES" shall have the meaning set forth in
SECTION 7.2(C).
"NGC TAX LOSS" shall have the meaning set forth in SECTION 7.8(A).
"NGC TAX LOSS PAYMENT" shall have the meaning set forth in SECTION
7.8(A).
"NGC TAXES" shall have the meaning set forth in SECTION 7.2(B).
"NGLS" shall mean natural gas liquids (including ethane, propane,
isobutane, normal butane, natural gasoline and pentane plus or any mixture or
combination thereof), field or plant gas condensate, sulphur, helium and other
products extracted or derived in connection with processing activities.
"NOVA" shall mean NOVA Gas Services (U.S.) Inc., a Delaware
corporation.
"NON WARREN BUSINESSES" shall mean the Contributed NGBU Business and
the Contributed West Texas LPG Pipeline Business.
"NYSE" shall mean the New York Stock Exchange.
"OPTIONS" shall mean those options to purchase shares of NGC
Corporation Stock granted pursuant to the NGC Corporation EEP or the NGC Option
Plan.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PEP INDIVIDUALS" shall mean C. L. Watson, Charles L. Watson Grantor
Retained Annuity Trust, Kim R. Watson Grantor Retained Annuity Trust, Keri M.
Watson Trust, Brian J. Watson Trust, Carly R. Watson Trust, Stephen W.
Bergstrom, Jeffrey Stephen Bergstrom Trust, Rebecca Jean Bergstrom Trust,
Gilbert Burciaga, Renee Eve Burciaga Trust, Christina Ann Burciaga Trust,
Gregory Gilbert Burciaga Trust, A. R. Cipriani, Jr., Jason Cipriani Trust, Emily
Cipriani Trust, David C. Feldman, Inc., James T. Hackett, H. Keith Kaelber,
Kenneth E. Randolph, Donald R. Sinclair, Jacob S. Ulrich, Jacob Shields Ulrich,
III Trust and Courtney Warren Ulrich Trust, collectively.
9
"PERMISSIBLE BURDEN" shall mean (1) Liens for current realty and
personal property taxes not yet due and payable; (2) Preferential Rights,
requirements for consent to assignment and other encumbrances of a similar
nature which are part of Contracts customarily used in the Industry; (3)
provisions contained in Contracts (not presently invoked) containing the
obligation to make volumetric adjustments (or pay in lieu thereof) to another
party for any share of prior overproduction, over taking, claims by purchasers
for delivery of prepaid NGL or natural gas or liability for refunds, or other
similar contingent liabilities relating to volumetric adjustments, in each case
customary in the Industry; (4) statutory liens of warehousemen, mechanics and
materialmen and other like statutory liens arising in the ordinary course of
business for obligations not yet due and payable; and (5) imperfections of
title, easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect to surface operations, pipelines, grazing, logging, canals,
ditches, reservoirs or the like; conditions, covenants or other restrictions;
easements for streets, alleys, highways, pipelines, power lines, telephone lines
and railways, and other assessments and rights-of-way, charges, orders,
declarations, operating agreements, instruments, defects, irregularities and
encumbrances of a similar character and all other Liens (including operator's
liens), in each case listed in this subsection (5) that (A) do not arise in
connection with or secure indebtedness for money borrowed or owed or the
extension of credit, and (B) do not materially detract from the value of the
Contributed Businesses or the NGC Assets (as applicable) subject thereto or
affected thereby or otherwise materially impair the Contributed Businesses or
the NGC Assets (as applicable) or operations being conducted on or with the
assets and properties that comprise the Contributed Businesses or the NGC Assets
(as applicable), so a reasonably prudent operator engaged in the Industry with
knowledge of the facts and circumstances and the legal effect thereon would
accept title to such Contributed Businesses or the NGC Assets (as applicable)
subject to such detractions, interferences or impairments.
"PERSON" shall mean an individual, corporation, limited liability
company, partnership, joint venture, trust or unincorporated organization, or a
Governmental Entity.
"PREFERENTIAL RIGHTS" shall mean any preferential purchase rights,
including, without limitation, rights of first refusal, right to bid or other
similar preferential rights that a third party may exercise with respect to any
of the assets or properties comprising the Contributed Businesses, the
Contributed West Texas LPG Pipeline Business or the NGC Assets (as applicable)
as a result of the transactions contemplated by this Agreement or by the
Ancillary Agreements.
"PRELIMINARY PROXY STATEMENT" shall mean the preliminary proxy
statement relating to the transactions contemplated hereby required to be filed
with the SEC under Regulation 14A under the Exchange Act.
"PROSPECTIVE EMPLOYEES" shall have the meaning set forth in SECTION
8.4(A).
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended.
"PURCHASE PLANS" shall mean the NGC Corporation Director and Key
Employee Stock Purchase Plan and the NGC Corporation Non-Employee Director
Compensation Plan, collectively.
10
"REFUND PAYMENT" shall have the meaning set forth in SECTION 7.8(I).
"REFUND PAYMENT NOTICE" shall have the meaning set forth in SECTION
7.8(I).
"RELEASE" shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, or on, into, under or from the soil, surface water, ground water or
property.
"RELEVANT NGC TAXES" shall have the meaning set forth in SECTION
7.8(B).
"REMAINING EMPLOYEES" shall have the meaning set forth in SECTION
8.4(B).
"REQUISITE REGULATORY APPROVALS" shall mean all permits, approvals,
filings, consents and waivers required to be obtained or made by NGC or any of
its Affiliates or Chevron or any of its Affiliates, and the expiration of all
waiting periods required to expire, before the consummation of the Combination
or any other transaction contemplated by this Agreement or the Ancillary
Agreements, as applicable, under applicable laws of any jurisdiction, domestic
or foreign, having jurisdiction over the transactions contemplated by this
Agreement or the Ancillary Agreements, including, without limitation,
notifications, approvals, orders, authorizations or filings required by the HSR
Act, the SEC, the Securities Act and the EU Merger Regulation.
"RETAINED ASSET" shall have the meaning set forth in SECTION 2.4.
"SAVINGS PLAN" shall mean the Trident NGL, Inc. Savings Plan providing
for, among other things, a profit sharing plan and a savings plan.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PARTICIPATING PREFERRED STOCK" shall mean the Series A
Participating Preferred Stock of the Surviving Corporation which shall have the
relative rights, designations and preferences set forth in the Certificate of
Incorporation attached hereto as EXHIBIT 2.2(D)(I).
"SIGNIFICANT AFFILIATE" shall mean Accord and NCL.
"SIGNIFICANT DISPOSITION" means, as to any Person, any possible or
proposed transaction involving the disposition of $100 million or more in value
of interests in the (i) NGC Assets or (b) the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business, taken as a whole.
"SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any
corporation, association, joint venture, partnership or other business entity of
which securities or other ownership interests representing more than 50% of the
ordinary voting power or beneficial interest are, at the time as of which any
determination is being made, owned directly or
11
indirectly by the Parent or one or more subsidiaries of the Parent, PROVIDED,
HOWEVER, that the term Subsidiary shall not include Joint Operations.
"SURVIVING CORPORATION" shall mean Newco, as the surviving corporation
in the Merger.
"SURVIVING CORPORATION GROUP" shall mean Surviving Corporation and its
Subsidiaries that are part of an affiliated group of corporations (as defined in
Section 1504(a) of the Code) as of the Closing Date.
"SURVIVING CORPORATION COMMON STOCK" shall mean the common stock, $0.01
par value per share, of the Surviving Corporation.
"SURVIVING CORPORATION TAX" or "TAXES" shall have the meaning set forth
in SECTION 7.2(B).
"SURVIVING CORPORATION RETURNS" shall have the meaning set forth in
SECTION 7.2(E).
"TAX" or "TAXES" shall mean and include any and all federal, state,
county, local, foreign and other taxes (including, without limitation, income
taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, motor vehicle
taxes, franchise taxes, withholding taxes, ad valorem taxes, severance taxes,
employment and payroll-related taxes, property taxes, import duties and all
other governmental charges and assessments) and any and all interest, fines,
penalties, and additions with respect thereto.
"TAX AUDIT" shall have the meaning set forth in SECTION 7.5(A).
"TAX INDEMNITY PAYMENT" shall have the meaning set forth in SECTION
7.6(C).
"TAX RETURNS" shall have the meaning set forth in SECTION 7.2(E).
"TECHNOLOGY" shall mean trade secrets, proprietary information,
inventions, know-how, processes or procedures, whether patentable or
unpatentable, and similar proprietary rights wherever located.
"TERMINATION DATE" shall have the meaning set forth in SECTION 13.1.
"THIRD PARTY" shall mean any Person (including any Governmental Entity)
that is not a party to this Agreement or is not a Subsidiary, Equity Affiliate
or Significant Affiliate of any party to this Agreement.
"THIRD-PARTY CLAIM" shall have the meaning set forth in SECTION 14.5.
"THIRD PARTY INSURANCE POLICIES" shall mean any insurance policy
providing coverage on an "occurrence" basis that was issued by a third party
which covers specific Chevron Facilities and is not a Chevron Corporation
Policy.
12
"TRIDENT HOLDING" shall mean Trident NGL Holding, Inc., a Delaware
corporation and predecessor in interest to NGC.
"TRIDENT NGL, INC." shall mean Trident NGL, Inc., a Delaware
corporation and indirect wholly-owned subsidiary of NGC.
"VALUE EXPERTS" shall have the meaning set forth in SECTION 15.5.
"UNADJUSTED NGC TAX LOSS" shall have the meaning set forth in SECTION
7.8(B).
"USED" shall mean with respect to the assets, Contracts or Governmental
Authorizations of any Person, those owned by such Person which are used, or have
been acquired for use but not yet placed in use.
"WARN ACT" shall have the meaning set forth in SECTION 8.2(A).
"WARRANT" shall have the meaning set forth in SECTION 4.2.
"WARREN PETROLEUM COMPANY" shall mean The Warren Petroleum Company, an
unincorporated division of Chevron.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meaning indicated herein.
1.3 OTHER DEFINITIONAL PROVISIONS. The words "hereof," "herein" and
"hereunder" and words of similar import, when used in this Agreement shall refer
to this Agreement as whole and not to any particular provision of this
Agreement. Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
1.4 "KNOWLEDGE". When used in this Agreement, "KNOWLEDGE" shall mean
the actual, and not implied or assumed, knowledge of any of the individuals set
forth on SCHEDULE 1.4 hereto.
ARTICLE 2
THE CONTRIBUTIONS
2.1 CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES. At the
Closing and immediately prior to the Effective Time (as defined herein), Newco
and the Contributing Parties will execute and deliver the Contribution and
Assumption Agreement in the form of EXHIBIT 2.1 hereto, pursuant to which the
Contributing Parties will contribute the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business to Newco in exchange for (A) the
issuance to Chevron of 38,623,210 shares of Newco Common Stock and 7,815,363
shares of Series A Participating Preferred Stock, (B) the assumption by Newco of
the Assumed Liabilities, including the assumption by Newco of the Assumed
Indebtedness in the amount of $155.373 million (subject to adjustment as
provided in SECTION 2.3); and (C) the issuance of a promissory
13
note to the Contributing Parties in a principal amount of $138.4 million (the
amount of which reflects the changes set forth in SCHEDULE 2.1(C) hereof) and in
the form of EXHIBIT 2.1(C) hereto (the "NEWCO NOTE"), subject to adjustment as
provided in SECTION 2.3. The consideration to be received by the Contributing
Parties as described in this SECTION 2.1 is hereinafter called the
"CONSIDERATION."
2.2 THE MERGER AND PAYMENT OF THE NEWCO NOTE. Upon the terms and
conditions set forth in this Agreement and the Certificate of Merger, at the
Closing but after the contribution described in SECTION 2.1, NGC shall be merged
with and into Newco in accordance with the applicable provisions of the DGCL
(the "MERGER"). Newco shall be the surviving corporation in the Merger (in such
capacity, the "SURVIVING CORPORATION") and shall continue its corporate
existence under the laws of the State of Delaware. The name of the Surviving
Corporation shall be "NGC Corporation." The Merger shall have all effects set
forth in the DGCL, this Agreement and the Certificate of Merger.
(a) Subject to the terms and conditions of this Agreement, a
certificate of merger in the form of EXHIBIT 2.2(A) (the "CERTIFICATE
OF MERGER") shall be duly prepared, executed and acknowledged by Newco,
which will be the Surviving Corporation in the Merger, and thereafter
delivered to the Secretary of State of the State of Delaware for
filing, as provided in the DGCL, as soon as practicable on the Closing
Date (but in no event before the execution and delivery of the
Contribution and Assumption Agreement by the parties thereto). The
Merger shall become effective upon filing the Certificate of Merger
with the Secretary of State of the State of Delaware (the "EFFECTIVE
TIME").
(b) At the Effective Time, each issued and outstanding share
of Newco will continue to be an issued and outstanding share of the
Surviving Corporation and each issued and outstanding share of NGC
Corporation Stock shall be automatically converted, without any action
on the part of the holder thereof, into one share of Surviving
Corporation Common Stock. Upon such conversion, all such shares of NGC
Corporation Stock shall be canceled and cease to exist and each
certificate theretofore representing any such shares shall, without any
action on the part of the holder thereof, be deemed to represent an
equivalent number of shares of Surviving Corporation Common Stock.
(c) From and after the Effective Time, the Merger shall have
all of the effects provided by applicable law.
(d) At the Effective Time, the Certificate of Incorporation
and Bylaws of Newco in the forms attached as EXHIBITS 2.2(D)(I) and
2.2(D)(II) to this Agreement, respectively, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof or of the DGCL.
(e) The number of directors of the Surviving Corporation shall
be 13 until otherwise determined pursuant to the Bylaws of the
Surviving Corporation. The directors of the Surviving Corporation shall
include each of the ten directors of NGC as of the Effective Time and
the three individuals who are serving as directors of Newco
14
immediately prior to the Effective Time. The initial executive officers
of the Surviving Corporation immediately following the Effective Time
shall be those individuals listed on SCHEDULE 2.2(E) to this Agreement.
The directors and executive officers of the Surviving Corporation shall
serve in such capacities until their respective successors are duly
elected or appointed.
(f) At the Effective Time, the Surviving Corporation shall
assume all rights and obligations of NGC under the NGC Plans and the
Purchase Plans as in effect at the Effective Time and shall continue
such plans in accordance with their respective terms.
(g) At the Effective Time, the stock transfer books of NGC
shall be closed and there shall be no transfers on such stock transfer
books of shares of NGC Corporation Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates representing any such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for
certificates representing shares of Surviving Corporation Common Stock.
(h) At the Effective Time, the Surviving Corporation shall
repay the Newco Note by wire transfer to a bank account, which shall
have been designated by Chevron not less than two Business Days prior
to the Closing.
2.3 CONSIDERATION ADJUSTMENT. The Consideration due to Chevron shall be
subject to the adjustments referred to in SECTION 2.3 and SECTION 2.4 hereof (in
the aggregate, the "CONSIDERATION ADJUSTMENT").
(a) NGBU FIXED BOOK. The amount of the Newco Note includes a
value for the NGBU long-term fixed price position "book" (the "FIXED
BOOK VALUE") of $12 million. The Fixed Book Value shall be recomputed
as of the Closing in accordance with the provisions of SCHEDULE 2.3(A),
and the Consideration will be (i) increased by any amount by which the
Fixed Book Value as of the Closing exceeds $12 million, and (ii)
decreased by any amount by which $12 million exceeds the Fixed Book
Value as of the Closing.
(b) INVENTORY ADJUSTMENT. The amount of each product of the
inventory of Warren Petroleum Company will be determined as of the
Closing Date based on accounting records, subject to NGC's review,
which amount shall be compared to the agreed upon quantities by product
set forth on SCHEDULE 2.3(B), with the difference valued based on the
provisions of SCHEDULE 2.3(B). For each product of inventory, (i) if
the amount on hand on the Closing Date is greater than the amount of
the inventory set forth on SCHEDULE 2.3(B), then the difference shall
result in an increase in the Consideration by the value of such amount,
and (ii) if the amount on hand on the Closing Date is less than the
amount set forth on SCHEDULE 2.3(B), then the difference shall result
in a reduction of the Consideration by the value of such amount.
(c) DISPOSITION OF ASSETS. The Consideration shall be reduced
by an amount equal to any cash or the value of other consideration
received or to be received by Chevron (unless such other consideration
is included in the Contributed Businesses or the
15
Contributed West Texas LPG Pipeline Business) as a result of any
dispositions of any of the properties or assets that comprise the
Contributed Businesses or the Contributed West Texas LPG Pipeline
Business during the period commencing on the date hereof and continuing
through and including the Closing Date, except for (i) sales of
inventory, (ii) sales or other dispositions of any of the assets and
properties that comprise the Contributed Businesses or the Contributed
West Texas LPG Pipeline Business to the extent subsequently replaced
with assets or properties of equivalent value prior to the Closing Date
and (iii) minor sales or dispositions of assets or properties
comprising the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business that do not exceed $25,000 individually or $500,000
in the aggregate.
(d) CASUALTY LOSSES. The Consideration shall be (i) reduced by
the amount of any Casualty Loss that occurs with respect to the
Contributed Businesses or the Contributed West Texas LPG Pipeline
Business after the date hereof and prior to the Closing Date, and (ii)
increased by the amount of any Casualty Loss with respect to the NGC
Facilities that occurs after the date hereof and prior to the Closing
Date MULTIPLIED by a fraction (the "CHEVRON CASUALTY LOSS RATIO"), the
(A) numerator of which is 28 and (B) the denominator of which is 72;
provided, however, that to the extent that any Casualty Loss occurs,
the Closing contemplated shall not be affected subject to the
respective rights of Chevron and NGC under SECTION 12.2(A) and SECTION
12.3(A), respectively, unless the amount of the Casualty Loss or
Losses, along with other losses resulting from breaches of
representations and warranties, causes an aggregate adverse effect on
either NGC or the Contributed Businesses in an amount in excess of $25
million.
(e) RETAINED ASSETS. The Consideration shall be reduced by the
Minimum Value or Agreed Value (as applicable) of any Retained Asset
pursuant to SECTION 2.4.
(f) NGBU STORED GAS. The Consideration shall be increased by
the fair market value of the aggregate amount of natural gas maintained
by the NGBU in storage as of the Closing date as determined in
accordance with SCHEDULE 2.3(F).
(g) NUG CONTRACT ADJUSTMENTS. The amount of the Newco Note has
been computed based on an assumed value for the Included NUG Contracts
(the "NUG VALUE") of $38 million. This value was computed based on such
contracts being marked to market employing fair market values as of
April 26, 1996, as more particularly set forth in SCHEDULE 2.3(G). The
NUG Value shall be recomputed as of the Closing Date, in accordance
with the terms set forth in such schedule, and the Consideration shall
be (i) increased by any amount by which the NUG Value as of the Closing
exceeds $38 million, and (ii) decreased by any amount by which $38
million exceeds the NUG Value as of the Closing.
(h) POST JUNE 1ST ADDITIONAL ADJUSTMENTS. In the event the
Closing Date occurs after June 1, 1996, the following additional
adjustments to Consideration shall be made. The Consideration shall
(i) be REDUCED by:
16
(A) the Net Operating Cash Flow from the Contributed
Warren Business during the period commencing on June 1, 1996
and continuing through and including the Closing Date (the
"ADJUSTMENT PERIOD"), adjusted to give effect to the Ancillary
Agreements relating to the Contributed Warren Business during
the Adjustment Period, as if each of such Ancillary Agreements
were in effect as of June 1, 1996; as used herein the term
"NET OPERATING CASH FLOW" shall mean an amount equal to net
income (after taxes and excluding out of period items
exceeding $250,000 individually related to pre-June 1, 1996
operations,) PLUS the amount of depreciation and amortization
and any write-downs of assets for accounting purposes, but
only to the extent that such write-downs have an earnings but
not a cash effect; in the calculation of the Net Operating
Cash Flow, there shall be no deductions for the severance
costs which the Chevron Group is required to bear pursuant to
the provisions of ARTICLE 8 hereof.
(B) an amount equal to $952,865 per month to reflect
an agreed adjustment to the Consideration for the cash flow
from the Non Warren Businesses for the Adjustment Period
(proportionately reduced for each portion of a month if the
Closing does not occur on the first day of a month), and
(ii) be INCREASED by
(A) any amount reflected in net income related to (x)
a Casualty Loss with respect to the Contributed Warren
Business covered by paragraph (d) above or (y) a disposition
covered by paragraph (c) above,
(B) the amount of capital expenditures on the
Contributed Warren Businesses reasonably made by Chevron in
accordance with SECTION 10.7 hereof during the Adjustment
Period,
(C) interest at the rate of 6% per annum during the
Adjustment Period on the sum of the Assumed Indebtedness and
the Newco Note, as adjusted to take into account the Estimated
Consideration Adjustment, and
(D) an amount equal to $580,482.16 times the number
of record dates for the payment of dividends on NGC
Corporation Stock after June 1, 1996 through the date of
Closing.
Five (5) calendar days prior to the Closing Date, Chevron shall deliver
to NGC (after consultation with NGC) an estimate available at such time (the
"ESTIMATED CONSIDERATION ADJUSTMENT"), which estimate shall be used to determine
the consideration due to Chevron under SECTIONS 2.1(B) AND 2.1(C). If the
Estimated Consideration Adjustment results in an aggregate increase in the
Consideration due to Chevron, then at Closing the amount of the Estimated
Consideration Adjustment shall be added to the outstanding principal balance of
the Newco Note. If the Estimated Consideration Adjustment results in an
aggregate decrease in the Consideration due Chevron of $138.4 million or less,
then at Closing the principal amount of the Newco Note shall be reduced by an
amount equal to the Estimated Consideration Adjustment. If the Estimated
Consideration Adjustment results in an aggregate decrease in the Consideration
due
17
Chevron that is equal to or greater than $138.4 million, then the Newco Note
shall be canceled and the remainder, if any, of the Estimated Consideration
Adjustment shall be applied to reduce the outstanding principal balance of the
Assumed Indebtedness.
Following the Closing, further Consideration Adjustments shall be made
as required pursuant to SECTIONS 15.3, 15.4, 15.5 AND 15.6.
2.4 ADJUSTMENTS FOR RETAINED ASSETS. If for any good and sufficient
reason, including Preferential Rights, Requisite Regulatory Approvals, or the
discovery of a sale or other transfer prior to the date of this Agreement,
either party determines, in good faith, that a Contributing Party is unable (or
in the case of contracts, that it is impractical) to transfer to Newco an asset
or property included in the Contributed Businesses or the Contributed West Texas
LPG Pipeline Business or is unable to transfer to Newco such asset or property
without a significant loss of use thereof by the Surviving Corporation, such
party shall promptly communicate such fact to the other party and consult with
such party concerning such impediment. If Chevron and NGC are unable to agree on
a solution to overcome such impediment (which could include alternative means of
transferring value effectively), the Contributing Party shall retain such asset
or property (whether one or more, the "RETAINED ASSET") and the net value which
cannot be effectively transferred. In such case, Chevron and NGC shall endeavor
in good faith to determine the fair value of the Retained Asset (net of the
economic value which has been transferred) for purposes of the Estimated
Consideration Adjustment. If the parties agree on such fair value (the "AGREED
VALUE"), they shall document their agreement in writing, which shall provide,
among other things, the Agreed Value the parties ascribed to the Retained Asset.
The Agreed Value set forth in such written agreement shall be final and binding
on the parties. If Chevron and NGC are unable to agree on the fair value of the
Retained Asset, then not less than five (5) Business Days prior to the Closing
Date, Chevron shall provide NGC with a document providing a reasonable estimate
of the fair value of the Retained Asset (the "MINIMUM VALUE") and the basis for
determining such value. The parties acknowledge and agree that the Minimum Value
shall be binding on the parties hereto for the purpose of Closing, but shall be
subject to adjustment after Closing as provided by SECTION 15.5. To the extent
that a Contributing Party does not transfer a Retained Asset pursuant to this
SECTION 2.4, the Closing contemplated hereby shall not be affected, subject to
NGC's rights under SECTION 12.3(A) in the event that NGC's reasonable estimate
of the fair value of the Retained Asset, along with other losses and costs
resulting from breaches of representations and warranties by Chevron, exceed $25
million in the aggregate. The parties hereto acknowledge that the Minimum Value
shall not be binding on NGC in determining a reasonable estimate of the fair
value of the Retained Asset for the purposes of the immediately preceding
sentence.
ARTICLE 3
THE CLOSING
3.1 CLOSING DATE. Subject to satisfaction or waiver of the conditions
set forth in ARTICLE 12 and the termination or expiration of the applicable
waiting period required under the HSR Act, the closing ("CLOSING") of the
transactions contemplated by this Agreement shall take place at the offices of
Akin, Gump, Strauss, Hauer & Feld, L.L.P. located at 1900 Pennzoil
18
Place - South Tower, 711 Louisiana, Houston, Texas (A) at 10:00 a.m., Houston
time, on the date of the Special Meeting of NGC Stockholders at which NGC
Stockholder Approval is obtained or as soon thereafter as practicable or (B) at
such other date or time as the parties hereto shall mutually agree in writing.
The date of the Closing shall hereinafter be referred to as the "CLOSING DATE."
3.2 DELIVERIES OF ANCILLARY DOCUMENTS AT CLOSING. At the Closing, the
following documents and agreements shall have been executed and delivered by and
among the parties thereto (collectively, the "ANCILLARY AGREEMENTS").
(a) Contribution and Assumption Agreement in the form of
EXHIBIT 2.1 hereto.
(b) Stockholders Agreement in the form of EXHIBIT 3.2(B)
(c) Registration Rights Agreement in the form of EXHIBIT 3.2(C)
(d) Master Alliance Agreement in the form of EXHIBIT 3.2(D)
(e) Natural Gas Purchase and Sale Agreement in the form of
EXHIBIT 3.2(E)
(f) Gas Supply and Purchase Agreement (St. James) in the form of
EXHIBIT 3.2(F)
(g) Gas Supply and Service Agreement (Oak Point Plant) in the form of
EXHIBIT 3.2(G)
(h) Gas Supply and Service Agreement (Orange Plant) in the form of
EXHIBIT 3.2(H)
(i) Gas Supply and Service Agreement (Cedar Bayou Plant) in the form
of EXHIBIT 3.2(I)
(j) Gas Supply and Service Agreement (Pascagoula Refinery) in the form
of EXHIBIT 3.2(J)
(k) Gas Supply and Service Agreement (Salt Lake City Refinery) in the
form of EXHIBIT 3.2(K)
(l) Gas Supply and Service Agreement (El Segundo Refinery) in the form
of EXHIBIT 3.2(L)
(m) Gas Supply and Service Agreement (Perth Amboy Refinery) in the
form of EXHIBIT 2.3 (M)
(n) Gas Supply and Service Agreement (Richmond Refinery) in the form
of EXHIBIT 3.2(M)
(o) Master Natural Gas Processing Agreement in the form of
EXHIBIT 3.2(O)
(p) Master Natural Gas Liquids Purchase Agreement in the form of
EXHIBIT 3.2(P)
(q) Feedstock Sale and Refinery Product Purchase Agreement (El Paso)
in the form of EXHIBIT 3.2(Q)
(r) Feedstock Sale and Refinery Product Purchase Agreement
(El Segundo) in the form of EXHIBIT 3.2(R)
(s) Refinery Product Sale Agreement (Hawaii) in the form of
EXHIBIT 3.2(S)
(t) Feedstock Sale and Refinery Product Purchase Agreement
(Pascagoula) in the form of EXHIBIT 3.2(T)
(u) Feedstock Sale and Refinery Product Purchase Agreement (Richmond)
in the form of EXHIBIT 3.2(U)
(v) Feedstock Sale and Refinery Product Purchase Agreement
(Salt Lake City) in the form of EXHIBIT 3.2(V)
19
(w) Feedstock and Refinery Product Master Services Agreement in the
form of EXHIBIT 3.2(W)
(x) CCC Product Sale and Purchase Agreement in the form of
EXHIBIT 3.2(X)
(y) CCC/WPC Services Agreement in the form of EXHIBIT 3.2(Y)
(z) Operating Agreement between Newco and Chevron Pipe Line Company
(Mt. Belvieu Pipelines) in the form of EXHIBIT 3.2(Z)
(aa) LPG System Loss/Gain Settlement Agreement in the form of
EXHIBIT 3.2(AA)
(bb) Transition Services Agreement in the form of EXHIBIT 3.2(BB)
(cc) Master Power Agreement (Chevron U.S.A. Production Company) in the
form of EXHIBIT 3.2(CC)
(dd) Master Power Service Agreement (Chevron Chemical Company) in the
form of EXHIBIT 3.2(DD)
(ee) Master Power Service Agreement (Chevron U.S.A. Products Company)
in the form of EXHIBIT 3.2(EE)
(ff) Galena Park Services Agreement in the form of EXHIBIT 3.2(FF)
(gg) Venice Operating Agreement in the form of EXHIBIT3.2(GG)
(hh) Product Storage Lease and Terminal Access Agreement (Venice) in
the form of EXHIBIT 3.2(HH)
(ii) An agreement incorporating the terms contained in the Term Sheet
regarding Fractionation Agreement (Venice) in the form of
EXHIBIT 3.2(II).
(jj) Technical Services Agreement in the form of EXHIBIT 3.2(JJ)
(kk) Miscellaneous Master Services Agreement in the form of
EXHIBIT 3.2(KK)
(ll) An agreement incorporating the terms contained in the Barge Co
Term Sheet attached as EXHIBIT 3.2(LL)
(mm) Natural Gas Purchase and Sale Agreement (Canadian Version # 1) in
the form of EXHIBIT 3.2(MM)
(nn) Natural Gas Purchase and Sale Agreement (Canadian Version #2) in
the form of as EXHIBIT 3.2(NN)
(oo) Agency Agreement for Administration of Natural Gas Purchase and
Sale Contracts in the form of EXHIBIT 3.2(OO)
(pp) Lone Star Swap Transaction Confirmation CUSA/NGC Master Swap
Agreement in the form of EXHIBIT 3.2(PP)
(qq) Transportation Assignment and Valuation Agreement in the form of
EXHIBIT 3.2(QQ)
(rr) Interstate Pipeline Capacity Release Agreement in the form of
EXHIBIT 3.2(RR).
(ss) West Texas LPG Pipeline Partnership Agreement in the form of
EXHIBIT (SS)
(tt) West Texas LPG Pipeline Operating Agreement in the form of
EXHIBIT 3.2(TT)
(uu) West Texas LPG Pipeline License Agreement in the form of
EXHIBIT 3.2(UU),
provided that, prior to the Closing, the parties will enter into any
clarifications or amendments to the Ancillary Agreements (other than those
listed in paragraphs (a), (b) and (c) of SECTION 3.2) as may be necessary to
ensure that only such Affiliates of any party as were clearly intended by
20
the parties to be bound by such agreements and entitled to benefits thereunder
are in fact so bound or become such beneficiaries.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF NGC
NGC represents and warrants to Chevron and Newco that:
4.1 CORPORATE STATUS. NGC is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is being conducted on the date of
this Agreement. NGC is duly qualified to conduct business and is in good
standing in each jurisdiction in which the nature of the business transacted by
it requires qualification, except where the failure to so qualify would not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC. Copies of the Certificate of Incorporation and
By-laws of NGC have been furnished or made available to Chevron, reflecting all
amendments thereto, and all such documents are now in effect and are complete
and correct.
4.2 CAPITALIZATION. As of April 30, 1996, the authorized capital stock
of NGC consisted of (i) 300,000,000 shares of NGC Corporation Stock, of which
110,969,968 shares were issued and outstanding, options to purchase 12,726,728
shares were outstanding pursuant to the grant of Options under the NGC Plans
with vesting, exercise and expiration terms as set forth in SCHEDULE 4.2 and
15,198,019 shares were reserved for future issuance pursuant to the NGC Plans,
179,286 shares were reserved for issuance under the terms of the Savings Plan,
1,131,364 shares were reserved for issuance pursuant to the Purchase Plans,
6,228 were reserved for issuance pursuant to a Warrant issued in favor of J.
Otis Winters (the "WARRANT") and no shares were held as treasury stock; (ii)
50,000,000 shares of preferred stock, none of which were outstanding and none of
which were held in reserve or as treasury stock. As of May 15, 1996, the
authorized capital stock of NGC consisted of (i) 300,000,000 shares of NGC
Corporation Stock, of which 110,972,191 shares were issued and outstanding,
options to purchase 12,712,610 shares were outstanding pursuant to the grant of
Options under the NGC Plans with vesting, exercise and expiration terms as set
forth in SCHEDULE 4.2 and 22,895,795 (19,695,795 if the Combination is not
consummated) shares were reserved for future issuance pursuant to the NGC Plans,
179,286 shares were reserved for issuance under the terms of the Savings Plan,
1,131,364 shares were reserved for issuance pursuant to the Purchase Plans,
6,228 shares were reserved for issuance pursuant to a Warrant issued in favor of
J. Otis Winters (the "WARRANT") and no shares were held as treasury stock; (ii)
50,000,000 shares of preferred stock, none of which were outstanding and none of
which were held in reserve or as treasury stock.
All outstanding shares of NGC Corporation Stock are validly issued, fully paid
and nonassessable. Except for (i) the right to purchase shares of NGC
Corporation Stock pursuant to the Options currently outstanding under the NGC
Plans, (ii) the right of NGC to issue shares of NGC Corporation Stock pursuant
to the terms of the Savings Plan, (iii) the right to purchase shares of NGC
Corporation Stock pursuant to the Purchase Plans, (iv) the right to purchase
21
shares of NGC Corporation Stock pursuant to the Warrant, (v) the right of
British Gas, NOVA and the other Clearinghouse Owners to purchase NGC Corporation
Stock pursuant to that certain Stockholders Agreement dated October 21, 1994 by
and among NGC and the Clearinghouse Owners and (vi) the obligation of NGC to
issue Options pursuant to Paragraph IV of the NGC Corporation EEP, as of the
date of this Agreement, there are no options, warrants, calls, rights,
commitments, preemptive rights or agreements of any character to which NGC is a
party or by which any party is bound obligating NGC to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock of
NGC or any securities or obligations convertible into or exchangeable for such
shares, or to grant, extend or enter into any option, warrant, call, right,
commitment, preemptive right or similar agreement.
4.3 OTHER SUBSIDIARIES. SCHEDULE 4.3 to this Agreement contains a list
of all of the Equity Affiliates of NGC and indicates for each Equity Affiliate
of NGC as of the date of this Agreement: (a) the percentage and type of equity
securities of each such Equity Affiliate owned or controlled by NGC and its
Subsidiaries, (b) the identity of any other beneficial or record owner of any
interest in any such Equity Affiliate and the percentage and type of ownership
and (c) the jurisdiction of incorporation or organization. Except as set forth
in SCHEDULE 4.3, all equity securities listed thereon as being owned by NGC or a
Subsidiary of NGC are owned by such Person, free and clear of all Liens of any
nature whatsoever. Except as set forth in SCHEDULE 4.3, there are no options,
warrants, calls, rights, commitments, preemptive rights or agreements of any
character to which any of NGC's Subsidiaries is a party or by which any such
party is bound obligating it to issue, deliver or sell, or cause to be issued,
delivered or sold, additional equity interests of a Subsidiary or any securities
or obligations convertible into or exchangeable for such interests or to grant,
extend or enter into any such option, warrant, call, right, commitment,
preemptive right or agreement. Each Subsidiary of NGC and, to the knowledge of
NGC, each Equity Affiliate of NGC is duly qualified to conduct its business and
is in good standing in each jurisdiction in which the nature of the business
transacted by it requires qualification, except where the failure to be so
qualified or registered or to be in good standing would not, either individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
NGC. Each Subsidiary of NGC and, to the knowledge of NGC, each Equity Affiliate
of NGC has all requisite corporate or partnership power and authority to own,
operate and lease its properties and to conduct its business as it is being
conducted on the date of this Agreement, except where the failure to have such
requisite corporate or partnership power and authority would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
NGC or on the ability of the Surviving Corporation to perform its obligations
under the Ancillary Agreements. A true and correct copy of the certificate or
articles of incorporation (as applicable) and bylaws of each corporate
Subsidiary of NGC and of the organizational and governing documents of each
other Subsidiary of NGC and, to the extent requested by Chevron, each Equity
Affiliate of NGC, as in effect on the date of this Agreement, has been provided
to Chevron.
4.4 NO GOVERNMENTAL APPROVALS. No Requisite Regulatory Approval is
required on the part of NGC or any Subsidiary or Equity Affiliate of NGC in
connection with the execution and delivery of this Agreement and the Ancillary
Agreements or the consummation by NGC or any of its Subsidiaries of the
transactions contemplated by this Agreement and the Ancillary Agreements, except
for (a) compliance with the HSR Act, the Securities Act, the Exchange Act, state
securities and takeover laws, PUHCA, and the Federal Energy Regulatory
Commission,
22
(b) filings required by the EU Merger Regulation, (c) the filing and recordation
requirements of the DGCL and (d) any Requisite Regulatory Approval that, if not
obtained, would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Surviving Corporation or on
the ability of the Surviving Corporation to perform its obligations under the
Ancillary Agreements.
4.5 AUTHORITY. The execution, delivery and performance by NGC of this
Agreement and the consummation by NGC of the transactions contemplated hereby
have been duly and validly authorized and approved by all necessary corporate
action (except the NGC Stockholder Approval) on the part of NGC. This Agreement
has been duly executed and delivered by NGC and this Agreement is the valid and
binding obligation of NGC, enforceable against NGC in accordance with its terms,
subject to (i) obtaining the Requisite Regulatory Approvals referenced in
SECTION 4.4 and (ii) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity). Without limiting the foregoing, the Board of Directors of NGC has
approved, for purposes of Section 203 of the DGCL and otherwise, this Agreement.
4.6 NO CONFLICTS. Except as set forth in SCHEDULE 4.6 to this
Agreement, and assuming the receipt of all Requisite Regulatory Approvals
referenced in SECTION 4.4, the execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements will not conflict
with, or result in any violation of or default or loss of any benefit under, any
provision of the certificate (or articles) of incorporation or bylaws of NGC and
each corporate Subsidiary or the organizational documents of each other
Subsidiary of NGC or any agreement or other arrangement to which any of them is
a party or of any permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to NGC or
any of its Subsidiaries or Affiliates, other than any conflict, violation,
default or loss that would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on NGC or on the
ability of the Surviving Corporation or its Affiliates to perform their
respective obligations under the Ancillary Agreements.
4.7 SEC DOCUMENTS.
(a) NGC has furnished Chevron with a true and complete copy of
the NGC SEC Documents. The NGC SEC Documents are all the documents
(other than preliminary material) that Trident Holding and NGC have
been required to file with the SEC since January 1, 1995. As of its
filing date (and, with respect to any registration statement, the date
on which it or any post-effective amendment was declared effective),
each NGC SEC Document was in compliance, in all material respects, with
the applicable requirements of the Securities Act and the Exchange Act,
contained no untrue statement of a material fact and did not omit any
statement of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of NGC,
Clearinghouse, Trident NGL, Inc., and Trident Holding included in the
NGC SEC Documents complied, at the time of filing with the SEC (and,
with respect to any
23
registration statement, at the time it was declared effective), as to
form, in all material respects, with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved
(subject, in the case of unaudited statements, to the omission of
certain footnotes) and fairly present, in all material respects
(subject, in the case of the unaudited statements, to normal, recurring
year-end audit adjustments) the consolidated financial position of NGC,
Clearinghouse, Trident NGL, Inc. and Trident Holding, as applicable, as
of the dates thereof and the consolidated results of their operations
for the periods presented. Except as set forth on SCHEDULE 4.24, since
December 31, 1995, there has not been any change in the business,
assets, financial condition or results of operation of NGC or any of
its Subsidiaries, which in any case would, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect
on NGC or on the ability of the Surviving Corporation to perform its
obligations under the Ancillary Agreements, other than changes
resulting from industry-wide conditions or general economic conditions
affecting the industry in which NGC carries on its business.
(b) NGC has made available to Chevron true and complete copies
of all internal audit reports that have been issued by NGC or any of
its predecessors or Subsidiaries or Significant Affiliates during the
past three years which would indicate that the internal controls
associated with or otherwise covering the NGC Assets have or had any
material weaknesses or its or their accounting records contained or
could contain any material errors. NGC's public accountants have not
issued any audit reports or other reports on internal controls which
indicate that the internal controls associated with or otherwise
covering any of the NGC Assets have or had any material weaknesses or
that the accounting records associated with or otherwise covering any
of the NGC Assets contained or could contain any material errors.
4.8 LITIGATION. Except as set forth in SCHEDULE 4.8 to this Agreement,
there are no (a) suits, actions or proceedings pending or, to the knowledge of
NGC, threatened, against or affecting NGC, any of its Subsidiaries or any Equity
Affiliate or any of their properties, which, if adversely determined, would,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC or (b) judgments, decrees, injunctions, rules or
orders of any Governmental Entity or arbitrator outstanding against NGC or any
of its Subsidiaries, which would, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on NGC or on the
ability of the Surviving Corporation to perform its obligations under the
Ancillary Agreements.
4.9 COMPLIANCE WITH LAWS. Except (i) to the extent the matter is
otherwise covered by SECTION 4.15 or 4.16, (ii) as set forth in SCHEDULE 4.9 to
this Agreement and (iii) matters relating to Environmental and Safety Laws
(which are dealt with in ARTICLE 6 hereof), the businesses of NGC and its
Subsidiaries have been operated in compliance with all laws, ordinances and
regulations of all Governmental Entities (including, without limitation, those
relating to licenses and permits for the ownership, occupancy and operation of
their properties), except for violations that would not, either individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
NGC or on the ability of the Surviving Corporation to perform its obligations
under the Ancillary Agreements. Except (x) as disclosed
24
in SCHEDULE 4.9 to this Agreement, (y) for matters relating to Environmental and
Safety Laws (which are dealt with in ARTICLE 6 hereof), and (z) for any
investigation or review that would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on NGC, as of the date
of this Agreement, no investigation or review by any Governmental Entity
(including without limitation any audit or similar review by any federal, state
or local taxing authority) with respect to NGC or any of its Subsidiaries or any
of their respective properties is pending or, to the knowledge of NGC,
threatened.
4.10 MATERIAL AGREEMENTS. Except as set forth in the exhibit index to
the NGC 1995 10-K and SCHEDULES 4.10 AND 8.1(A) to this Agreement and except for
this Agreement and the Ancillary Agreements, as of the date hereof, none of NGC,
any of its Subsidiaries or either of its Significant Affiliates, is a party to
or is bound by any Contract which is material to NGC and its Subsidiaries and
Significant Affiliates, taken as a whole. True and complete copies of each
document filed as an exhibit to the NGC 1995 10-K have been furnished or made
available to Chevron. Except as set forth on SCHEDULE 4.10, (i) NGC and each of
its Subsidiaries and Significant Affiliates, as applicable, has performed or
complied with all obligations required to be performed or complied with by it or
them, as applicable, under the Contracts listed on the exhibit index to the NGC
1995 10-K and SCHEDULE 4.10, (ii) there does not exist under any such Contract
any default, or any event or condition which, either individually or in the
aggregate (after notice or the lapse of time or both), would constitute a
default by NGC, its Subsidiaries or either of its Significant Affiliates or, to
the best of NGC's knowledge and belief, by any other party thereto and (iii) to
the best of NGC's knowledge, no course of conduct has modified in any respect
any of the written terms in any such Contract; except, in each case, where it
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on NGC or on the ability of the Surviving Corporation to
perform its obligations under the Ancillary Agreements.
4.11 NO UNDISCLOSED MATERIAL LIABILITIES. As of the date of this
Agreement, there are no liabilities of NGC and its Subsidiaries of any kind
whatsoever, whether or not accrued and whether or not contingent or absolute,
determined or otherwise, other than (a) liabilities recorded in the financial
statements of NGC and Accord included in the NGC 1995 10-K or disclosed in notes
3 ("MARKET RESERVES"), 7, 9 and 11 ("PENSION PLAN") to such NGC financial
statements and notes 12, 14 and 17 to such Accord financial statements or any
schedule to this Agreement and (b) liabilities that in the aggregate would not
reasonably be expected to have a Material Adverse Effect on NGC or on the
ability of the Surviving Corporation to perform its obligations under the
Ancillary Agreements.
4.12 PUBLIC UTILITY. Other than Electric Clearinghouse, Inc., neither
NGC nor any of its Subsidiaries nor any Person in which it owns an equity
interest is a "holding company," a "subsidiary company" of a "holding company"
or of a "subsidiary company" of a "holding company," or a "public utility" as
each of such terms is defined in PUHCA, as amended, and the rules and
regulations promulgated thereunder. Electric Clearinghouse, Inc. is a "utility"
as defined in PUHCA, but has received a "no action letter" from the SEC, a copy
of which has been delivered to Chevron.
4.13 BROKERS OR FINDERS. No broker, investment banker or other firm or
Person is or will be entitled by virtue of any agreement, commitment or action
made or taken by NGC or
25
its Subsidiaries any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement,
except that Lehman Brothers shall be entitled to a fee to be paid by NGC for
acting as financial advisor to NGC in connection with the transactions
contemplated by this Agreement.
4.14 FULL DISCLOSURE. To the best knowledge of NGC, any information
furnished by or on behalf of NGC, its Subsidiaries or its Significant Affiliates
to Chevron or Newco pursuant to the Combination, and any information contained
in the schedules referred to in this Agreement, does not and will not contain
any untrue statement of a material fact and does not and will not omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
4.15 TITLE TO PERSONAL PROPERTY ASSETS. Except with respect to the NGC
Assets specifically covered by SECTIONS 4.16(A), 4.16(B) OR 4.16(C) below and to
matters set forth on SCHEDULE 4.15, NGC or its Subsidiaries have, and the
Surviving Corporation will acquire upon consummation of the transactions
contemplated hereby, title to or ownership of all of the personal property
assets of NGC free and clear of any Lien, except for Permissible Burdens and for
Liens securing purchase money indebtedness not exceeding $200,000 with respect
to any personal property asset (all of which indebtedness is currently paid as
of the date hereof) and capital leases covering personal property assets with
lease payments not exceeding $200,000 over the term of any single lease (which
leases are currently paid as of the date hereof).
4.16 NGC FACILITIES - TITLE AND OTHER MATTERS.
(a) NGC or its Subsidiaries or Equity Affiliates are the owner
of, and the Surviving Corporation will acquire upon consummation of the
Merger, title to the properties listed on SCHEDULE 4.16(A)(1) and
identified as being owned directly or indirectly in fee, in whole or in
part, by NGC or its Subsidiaries or Equity Affiliates (as applicable)
and to all of the buildings, structures and other improvements located
thereon free and clear of all Liens, except for (A) Permissible Burdens
and (B) Liens referred to on SCHEDULE 4.16(A)(2) (such Liens and
Permissible Burdens shall hereinafter be collectively referred to as
the "NGC PERMITTED EXCEPTIONS").
(b) NGC or its Subsidiaries or Equity Affiliates have, and the
Surviving Corporation will acquire upon consummation of the Merger,
title to the leasehold estate purported to be granted under each lease,
sublease or similar agreement with respect to each property listed in
SCHEDULE 4.16(B) and identified as being leased lands and, unless
otherwise provided in such agreement, to all of the buildings,
structures, fixtures and other improvements located thereon, free and
clear of all Liens, except for NGC Permitted Exceptions. Each such
lease is valid, binding and in full force and effect, all rent and
other sums and charges payable by NGC or its Subsidiaries or, to the
best knowledge of NGC, its Equity Affiliates (as applicable) thereunder
are current, no notice of default or termination under any such lease
is outstanding, no termination event or condition or uncured default on
the part of NGC or its Subsidiaries or, to the best knowledge of NGC,
its Equity Affiliates (as applicable) or, to the best of NGC's
knowledge and belief, the lessor thereof, exists under any such lease,
and no event has occurred and no condition exists which, with the
giving of notice or the lapse of time or
26
both, would constitute such a default or termination event. For
purposes of this Agreement, the properties listed on SCHEDULES
4.16(A)(1) and 4.16(B) shall be referred to as the "NGC NGL
FACILITIES." Neither NGC nor its Subsidiaries or Equity Affiliates
currently has interests in any assets or properties that are of a
similar nature or type to the foregoing that are not set forth in such
Schedules.
(c) NGC or its Subsidiaries or Equity Affiliates have, and the
Surviving Corporation will acquire upon consummation of the Merger,
title to the pipeline assets listed on of SCHEDULE 4.16(C) (the "NGC
PIPELINE FACILITIES") so as to permit the use of the NGC Pipeline
Facilities as they are currently used by NGC or its Subsidiaries or
Equity Affiliates, free and clear of any Liens, except for NGC
Permitted Exceptions. Subject to the NGC Permitted Exceptions, NGC or
its Subsidiaries or Equity Affiliates (as applicable) has title to the
Easements on which the NGC Pipeline Facilities are located and such
Easements grant to NGC or its Subsidiaries or Equity Affiliates (as
applicable) the full power and legal right to own and operate the NGC
Pipeline Facilities in the manner in which the same are currently being
operated. Neither NGC nor its Subsidiaries or Equity Affiliates
currently has interests in any assets or properties that are of a
similar nature or type to the foregoing that are not set forth in such
Schedule.
For purposes of this Agreement, (i) "NGC FACILITIES" shall
mean the NGC NGL Facilities and NGC Pipeline Facilities, collectively
and taken as a whole, and an "NGC FACILITY" shall mean any one of the
NGC Facilities and (ii) "FORMER NGC FACILITIES" shall mean assets or
properties of similar type to the NGC Facilities which have been
transferred by NGC or its Subsidiaries or Equity Affiliates prior to
the date hereof.
(d) SCHEDULE 4.16(D) sets forth with respect to each NGC
Facility, the name and location of such NGC Facility, whether such NGC
Facility is a gas processing, fractionation or pipeline facility, the
capacity of such NGC Facility, the ownership interest of NGC in such
NGC Facility and the name of the Person operating such NGC Facility.
4.17 MAJOR CUSTOMERS AND SUPPLIERS. SCHEDULE 4.17 contains a complete
and correct list of the top 10 customers of each of Clearinghouse and Trident
NGL, Inc. and the top 10 vendors or suppliers of each of Clearinghouse and
Trident NGL, Inc., in each case for the fiscal year ended December 31, 1995, in
terms of the aggregate dollar purchases or aggregate dollar sales, as
applicable.
4.18 BUILDINGS, VEHICLES, MACHINERY, EQUIPMENT, ETC. Except as set
forth on SCHEDULE 4.18, the buildings, fixtures, vehicles, pipelines, machinery
and equipment included in, or subject to any Contract included in, the NGC
Assets are in all material respects adequate for the purposes for which such
assets are presently used. To the best of NGC's knowledge and belief, there are
no facts or conditions affecting any of the buildings, structures, fixtures,
pipelines and other improvements included within the NGC Facilities which would
interfere in any material respect with the use, occupancy or operation thereof
as currently used, occupied or operated, except for NGC Permitted Exceptions.
27
4.19 INVENTORY. All inventories included as a part of the NGC Assets as
of the date of this Agreement are of a quality and condition that is usable or
saleable, as the case may be, in the ordinary course of business for the
purposes for which intended in conformity with industry standards.
4.20 PREFERENTIAL RIGHTS. Except as set forth on SCHEDULE 4.20 and
except for consents to assign Requisite Regulatory Approvals, to the best of
NGC's knowledge, there are no Preferential Rights in respect of any of the NGC
Facilities which can be exercised with respect to the NGC Facilities, as a
result of, or for, the execution, delivery, performance or consummation of the
transactions contemplated hereby or by the Ancillary Agreements; provided,
however, that in no event shall a breach of this representation be actionable by
Chevron if, in the event of a subsequent transfer by the Surviving Corporation
of an asset, property or Contract contributed to the Surviving Corporation by
NGC, a third party exercises a Preferential Right (with respect to such
subsequent transfer) to purchase an interest in such asset or property.
4.21 INTELLECTUAL PROPERTY, ETC. SCHEDULE 4.21 accurately discloses all
licenses, sublicenses or agreements relating to the use of the Intellectual
Property and Technology in connection with the NGC Assets pursuant to a license
or sublicense agreement with a third party. Except as set forth in SCHEDULE
4.21, there is no existing or threatened infringement, misuse or
misappropriation by others of the Intellectual Property or Technology that is
material to NGC taken as a whole, there is no pending or threatened claim by NGC
against others for any such infringement, misuse or misappropriation, and there
is no pending judicial proceeding involving any claim, and NGC has not received
any written notice of claim of any infringement, misuse or misappropriation by
NGC of any Intellectual Property or Technology owned by any third party.
4.22 JOA RELATED AGREEMENTS. Except as disclosed on SCHEDULE 4.22, with
respect to each Joint Operation in which NGC or any of its Subsidiaries is a
participant, to the best of NGC's knowledge, (i) all JOA Related Agreements to
which NGC or its Subsidiaries is a party are in full force and effect, (ii) each
Person who is a party thereto has performed in all material respects all
obligations required to be performed by it thereunder, and (iii) there does not
exist under any such JOA Related Agreement any breach or default; except, in
each case, where it would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on NGC or on the
ability of the Surviving Corporation to perform its obligations under the
Ancillary Agreements.
4.23 INSURANCE. NGC has maintained and is maintaining as of the date
hereof insurance covering its assets and operations in an amount and with a
scope of coverage that is consistent with industry standards.
4.24 ABSENCE OF CHANGES OR EVENTS. Except as set forth on SCHEDULE 4.24
or in note 14 to the financial statements of NGC included in the NGC 1995 10-K
or as permitted by SECTION 11.5, since December 31, 1995 NGC has operated the
NGC Assets in the ordinary course consistent with past practice and has not, on
behalf of, arising from or attributable to the NGC Assets:
28
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for NGC
Permitted Exceptions or except in the ordinary course of business
consistent with past practice;
(b) created or permitted to be created any Lien other than an
NGC Permitted Exception on any of the NGC Assets;
(c) sold, transferred, leased to or otherwise disposed of any
of the NGC Assets, except for inventory sold in the ordinary course of
business, or cancelled or compromised any material debt or claim, or
waived or released any right of material value except in the ordinary
course of business consistent with past practice;
(d) suffered any material damage, destruction or Casualty Loss
(whether or not covered by insurance);
(e) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material adverse change in their relations with
any of the employees, agents, customers or suppliers;
(f) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or Governmental Entity;
(g) entered into any transaction or Contract other than in the
ordinary course of business consistent with past practices and except
for (i) this Agreement and the Ancillary Agreements and (ii) any
employee benefit plans described in the NGC proxy statement dated March
29, 1996 that are to be considered and voted upon by the stockholders
of NGC at the 1996 Annual Meeting;
(h) amended, modified or terminated any Contract except in the
ordinary course of business consistent with past practice;
(i) with respect to any Subsidiary, purchased or redeemed any
shares of its capital stock or any option, warrant or right to purchase
any of its capital stock;
(j) with respect to any Subsidiary, issued, sold or delivered
or agreed to issue, sell or deliver any additional shares of its
capital stock, any options, warrants or rights to acquire any such
capital stock, any securities convertible into or exchangeable for such
capital stock or any bonds or other securities;
(k) made any material increase in the compensation payable or
to become payable by NGC (other than in the ordinary course of
business, consistent with past practices), or any material increase in
benefits or benefit plan costs (other than in the ordinary course of
business consistent with past practices or costs outside the control of
NGC), or any material increase in bonus, insurance, pension,
compensation or other benefit plans, in each case, with respect to its
employees; or
29
(l) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a) through (k)
above;
except, in each case, where the failure to so operate would not,
individually or in the aggregate, have a Material Adverse Effect on NGC
or the Surviving Corporation or on the ability of the Surviving
Corporation to perform the Ancillary Agreements.
4.25 ACQUISITIONS; CAPITAL EXPENDITURES. Except for existing
commitments which have been set forth on SCHEDULE 4.25 hereto, neither NGC nor
any Subsidiary has any existing commitments or agreements to acquire any assets
(including under circumstances where such acquisition would be classified as a
capital expenditure under generally accepted accounting principles consistently
applied) or to make any capital expenditure or contribution in any individual
transaction or project where the purchase price, capital expenditure or
contribution required of NGC or a Subsidiary, directly or indirectly, exceeds
$10 million or in transactions or projects where the aggregate purchase price,
capital expenditure or contribution exceeds $50 million.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF CHEVRON
Chevron represents and warrants to NGC that:
5.1 CORPORATE STATUS. Each Contributing Party is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is being
conducted on the date of this Agreement. Each Contributing Party is duly
qualified to conduct business and is in good standing in each jurisdiction in
which the nature of the business transacted by it requires qualification, except
where the failure to so qualify would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Contributed Businesses.
5.2 NEWCO STATUS AND CAPITALIZATION. Newco is duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
authorized capital stock of Newco consists of 400,000,000 shares of common
stock, $0.01 par value ("NEWCO COMMON STOCK") and 50,000,000 shares of Preferred
Stock, $0.01 par value, of which 7,815,363 shares have been designated Series A
Participating Preferred Stock. As of the date of this Agreement, one share of
Newco Common Stock is validly issued and outstanding and is held by Chevron of
record and beneficially and no shares of Preferred Stock of Newco are issued or
outstanding.
5.3 NO GOVERNMENTAL APPROVALS. No Requisite Regulatory Approval is
required on the part of Chevron or its Affiliates in connection with the
execution and delivery of this Agreement and the Ancillary Agreements or the
consummation by Chevron or its Affiliates of the transactions contemplated by
this Agreement and the Ancillary Agreements, except (a) as set forth on SCHEDULE
5.3, (b) for compliance with the HSR Act, the Securities Act, the Exchange Act,
state takeover laws, PUHCA and the Federal Energy Regulatory Commission,
30
(c) filings required by the EU Merger Regulation, (d) the filing and recordation
requirements of the DGCL and (e) for any Requisite Regulatory Approval that, if
not obtained, would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business (taken as a whole) or the ability
of Chevron or its Affiliates to perform their obligations under the Ancillary
Agreements.
5.4 AUTHORITY. The execution, delivery and performance by Chevron of
this Agreement has been, and the execution, delivery and performance by Chevron
and its Affiliates, as applicable, of the Ancillary Agreements and the
consummation by Chevron and its Affiliates of the transactions contemplated
hereby and thereby will be at Closing, duly and validly authorized and approved
by all necessary corporate action. This Agreement has been duly executed and
delivered by Chevron and this Agreement is, and, upon due execution and delivery
thereof the Ancillary Agreements shall be, valid and binding obligations of
Chevron and its Subsidiaries or Affiliates, as applicable, enforceable against
Chevron and its Subsidiaries or Affiliates, as applicable, in accordance with
their respective terms, subject to (i) obtaining the Requisite Regulatory
Approvals referenced in SECTION 5.3 and (ii) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5.5 NO CONFLICTS. Except as set forth in SCHEDULE 5.5 to this Agreement
and assuming the receipt of all Requisite Regulatory Approvals referenced in
SECTION 5.3, the execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements will not conflict with, or result in
any violation of or default or loss of any benefit under, any provision of the
certificate of incorporation or bylaws of Chevron or its Subsidiaries or
Affiliates, as applicable, or any agreement or other arrangement to which any of
them is a party or of any permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Chevron or any of its Subsidiaries or Affiliates other than any conflict,
violation, default or loss that would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Contributed Businesses and the Contributed West Texas LPG Pipeline Business
(taken as a whole) or on the ability of Chevron or its Affiliates to perform
their obligations under the Ancillary Agreements.
5.6 FINANCIAL STATEMENTS. Chevron previously has delivered to NGC a
true and complete copy of:
(i) the balance sheet of the Contributed Warren
Business (without giving effect to the changes shown on
SCHEDULE 5.6) as of December 31, 1995, and the related
statement of income for the year ended December 31, 1995
together with notes describing the basis and assumptions on
which such financial statements were prepared and any
departures from generally accepted accounting principles and
accompanied by a report by Price Waterhouse LLP describing the
work performed and significant matters that came to their
attention as a result of
31
performing certain limited procedures as outlined in the
Chevron and Price Waterhouse LLP engagement letter dated
February 15, 1996, and
(ii) the balance sheet of the Contributed NGBU
Business (without giving effect to the changes shown on
SCHEDULE 5.6) as of December 31, 1995, and the related
statement of income for the year ended December 31, 1995
together with notes describing the basis and assumptions on
which such financial statements were prepared and any
departures from generally accepted accounting principles and
accompanied by a report by Price Waterhouse LLP describing the
work performed and significant matters that came to their
attention as a result of performing certain limited procedures
as outlined in the Chevron and Price Waterhouse LLP engagement
letter dated February 15, 1996.
(all of the foregoing financial statements being referred to herein as the
"FINANCIAL STATEMENTS"). Subject to the changes set forth on SCHEDULE 5.6, the
Financial Statements fairly present the financial position and the results of
operations of the Contributed Warren Business and the Contributed NGBU Business,
as applicable, as of the dates and for the periods indicated, in each case in
accordance with generally accepted accounting principles (except as noted in the
notes to the Financial Statements). The statements of income included in the
Financial Statements do not contain any material items of special or
nonrecurring income except as expressly specified therein. Except as set forth
in SCHEDULE 5.25, or as permitted by SECTION 10.4, since December 31, 1995,
there has not been any change in the business, assets, financial condition or
results of operation of the Contributed Warren Business or the Contributed NGBU
Business, which would, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Contributed Businesses or on
the ability of Chevron or its Affiliates to perform their obligations under the
Ancillary Agreements, other than changes resulting from industry-wide conditions
or general economic conditions affecting the industry in which the Contributed
Warren Business or Contributed NGBU Business, as applicable, carry on their
respective businesses.
5.7 FINANCIAL INFORMATION; INTERNAL CONTROL REPORTS.
(a) Chevron previously has delivered to NGC a true and
complete copy of:
(i) the consolidated balance sheets of the Warren
Petroleum Company as of December 31, 1995, 1994 and 1993, and
the related consolidated statements of income for each of the
fiscal years ended December 31, 1995, 1994 and 1993;
(ii) financial schedules detailing the NGBU's
revenues, transportation costs, other direct costs and direct
and indirect overhead costs of each of the fiscal years ended
December 31, 1995, 1994 and 1993; and
(iii) computer disks containing the NGBU's long-term
fixed price position "book" as of March 7, 1996.
The financial statements set forth in SECTION 5.7(A)(I) and the financial
schedules set forth in SECTION 5.7(A)(II) were prepared in accordance with
Chevron's internal accounting policies and
32
procedures; based on these policies and procedures, the financial statements set
forth in SECTION 5.7(A)(I) fairly present the financial position and results of
operations of the Warren Petroleum Company and the financial schedules set forth
in SECTION 5.7(A)(II) fairly present the revenues and specified costs of NGBU,
in each case as of the dates and for the periods indicated. Chevron has
previously provided NGC with a summary description of its internal accounting
policies and procedures.
(b) Chevron has made available to NGC financial information
relating to the Contributed West Texas LPG Pipeline Business certified
by Chevron (or Chevron Affiliates) to the United States Federal Energy
Regulatory Commission in Docket IS 94- 32-000, and such certification
was accurate, true and correct to such officer's knowledge and belief
as of the date certified or submitted.
(c) Chevron has made available to NGC true and complete copies
of all internal audit reports that have been issued by Chevron or any
of its Subsidiaries or Affiliates during the past three years which
would indicate that the internal controls associated with or otherwise
covering either of the Contributed Businesses have or had any material
weaknesses or that the accounting records covering either of the
Contributed Businesses contained or could contain any material errors.
Chevron's public accountants have not issued any audit reports or other
reports on internal controls which indicate that the internal controls
associated with or otherwise covering either of the Contributed
Businesses have or had any material weaknesses or that the accounting
records associated with or otherwise covering either of the Contributed
Businesses contained or could contain any material errors.
5.8 LITIGATION. Except as set forth in SCHEDULE 5.8, there are no (a)
suits, actions or proceedings pending or, to the knowledge of Chevron,
threatened, against any Contributing Party or otherwise affecting the
Contributed Businesses which, if adversely determined, would, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Contributed Businesses or (b) judgments, decrees,
injunctions, rules or orders of any Governmental Entity or arbitrator
outstanding against any Contributing Party or otherwise affecting the
Contributed Businesses which would, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Contributed
Businesses or on the ability of Chevron or its Affiliates to perform their
obligations under the Ancillary Agreements.
5.9 COMPLIANCE WITH LAWS. Except (i) to the extent the matter is
otherwise covered by SECTION 5.17 or 5.18, (ii) as set forth in SCHEDULE 5.9 and
(iii) for matters relating to Environmental and Safety Laws (which are dealt
with in ARTICLE 6 hereof), the Contributed Businesses have been operated in
compliance with all laws, ordinances and regulations of all Governmental
Entities (including, without limitation, those relating to licenses and permits
for the ownership, occupancy and operation of their properties), except for
violations that would not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Contributed Businesses or
on the ability of Chevron or its Affiliates to perform their obligations under
the Ancillary Agreements. As of the date of this Agreement, no investigation or
review by any Governmental Entity (including without limitation any audit or
similar review by any federal, state or local taxing authority) with respect to
the Contributed Businesses is
33
pending or, to the knowledge of Chevron, threatened, except (x) as disclosed in
SCHEDULE 5.9, (y) for matters relating to Environmental and Safety Laws (which
are dealt with in ARTICLE 6 hereof) and (z) for any investigation or review that
would not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Contributed Businesses or on the ability
of Chevron or its Affiliates to perform their obligations under the Ancillary
Agreements.
5.10 INTENTIONALLY OMITTED.
5.11 SUFFICIENCY OF ASSETS. The assets and properties comprising the
Contributed Businesses constitute the assets, properties and Contracts
sufficient to conduct the Contributed Warren Business and the Contributed NGBU
Business and to produce the earnings set forth in the Financial Statements,
except as set forth on SCHEDULE 5.6.
5.12 MATERIAL AGREEMENTS. SCHEDULE 5.12 contains or refers to a
complete and correct list of all Contracts with payments, receipts or other
obligations with an aggregate value in excess of $100,000 per annum (i) that are
included in the Contributed Businesses or (ii) by which any of the assets or
properties comprising the Contributed Businesses are bound or otherwise subject.
All Contracts listed on SCHEDULE 5.12 are in full force and effect. Except as
set forth on SCHEDULE 5.12, (i) Chevron or its Affiliates have performed or
complied with all obligations required to be performed or complied with by it or
them, as applicable, under the Contracts listed on SCHEDULE 5.12, (ii) there
does not exist under any such Contract any default, or any event or condition
which, either individually or in the aggregate (after notice or the lapse of
time or both), would constitute a default by Chevron or its Affiliates and (iii)
to the best of Chevron's knowledge, no course of conduct has modified in any
respect any of the written terms in any such Contract; except, in each case,
where it would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Contributed Businesses or on the ability
of Chevron or its Affiliates to perform their obligations under the Ancillary
Agreements.
5.13 NO UNDISCLOSED MATERIAL LIABILITIES. As of the date of this
Agreement, there are no liabilities relating to the Contributed Warren Business
and the Contributed NGBU Business of any kind whatsoever, whether or not accrued
and whether or not contingent or absolute, determined or otherwise, other than
(a) liabilities disclosed in the Financial Statements or in the financial
statements or schedules referenced in SECTION 5.7(A) or any schedule to this
Agreement, (b) the Chevron Permitted Exceptions, and (c) liabilities that in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
the Contributed Businesses or on the ability of Chevron or its Affiliates to
perform their obligations under the Ancillary Agreements.
5.14 PUBLIC UTILITY. None of the Contributing Parties, the Contributed
Warren Business, the Contributed NGBU Business, nor any Person in which it or
they own an equity interest is a "holding company," a "subsidiary company" of a
"holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" as each of such terms is defined in the PUHCA, and the rules
and regulations promulgated thereunder.
34
5.15 BROKERS OR FINDERS. No agent, broker, investment banker or other
firm or Person is or will be entitled by virtue of any agreement, commitment or
action made or taken by Chevron or its Subsidiaries to any broker's or finder's
fee or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, except that Goldman Sachs & Co.
shall be entitled to a fee to be paid by Chevron for acting as financial advisor
to Chevron in connection with the Combination.
5.16 FULL DISCLOSURE. To the best knowledge of Chevron, any information
furnished by or on behalf of Chevron or its Affiliates to NGC or Newco pursuant
to the Combination, and any information contained in the schedules referred to
in this Agreement, does not and will not contain any untrue statement of a
material fact and does not and will not omit to state any material fact
necessary to make any statement, in light of the circumstances under which such
statement is made, not misleading.
5.17 TITLE TO PERSONAL PROPERTY ASSETS. Except with respect to the
assets and properties comprising the Contributed Businesses specifically covered
by SECTIONS 5.18(A), 5.18(B) OR 5.18(C) below, the Contributing Parties have,
and the Surviving Corporation will acquire upon consummation of the transactions
contemplated hereby, title to or ownership of all of the personal property
assets comprising the Contributed Businesses free and clear of any Lien, except
for Permissible Burdens and for Liens securing purchase money indebtedness not
exceeding $200,000 with respect to any personal property asset (all of which
indebtedness is currently paid as of the date hereof) and capital leases
covering personal property assets with lease payments not exceeding $200,000
over the term of any singe lease (which leases are currently paid as of the date
hereof).
5.18 CHEVRON FACILITIES - TITLE AND OTHER MATTERS.
(a) The Contributing Parties are the owners of, and the
Surviving Corporation will acquire upon consummation of the
transactions contemplated hereby, title to the properties listed in
SCHEDULE 5.18(A)(1) and identified as being owned in fee, in whole or
in part, by the Contributing Parties and to all of the buildings,
structures and other improvements located thereon (other than any
"Excluded Assets", as defined in the Contribution Agreement) free and
clear of all Liens except for (A) Permissible Burdens and (B) Liens
referred to on SCHEDULE 5.18(A)(2), including any Liens securing the
Assumed Liabilities (such Liens and Permissible Burdens are hereinafter
collectively referred to as the "CHEVRON PERMITTED EXCEPTIONS").
(b) The Contributing Parties have, and the Surviving
Corporation will acquire upon consummation of the transactions
contemplated hereby, title to the leasehold estate purported to be
granted under each lease, sublease or similar agreement with respect to
each property listed in SCHEDULE 5.18(B) and identified as being leased
lands and, unless otherwise provided in such agreement, to all of the
buildings, structures, fixtures and other improvements located thereon
(other than any "Excluded Assets", as defined in the Contribution
Agreement), free and clear of all Liens, except for Chevron Permitted
Exceptions. Each such lease is valid, binding and in full force and
effect, all rent and other sums and charges payable by any of the
Contributing Parties thereunder are current, no notice of default or
termination under any such lease is outstanding, no
35
termination event or condition or uncured default on the part of any of
the Contributing Parties or, to the best of Chevron's knowledge and
belief, the lessor thereof, exists under any such lease, and no event
has occurred and no condition exists which, with the giving of notice
or the lapse of time or both, would constitute such a default or
termination event.
For purposes of this Agreement, the properties listed on
SCHEDULES 5.18(A)(1) and 5.18(B) shall be referred to as the "CHEVRON
NGL FACILITIES."
(c) The Contributing Parties have, and the Surviving
Corporation will acquire upon consummation of the transactions
contemplated hereby, title to the assets and properties comprising the
Contributed Businesses that are specifically listed on SCHEDULE 5.18(C)
(the "CHEVRON PIPELINE FACILITIES") so as to permit the use of the
Chevron Pipeline Facilities as currently used by the Contributing
Parties, free and clear of any Liens, except for Chevron Permitted
Exceptions. Subject to the Chevron Permitted Exceptions, the
Contributing Parties have title to the Easements on which the Chevron
Pipeline Facilities are located, and such Easements grant to the
Contributing Parties the full power and legal right to own and operate
the Chevron Pipeline Facilities in the manner in which the same are
currently being operated. SCHEDULE 5.18(C) sets forth the ownership
interest of the applicable Contributing Party in each of the Chevron
Pipeline Facilities.
For purposes of this Agreement, "CHEVRON FACILITIES" shall
mean the Chevron NGL Facilities and Chevron Pipeline Facilities,
collectively and taken as a whole, and a "CHEVRON FACILITY" shall mean
any one of the Chevron Facilities.
(d) SCHEDULE 5.18(D) sets forth with respect to each Chevron
NGL Facility, the name and location of such Chevron NGL Facility,
whether such Chevron NGL Facility is a gas processing or fractionation
facility, the capacity of such Chevron NGL Facility, the ownership
interest of the applicable Contributing Party in such Chevron NGL
Facility and the name of the Person operating such Chevron NGL
Facility.
5.19 MAJOR CUSTOMERS AND SUPPLIERS. SCHEDULE 5.19 contains a complete
and correct list of the top 10 customers of each of Warren Petroleum Company and
NGBU and the top 10 vendors and suppliers of each of Warren Petroleum Company
and NGBU, in each case for the fiscal year ended December 31, 1995, in terms of
the aggregate dollar purchases or aggregate dollar sales, as applicable.
5.20 BUILDINGS, VEHICLES, MACHINERY, EQUIPMENT, ETC. Except as set
forth on SCHEDULE 5.20, the buildings, fixtures, vehicles, pipelines, machinery
and equipment included in, or subject to any Contract included in, the
Contributed Businesses are in all material respects adequate for the purposes
for which such assets are presently used. There are no facts or conditions
affecting any of the buildings, structures, fixtures, pipelines and other
improvements included within the Chevron Facilities which would interfere in any
material respect with the use, occupancy or operation thereof as currently used,
occupied or operated, except for Chevron Permitted Exceptions.
36
5.21 INVENTORY. All inventory included in the Contributed Businesses is
of a quality and condition that is usable or saleable, as the case may be, in
the ordinary course of business for the purposes for which intended in
conformity with industry standards.
5.22 PREFERENTIAL RIGHTS. Except as set forth on SCHEDULE 5.22 and
except for consents to assign Requisite Regulatory Approvals, to the best of
Chevron's knowledge, there are no Preferential Rights which can be exercised
with respect to any of the assets and properties comprising the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business, as a result of,
or for, the execution, delivery, performance or consummation of the transactions
contemplated hereby or by the Ancillary Agreements; provided, however, that in
no event shall a breach of this representation be actionable by the Surviving
Corporation if, in the event of a subsequent transfer by the Surviving
Corporation of an asset, property or Contract contributed to the Surviving
Corporation by any of the Contributing Parties, a third party exercises a
Preferential Right (with respect to such subsequent transfer) to purchase an
interest in such asset or property.
5.23 INTELLECTUAL PROPERTY, ETC. SCHEDULE 5.23 accurately discloses all
licenses, sublicenses or agreements relating to the use of the Intellectual
Property and Technology in connection with the Contributed Businesses pursuant
to a license or sublicense agreement with a third party. Except as set forth in
SCHEDULE 5.23, there is no existing or threatened infringement, misuse or
misappropriation by others of the Intellectual Property or Technology that is
material to the Contributed Businesses, there is no pending or threatened claim
by any Contributing Party (with respect to the Contributed Businesses) against
others for any such infringement, misuse or misappropriation, and there is no
pending judicial proceeding involving any claim, and no Contributing Party has
received any written notice of claim of any infringement, misuse or
misappropriation by the Contributing Party (with respect to the Contributed
Businesses) of any Intellectual Property or Technology owned by any third party.
5.24 JOA RELATED AGREEMENTS. Except as disclosed on SCHEDULE 5.24, with
respect to each Joint Operation to which any of the assets or properties
comprising the Contributed Businesses is subject, to the best of Chevron's
knowledge, (i) all JOA Related Agreements are in full force and effect, (ii)
each Person who is a party thereto has performed in all material respects all
obligations required to be performed by it thereunder, and (iii) there does not
exist under any such JOA Related Agreement any breach or default; except, in
each case, where it would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Contributed
Businesses or on the ability of Chevron or its Affiliates to perform their
obligations under the Ancillary Agreements.
5.25 ABSENCE OF CHANGES OR EVENTS. Except as set forth on SCHEDULE 5.25
or as permitted by SECTION 10.4, since December 31, 1995, Chevron and its
Subsidiaries and Affiliates have operated the Contributed Businesses in the
ordinary course consistent with past practice and have not, on behalf of,
arising from or attributable to the Contributed Businesses:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for the
Chevron Permitted Exceptions or except in the ordinary course of
business consistent with past practice;
37
(b) created or permitted to be created any Lien other than a
Chevron Permitted Exception on any of the assets or properties
comprising the Contributed Businesses;
(c) sold, transferred, leased to or otherwise disposed of the
Contributed Businesses, except for Inventory sold in the ordinary
course of business, or cancelled or compromised any material debt or
claim, or waived or released any right of material value except in the
ordinary course of business consistent with past practice;
(d) suffered any material damage, destruction or Casualty Loss
(whether or not covered by insurance);
(e) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material adverse change in their relations with
any of the employees, agents, customers or suppliers;
(f) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or Governmental Entity;
(g) entered into any transaction or Contract other than in the
ordinary course of business consistent with past practices and except
for this Agreement and the Ancillary Agreements;
(h) amended, modified or terminated any Contract except in the
ordinary course of business consistent with past practices;
(i) made any material increase in the compensation payable or
to become payable by Chevron (other than in the ordinary course of
business, consistent with past practices), or any material increase in
benefits or benefit plan costs (other than in the ordinary course of
business consistent with past practices or costs outside the control of
Chevron), or any material increase in bonus, insurance, pension,
compensation or other benefit plans, in each case, with respect to the
Prospective Employees; or
(j) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a) through (i)
above;
except, in each case, where the failure to so operate would not,
individually or in the aggregate, have a Material Adverse Effect on the
Contributed Businesses or on the ability of Chevron or its Affiliates
to perform their obligations under the Ancillary Agreements.
38
ARTICLE 6
ENVIRONMENTAL MATTERS
6.1 CHEVRON'S ENVIRONMENTAL INDEMNITY.
(a) Subject to the limitations set forth in ARTICLE 14,
Chevron agrees to and shall indemnify and hold the NGC Indemnitees
harmless against and from any and all Losses from:
(i) the Release of Hazardous Materials in, on, at, or
from the Chevron Facilities occurring prior to the Closing
Date in violation of any Environmental and Safety Law;
(ii) liability to third parties as a result of
Releases of Hazardous Materials in, on, at, or from the
Chevron Facilities occurring prior to the Closing Date;
(iii) the designation of the Surviving Corporation
under CERCLA or any analogous state statute as a potentially
responsible party for, or any private party action relating
to, onsite or offsite disposal of Hazardous Materials, to the
extent such substances were generated at or disposed on the
Chevron Facilities prior to the Closing Date;
(iv) fines or penalties for which the Surviving
Corporation may become liable with respect to any violation of
Environmental and Safety Laws at a Chevron Facility occurring
prior to the Closing Date;
(v) a failure of a Contributing Party to operate a
Chevron Facility as of the Closing Date in substantial
compliance with (i) all applicable Environmental and Safety
Laws, (ii) all terms and conditions of Environmental Permits,
and (iii) all environmental orders and consent agreements in
effect and applicable to the Chevron Facility;
(vi) the failure of a Contributing Party or an
operator of a Chevron Facility to have all the Environmental
Permits required by Environmental and Safety Laws to operate
the Chevron Facilities as they are being operated as of the
Closing Date; and
(vii) environmental conditions that exist on the
Chevron Facilities as of the Closing Date that would, solely
with the lapse of time or the giving of notice or both,
subject the Surviving Corporation to any responsibility for
any current remediation obligations under any applicable
Environmental and Safety Laws.
(b) Subject to the provisions of SECTION 6.4 below, in the
event that the Surviving Corporation (or any Affiliate) sells,
transfers or otherwise conveys any of the assets or properties
comprising the Contributed Businesses to a party that is not an
39
Affiliate of the Surviving Corporation (the "PURCHASER"), then the
Surviving Corporation shall be entitled to indemnification pursuant to
the indemnity obligations set forth in paragraph (a) of this SECTION
6.1 for Losses that result from an indemnity covering environmental
matters granted by the Surviving Corporation (or any Affiliate) to the
Purchaser in connection with the transfer of such asset or property to
the Purchaser, but only (x) with respect to claims asserted by such
Purchaser relating to or during the period of the Purchaser's ownership
and (y) to the extent that the Surviving Corporation would have been
entitled to such indemnification had it (instead of the Purchaser) been
the owner and asserted such claim for indemnification against Chevron
pursuant to SECTION 6.1(A) hereof; provided, however, that any claims
by the Surviving Corporation for indemnification under this paragraph
(b) shall be subject, along with any other Discrete Claims made under
SECTION 6.1(A) or ARTICLE 14, to the limitations set forth in SECTION
14.4; and provided further, that in no event shall this SECTION 6.1(B)
be construed to provide any Purchaser with any indemnification rights
hereunder from either Chevron or the Surviving Corporation, nor shall
Chevron or the Surviving Corporation be in any way liable or otherwise
obligated to any Purchaser under this SECTION 6.1.
6.2 SURVIVING CORPORATION'S ENVIRONMENTAL INDEMNITY.
(a) Subject to the limitations set forth in ARTICLE 14, NGC,
for and on behalf of the Surviving Corporation, agrees that the
Surviving Corporation shall indemnify and hold the Chevron Indemnitees
harmless against and from any and all Losses from:
(i) the Release of Hazardous Materials in, on, at, or
from the NGC Facilities or Former NGC Facilities occurring
prior to the Closing Date in violation of any Environmental
and Safety Law;
(ii) liability to third parties as a result of
Releases of Hazardous Materials in, on, at, or from the NGC
Facilities or Former NGC Facilities occurring prior to the
Closing Date;
(iii) the designation of the Surviving Corporation
under CERCLA or any analogous state statute as a potentially
responsible party for, or any private party action relating
to, onsite or offsite disposal of Hazardous Materials, to the
extent such substances were generated at or disposed on the
NGC Facilities or Former NGC Facilities prior to the Closing
Date;
(iv) fines or penalties for which the Surviving
Corporation may become liable with respect to any violation of
Environmental and Safety Laws at an NGC Facility occurring
prior to the Closing Date;
(v) a failure of NGC or any of its Subsidiaries or
Equity Affiliates to operate an NGC Facility as of the Closing
Date in substantial compliance with (i) all applicable
Environmental and Safety Laws, (ii) all terms and conditions
of Environmental Permits, and (iii) all environmental orders
and consent agreements in effect and applicable to the NGC
Facility;
40
(vi) the failure of NGC or any of its Subsidiaries or
Equity Affiliates or an operator of an NGC Facility to have
all the Environmental Permits required by Environmental and
Safety Laws to operate the NGC Facilities as they are being
operated as of the Closing Date; and
(vii) environmental conditions that exist on the NGC
Facilities or Former NGC Facilities as of the Closing Date
that would, solely with the lapse of time or the giving of
notice or both, subject the Surviving Corporation to any
responsibility for any current remediation obligations under
any applicable Environmental and Safety Laws.
6.3 FURTHER LIMITATION ON RECOVERY FOR LOSSES. Chevron and NGC agree
that no Losses suffered by the Surviving Corporation as a result of Releases
from and after the Closing Date shall be the subject of any payments to or from
Chevron under the provisions of ARTICLE 14.
6.4 PREVIOUSLY GRANTED INDEMNITIES. The parties hereby agree that the
transactions contemplated hereby, including, without limitation, the
contribution of the assets comprising the Contributed Businesses to Newco or the
Merger, shall not terminate or otherwise affect any indemnity granted prior to
the date hereof by NGC or any Affiliate thereof or any predecessor thereto in
favor of any Contributing Party or of any Contributing Party in favor of NGC or
any Affiliate thereof or any predecessor thereto covering environmental losses
or claims relating to any asset or property comprising a part of the Contributed
Businesses or the NGC Assets (as the case may be), notwithstanding the fact that
such indemnity by its terms would otherwise terminate upon the contribution of
such asset to Newco or the Merger.
6.5 SURVIVAL. Notwithstanding any other provisions of this Agreement,
the indemnities set forth in SECTIONS 6.1 and 6.2 shall survive for a period
commencing on the Closing Date and continuing through and including August 30,
2001, and shall terminate at the expiration of such period, except in the case
of (i) Third Party Claims or Use Claims for which a notice complying with the
terms of SECTION 14.5(A) and SECTION 14.7, respectively, and covering a Discrete
Claim that has previously occurred is received on or prior to August 30, 2001 or
(ii) Environmental Remediation Claims for which a notice complying with the
terms of SECTION 14.6(A) and covering a Discrete Claim that has previously
occurred is received on or prior to August 30, 2001.
ARTICLE 7
TAXES
7.1 TAX FILINGS AND REPRESENTATIONS.
(a) The parties believe that (i) the contribution of
Contributed Businesses and the Contributed West Texas LPG Pipeline
Business by the Chevron Group to Newco will be treated as a transaction
described in Section 351 of the Code and Chevron will be afforded
nonrecognition treatment, in part, under such section, and (ii) the
Merger will constitute a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code, with the result, in part, of affording
nonrecognition treatment to NGC and its
41
stockholders with respect to the transfers and exchanges occurring in
the Merger. Each party agrees that it will file its Tax Returns
consistent with these tax consequences and the allocation contemplated
by SECTION 7.2(D).
(b) NGC represents that it has no present plan or intention
for the Surviving Corporation (a) to enter into a transaction or series
of transactions that would terminate the existence of Surviving
Corporation, (b) or its Subsidiaries to dispose of the assets and
properties comprising the Contributed Businesses and the Contributed
West Texas LPG Pipeline Business, other than dispositions in the
ordinary course of business operations (including dispositions to
rationalize the various operations acquired by Newco), and dispositions
to members of the Surviving Corporation Group or to partnerships
wholly-owned by such members and/or Chevron (or its Affiliates), or (c)
to redeem or otherwise reacquire any stock or indebtedness to be issued
in the Combination (other than with respect to Surviving Corporation
Stock acquired from employees not referred to in SECTION 12.2(D)
through the NGC Plans and Savings Plan or the exercise of rights to pay
or call indebtedness as allowed by its terms).
7.2 TAX RESPONSIBILITIES. Chevron will be responsible for and shall pay
any and all Chevron Taxes. Chevron represents that each transferor of a part of
the Contributed Businesses and the Contributed West Texas LPG Pipeline Business
is a member of the Chevron Group. Surviving Corporation shall be responsible for
and shall pay any and all Surviving Corporation Taxes. Chevron shall have no
liability whatsoever with regard to Surviving Corporation Taxes or NGC
Stockholder Taxes, except as otherwise provided in SECTION 7.6. Surviving
Corporation and the NGC stockholders shall have no liability whatsoever with
regard to Chevron Taxes, except as otherwise provided in SECTION 7.6.
(a) The term "CHEVRON TAXES" or "CHEVRON TAX" shall mean any
and all Taxes imposed upon, paid, payable, or required to be collected
by any or all of Chevron and the Chevron Group for any and all taxable
years or periods. The term "CHEVRON TAXES" or "CHEVRON TAX" also
includes any ad valorem Tax imposed upon assets held by Chevron or the
Chevron Group and those Taxes identified as such in clause (iii) of
SECTION 7.2(D). Newco and its Subsidiaries, if any, shall be treated as
members of the Chevron Group through the Closing Date.
(b) The term "SURVIVING CORPORATION TAXES" or "SURVIVING
CORPORATION TAX" shall mean (i) assuming the Merger is effected, any
and all Taxes imposed upon, paid, payable or required to be collected
by any or all of NGC, the NGC Group, Clearinghouse, Trident NGL, Inc.
and Trident Holding for any and all taxable years or periods ending on
or before the Closing Date ("NGC TAXES") and (ii) for any and all
taxable years or other periods beginning on or after the Closing Date,
any and all Taxes imposed upon, paid, payable or required to be
collected by Surviving Corporation and the Surviving Corporation Group
and those Taxes identified as such in clause (iii) of SECTION 7.2(D).
The term "SURVIVING CORPORATION TAXES" or "SURVIVING CORPORATION TAX"
also includes any ad valorem Tax imposed upon assets held by NGC or
Surviving Corporation, respectively.
42
(c) The term "NGC STOCKHOLDER TAXES" or "NGC STOCKHOLDER TAX"
shall mean any and all taxes paid, payable or required to be collected
by any and all of the NGC Stockholders. The term "NGC STOCKHOLDERS"
shall mean any and all of the stockholders of NGC or Surviving
Corporation, other than Chevron.
(d) For purposes of this SECTION 7.2:
(i) In the case of any Tax attributable to a taxable
year or other period that includes or ends on the Closing
Date, such Tax shall be allocated between the portion of such
taxable year or other period ending on the Closing Date and
the portion beginning after the Closing Date by allocating all
items of income, loss, deduction, credit, payroll, premium,
capital, gross receipts, sales, and the like between the
portion ending on and the portion beginning after the Closing
Date based on an interim closing of the books as of 11:59 p.m.
on the Closing Date. The parties hereto agree that on the
Closing Date they shall not cause Newco or its Subsidiaries to
participate in any transaction outside of the ordinary course
of business, other than the transactions contemplated by this
Agreement.
(ii) Provided, however, that if any such item cannot
reasonably be determined on the basis of an interim closing of
the books, and except to the extent otherwise required by
applicable law, then such item shall be allocated based on the
number of days in the period ending on the Closing Date and
the number of days in the period beginning after the Closing
Date.
(iii) Notwithstanding anything to the contrary in
this SECTION 7.2, Chevron shall be responsible for all
transfer Taxes and other Taxes relating to the contribution of
the Contributed Businesses and the Contributed West Texas LPG
Pipeline Business to Newco (which Taxes shall be "CHEVRON
TAXES"), and the Surviving Corporation shall be responsible
for all transfer Taxes and other Taxes relating to the Merger
(which Taxes shall be "SURVIVING CORPORATION TAXES").
(iv) Notwithstanding anything to the contrary in this
SECTION 7.2, any ad valorem Tax relating to any asset
comprising a part of the Contributed Businesses or the
Contributed West Texas LPG Pipeline Business that is
attributable to a tax period that includes the Closing Date
shall be allocated as a Chevron Tax or a Surviving Corporation
Tax based on the number of days that each such party owned
such asset during such period.
(v) Notwithstanding anything to the contrary in this
SECTION 7.2, all Taxes imposed upon, paid, payable, or
required to be collected by Newco or its Subsidiaries while it
is a member of the Chevron Group, including any consolidated
or combined liabilities of the Chevron Group (including,
without limitation, Tax liabilities incurred by reason of
Treasury Regulations ss.1.1502-6) shall be considered Chevron
Taxes.
(e) Subject to the provisions of SECTIONS 7.1 (A) and 7.3
hereof, (i) Chevron shall be responsible, at its sole cost and expense,
for the preparation, maintenance and
43
filing of all tax returns, information returns, reports, statements,
and related documents (hereinafter collectively referred to as "TAX
RETURNS") relating to Chevron Taxes, and (ii) Surviving Corporation or
NGC shall be responsible, at its sole cost and expense, for the
preparation and filing of all Tax Returns relating to Surviving
Corporation Taxes or NGC Taxes. All Tax Returns required to be filed by
Chevron ("CHEVRON RETURNS") have been or will be filed at the times and
in the manner prescribed by law. All Tax Returns required to be filed
by Surviving Corporation or NGC ("SURVIVING CORPORATION RETURNS") have
been or will be filed by Surviving Corporation or NGC at the times and
in the manner prescribed by law.
7.3 RECORDS AND ASSISTANCE. Subject to the reimbursement of reasonable
out-of-pocket expenses, the parties hereto will provide each other such records
and assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax Return, and audit or other examination by any taxing
authority, and any judicial and administrative proceedings relating to liability
for Taxes (including, without limitation, any additions to or refunds of Taxes).
Surviving Corporation shall retain all records delivered to it by Chevron in the
Combination relating to Chevron Taxes for the longer of (i) six (6) years after
the September 15 following the end of the taxable year to which the Tax Audit
with respect to Chevron Taxes relates or (ii) upon notice from Chevron, with
respect to any Tax Audit, that the statute of limitations has been extended
beyond six (6) years after the September 15 following the end of the taxable
year to which the Tax Audit with respect to Chevron Taxes relates, until the end
of such extension period. Chevron shall reimburse Surviving Corporation for any
reasonable out-of-pocket expenses incurred by it with respect to such record
retention to the extent of the excess, if any, of the expenses attributable to
the period described in SECTION 7.3(II), over the expenses attributable to the
period described in SECTION 7.3(I). Surviving Corporation shall secure the same
access to records and assistance and the same record retention described in the
immediately preceding sentence in the event that Surviving Corporation disposes
of any of the Contributed Businesses or the Contributed West Texas LPG Pipeline
Business. All information provided pursuant to this ARTICLE 7 shall be held in
confidence and shall not be disclosed to persons other than requesting parties
hereto for any reason whatsoever, except to the extent that such disclosure is
required in order to effect the intent of this ARTICLE 7 or such disclosure is
required by law.
7.4 TAX SHARING AGREEMENTS. This Agreement supersedes and terminates
any and all other tax sharing, tax allocation, and other similar agreements,
policies, and arrangements previously in effect with respect to (i) all or any
of Newco or its Subsidiaries, on the one hand, and (ii) any or all of the other
members of the Chevron Group, on the other hand. Except as expressly provided in
this Agreement, neither Newco nor its Subsidiaries shall have any obligation,
directly or indirectly, to make any payment to or on behalf of any other member
of the Chevron Group in respect of any Tax or refund of Tax for any taxable
year.
7.5 TAX AUDITS. With respect to the taxable years of Chevron, NGC,
Newco, or Surviving Corporation not yet audited by, currently under audit by, or
under protest or appeal with, any taxing authority:
(a) Subject to SECTION 7.5(D), Chevron, at its sole cost and
expense, shall control the conduct of all stages of any audit or other
judicial or administrative
44
proceeding (collectively referred to as a "TAX AUDIT") with respect to
Chevron Taxes. Surviving Corporation, at its sole cost and expense,
shall control the conduct of all Tax Audits with respect to Surviving
Corporation Taxes.
(b) Chevron shall give prompt notice to Surviving Corporation
of any Tax adjustment proposed in writing pursuant to any Tax Audit
controlled by Chevron (i) that may be borne by the Surviving
Corporation (or any of its Subsidiaries) or have an adverse effect on
either of the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business or (ii) that could give rise to an indemnification
under SECTION 7.6(A). Upon Surviving Corporation's reasonable request,
Chevron shall discuss with Surviving Corporation and Surviving
Corporation's counsel the position that Chevron intends to take
regarding any issue concerning such Tax Audit, and shall afford
Surviving Corporation and its counsel a reasonable opportunity to
participate, at Surviving Corporation's sole cost and expense, in the
conduct of that portion of any such Tax Audit relating to such claim
(including, without limitation, participation in conferences and
subsequent non-judicial proceedings with the taxing authority and
submission of pertinent materials in support of Chevron's position).
(c) Surviving Corporation shall give prompt notice to Chevron
of any Tax adjustment proposed in writing pursuant to any Tax Audit
controlled by Surviving Corporation (i) that could give rise to a claim
against Chevron under this Agreement or (ii) that could give rise to an
indemnification under SECTION 7.6(B). Upon Chevron's reasonable
request, Surviving Corporation shall discuss with Chevron and Chevron's
counsel the position that Surviving Corporation intends to take
regarding any issue concerning such Tax Audit, and shall afford Chevron
and its counsel a reasonable opportunity to participate, at Chevron's
sole cost and expense, in the conduct of that portion of any such Tax
Audit relating to such claim (including, without limitation,
participation in conferences and subsequent non-judicial proceedings
with the taxing authority and submission of pertinent materials in
support of Surviving Corporation's position).
(d) In the case of a Tax Audit that Chevron believes could
give rise to an indemnity under clause (iii) of SECTION 7.6(B) (and so
much of clause (iv) as relates thereto), Chevron shall give prompt
notice to Surviving Corporation in writing as soon as reasonably
possible after initial discussions with or receipt of a written
communication from any representative of a taxing authority regarding
any issues that could give rise to a claim for such indemnity (the
"AUDIT ISSUES"). Chevron shall at all times take positions in the Tax
Audit, with respect to the Audit Issues, consistent with those advanced
by Surviving Corporation in writing and shall afford Surviving
Corporation and its counsel a reasonable opportunity to participate, at
Surviving Corporation's sole cost and expense, in the conduct of that
portion of any Tax Audit relating to such claim (including, without
limitation, participation in conferences and subsequent non-judicial
proceedings with the taxing authority and submission of pertinent
materials in support of Chevron's position). Chevron shall appeal (to
the extent legally allowable) all decisions inconsistent with the
positions advanced by Surviving Corporation with respect to such Audit
Issues that could result in indemnification under SECTION 7.6(B)(III),
unless otherwise agreed by Chevron and Surviving Corporation. If
Surviving Corporation believes a decision of a court of
45
law with respect to such Audit Issues should be appealed, but Chevron
disagrees, Surviving Corporation shall reimburse Chevron for all costs
and expenses related to the Audit Issues of any such appeal.
7.6 TAX INDEMNITY.
(a) With the exception of increases in Chevron Taxes described
in clause (ii) of SECTION 7.6(B) hereof, Chevron shall indemnify,
protect, save, and keep harmless Surviving Corporation and its
Subsidiaries and their respective officers, directors, employees,
agents and Affiliates from and against (i) any and all Chevron Taxes
directly incurred by any of them in connection therewith, and (ii) any
and all Surviving Corporation Taxes payable for taxable periods
beginning on or after the Closing Date, but only to the extent (if any)
of the amount of any such Surviving Corporation Tax that is caused by
or arises from a breach or other violation of, or inaccuracy or
incompleteness of, any of the covenants, warranties, or representations
of Chevron set forth in the last sentence of SECTION 7.1(A) AND IN
SECTION 7.2 hereof, and (iii) all reasonable costs and expenses
(including, without limitation, court costs and professional fees)
incurred by Surviving Corporation (or its Subsidiaries) in connection
with an indemnity provided in this SECTION 7.6(A).
(b) With the exception of increases in Surviving Corporation
Taxes described in clause (ii) of SECTION 7.6(A) hereof, Surviving
Corporation shall indemnify, protect, save, and keep harmless Chevron
and its Subsidiaries and their respective officers, directors,
employees, agents and Affiliates from and against (i) any and all
Surviving Corporation Taxes directly incurred by any of them, (ii) any
and all Chevron Taxes payable for taxable periods ending on or after
the Closing Date, but only to the extent (if any) of the amount of any
such Chevron Tax that is caused by or arising from a breach or other
violation of, or inaccuracy or incompleteness of, any of the covenants,
warranties, or representations of NGC set forth in the last sentence of
SECTION 7.1(A) AND IN SECTION 7.2 hereof, (iii) provided that SECTION
7.5(D) has been complied with, any and all Chevron Taxes payable for
the taxable period that includes the Closing Date that is caused by or
arises from the inaccuracy of any of the representations of NGC set
forth in SECTION 7.1(B) hereof; and (iv) all reasonable costs and
expenditures (including, without limitation, court costs and
professional fees) incurred by Chevron (or its Subsidiaries) in
connection with any indemnity provided in this SECTION 7.6(B).
(c) Any payments required to be made pursuant to this SECTION
7.6 (a "TAX INDEMNITY PAYMENT") shall be made, whether or not the
amount is contested under SECTION 7.6(D), on the latest of (i) twenty
(20) Business Days after written demand by the indemnified party, which
written demand shall include a statement (the "INDEMNITY STATEMENT")
setting forth in reasonable detail the good faith computations of the
indemnification hereunder and the procedure for contesting the amount
(including the timing of the written notice thereof) set forth in
SECTION 7.6(D) hereof, (ii) five (5) Business Days before the last day
prescribed by law on which the payment of the indemnified Tax in
question may be made to the relevant taxing authority without the
imposition of any penalty, interest, addition to Tax, or other late
charge by the taxing authority, or (iii) in the case of an Indemnity
Payment under clause (iii) of SECTION 7.6(B)
46
or clause (iv) of SECTION 7.6(B) to the extent it relates to an
Indemnity Payment under such clause (iii), the later of ten days after
(A) if Chevron and the Surviving Corporation agree that a Tax Indemnity
Payment is required under SECTION 7.6(B)(III), the date judgment by a
Circuit Court of Appeals or the Supreme Court of the United States
becomes final and unappealable, or (B) otherwise, after the decision of
the Arbitrator pursuant to the procedures in SECTION 7.6(D) as to
whether an Indemnity Payment is required pursuant to Section
7.6(b)(iii).
(d) Chevron or Surviving Corporation may contest the amount of
any Tax Indemnity Payment set forth on an Indemnity Statement within
120 Business Days of the receipt of the Tax Indemnity Statement by
written notice; PROVIDED, HOWEVER, to the extent that any Tax Indemnity
Payment set forth on an Indemnity Statement relates to SECTION
7.6(B)(III) or SECTION 7.6(B)(IV) (as it relates to an Indemnity
Payment under SECTION 7.6(B)(III), such 120 day period for contesting
an amount on a Tax Indemnity Statement shall begin on the later of the
date of a final settlement with the U.S. Government or the date
judgment by a trial court, a Circuit Court of Appeals or the Supreme
Court of the United States becomes final and unappealable, unless
otherwise agreed by Chevron and Surviving Corporation. If Surviving
Corporation or Chevron contests such amount during the 120 day period,
Chevron and Surviving Corporation, at their joint expense, shall select
and engage an independent nationally-recognized public accounting or
law firm (an "ARBITRATOR") (which shall in no event be the auditors for
or representatives of either Chevron or Surviving Corporation at the
time of selection) to redetermine the amount of the Chevron Tax or
Surviving Corporation Tax so contested, which redetermination shall be
binding and conclusive. If Chevron and Surviving Corporation cannot
agree on one (1) jointly chosen Arbitrator, then each shall select one
(1) Arbitrator at its own cost and expense. Such two (2) Arbitrators
selected by Chevron and Surviving Corporation shall then select a third
Arbitrator (other than themselves) to redetermine the amount of the
Chevron Tax or Surviving Corporation Tax so contested, which
redetermination shall be binding and conclusive. If such Arbitrator
redetermines that the amount of the Tax Indemnity Payment is less than
the amount shown in the Indemnity Statement so contested, then (i) the
indemnified party shall refund such difference (together with any
interest on such difference that the indemnified party has collected
from the indemnifying party) to the indemnifying party within fifteen
(15) days after the indemnified party has received written notice of
the amount determined by said Arbitrator or (ii) in the case of a Tax
Indemnity Payment required under SECTION 7.6(B)(III), Surviving
Corporation shall pay Chevron the lesser of (A) the amount shown on the
Indemnity Statement with respect to such Tax Indemnity Payment or (b)
the amount determined by the Arbitrator.
(e) If any amount payable pursuant to this SECTION 7.6 is not
paid when due, then such amount shall bear interest at the lesser of
(i) the highest lawful rate for the period of time that the amount
remains unpaid, or (ii) the rate of interest accruing under Section
6621(a)(2) of the Code for the period of time that the amount remains
unpaid.
(f) Any Tax Indemnity Payment required to be made pursuant to
this SECTION 7.6, other than Tax Indemnity Payments required to be made
pursuant to SECTION 7.6(B)(III), shall be increased or reduced, as
appropriate, to take into account the tax
47
consequences to the payee, if any, of (i) such Tax Indemnity Payment to
the indemnified party and (ii) expenditures made by the indemnified
party that are being reimbursed by such Tax Indemnity Payment.
(g) Any Tax Indemnity Payment required to be made pursuant to
SECTION 7.6(B)(III) at the time stated in SECTION 7.6(C)(III) shall be
increased by an amount of interest at Chevron's effective borrowing
rate as in effect from time-to-time from the date on which Chevron
actually paid the Tax for which the Tax Indemnity Payment is made until
the date when payment is due pursuant to SECTION 7.6(C)(III).
7.7 SURVIVAL. Notwithstanding any other provisions of this Agreement,
all of the warranties, representations, covenants and agreements set forth in
this ARTICLE 7 with respect to each Tax liability and any and all Tax Returns,
audits, examinations, and proceedings relating thereto shall survive the Closing
for a period ending 90 days after the latest of (i) the lapse of the applicable
period for assessment, imposition, or refund of Tax (as the same may be
extended) with respect thereto, (ii) receipt of the notice described in SECTIONS
7.5(B)(II) or 7.5(C)(II) hereof, (iii) the lapse of the applicable period for
assessment, imposition or refund of Tax (as the same may be extended) relating
to the taxable year or period in which any Tax savings are actually realized
pursuant to SECTION 7.6(F) or (iv) the determination by the Arbitrator referred
to in SECTION 7.6(D). This SECTION 7.7 shall not prejudice the survival of any
other warranty, representation or covenant under this Agreement.
7.8 INDEMNITY FOR NGC TAX LOSSES.
(a) Surviving Corporation shall pay to Chevron the amount of
any NGC Tax Loss (an "NGC TAX LOSS PAYMENT"). The term "NGC Tax Loss"
shall mean the "Unadjusted NGC Tax Loss" (defined in SECTION 7.8(B))
adjusted as provided in SECTION 7.8(C).
(b) The term "Unadjusted NGC Tax Loss" shall mean the excess,
if any, of (i) any and all NGC Taxes paid by Surviving Corporation on
or after the Closing Date (other than (x) Taxes paid with final returns
or statements for taxable periods ending in or after 1995 that are
filed after the Closing Date (other than amended returns or amended
statements) or (y) Taxes for tax periods ending on or after the Closing
Date) ("RELEVANT NGC TAXES"), over (ii) the present value (as of the
date of the payment of the Relevant NGC Taxes) of the tax savings or
refunds, if any, reasonably expected to the Surviving Corporation as a
result of the payment of the Relevant NGC Taxes or the adjustments
resulting in such Relevant NGC Taxes, in either case, for any taxable
period of NGC (or its Subsidiaries) or Surviving Corporation (or its
Subsidiaries). This present value shall be computed using NGC's
effective borrowing rate as in effect from time-to-time. Surviving
Corporation shall prepare and provide to Chevron a schedule setting
forth the amount of the expected Tax savings or refunds and shall
update such schedule no less often than once each calendar year.
(c) The Unadjusted NGC Tax Loss shall be adjusted in the
following manner to compute the NGC Tax Loss. The Unadjusted NGC Tax
Loss shall be reduced (but not below zero) by up to $7.5 million (as
agreed by the Parties), (which after such
48
reduction shall be referred to as the "GROSS TAX LOSS"). For purposes
hereof, an NGC Tax Loss will have occurred at each time that the amount
of the Gross Tax Loss increases, for example, without limitation, upon
a decrease in the present value of the reasonably expected Tax savings
or refunds taken into account in the previous determination of the
Gross Tax Loss as a result of the reasonable expectation of either a
delay in achieving or a failure to achieve such Tax savings or refunds.
The amount of the NGC Tax Loss incurred at each such time shall be the
product of the increase in the Gross Tax Loss at such time and the
fraction described in SECTION 14.1(D)(II) as in effect at such time.
Notwithstanding the foregoing, if the amount of Relevant NGC Tax paid
to a taxing authority for a particular taxable period is less than
$100,000, the Relevant NGC Tax shall be considered to be $0.00.
(d) The NGC Tax Loss Payment shall be made within thirty (30)
days after the latest of (i) the settlement with the taxing authority
of the claim for NGC Taxes, (ii) the expiration of the period for
appeal of a final adjudication of the claim for NGC Taxes, (iii) the
rendering of a determination by the Arbitrator of the amount of the NGC
Tax Loss, or (iv) the expiration of the period for Surviving
Corporation to give notice that it contests the amount of the NGC Tax
Loss Payment requested by Chevron in an NGC Tax Loss Indemnity
Statement. (The occurrence of an event described in SECTION 7.8(D)(I)
OR (II) shall be referred to in this SECTION 7.8 as a "FINAL
DETERMINATION"). If an NGC Tax Loss Payment is not made when due, then
the amount thereof shall bear interest for the period of time that the
amount remains unpaid at the lesser of (i) the highest lawful rate, or
(ii) the rate of interest accruing under Section 6621(a)(2) of the
Code. Any NGC Tax Loss Payment shall be increased by an amount of
interest at Chevron's effective borrowing rate as in effect from
time-to-time from the date on which Surviving Corporation makes the
payment of the Relevant NGC Tax for which such NGC Tax Loss Payment is
made, until the date the related NGC Tax Loss Payment is due.
(e) Surviving Corporation shall give prompt notice to Chevron
of any Tax adjustment proposed in writing pursuant to any Tax Audit
controlled by Surviving Corporation which adjustment could reasonably
be expected to give rise to an NGC Tax Loss Payment under SECTION
7.8(A) and prompt notice of the Final Determination of such Tax Audit
(the "FINAL DETERMINATION NOTICE"). The Final Determination Notice
shall set forth (i) in reasonable detail Surviving Corporation's good
faith computation of the amount of any NGC Tax Loss Payment required
under SECTION 7.8(A), (ii) the procedure (as described in SECTION
7.8(F) below) Chevron must follow to respond, and (iii) a reference to
SECTION 7.8 of this Agreement.
(f) Within one hundred twenty (120) days of the Final
Determination Notice, Chevron shall notify Surviving Corporation in a
written notice setting forth in reasonable detail Chevron's good faith
computations of the amount of any NGC Tax Loss Payment required under
SECTION 7.8(A), the basis of Chevron's request for such payment, and
the procedure (as described in SECTION 7.8(G) below) by which Surviving
Corporation may contest the amount (including the timing of the written
notice of contest).
49
(g) Within one hundred twenty (120) days of the receipt of the
notice given in SECTION 7.8(F), Surviving Corporation may contest by
written notice to Chevron the amount of the NGC Tax Loss Payment
proposed by Chevron. After the notice in this SECTION 7.8(G) has been
given, Chevron and Surviving Corporation, at their joint expense, shall
select one (1) Arbitrator (as defined in SECTION 7.6(D)). If, within
thirty (30) days after the notice in this SECTION 7.8(G) has been
given, Chevron and Surviving Corporation cannot agree on one (1)
jointly chosen Arbitrator, then each shall select one (1) Arbitrator at
its own cost and expense. Such two (2) Arbitrators selected by Chevron
and Surviving Corporation shall then select a third Arbitrator (other
than themselves) to redetermine the amount of the NGC Tax Loss Payment
so contested, which redetermination shall be binding and conclusive. If
such third Arbitrator redetermines that the amount of the NGC Tax Loss
Payment is less than the amount shown in the notice of Chevron so
contested, the amount of the NGC Tax Loss Payment shall be such
redetermined amount. If such Arbitrator determines that the amount of
the NGC Tax Loss Payment was equal to or higher than the amount shown
in the notice of Chevron, the payment in such notice shall be the NGC
Tax Loss Payment.
(h) Notwithstanding any other provisions of this Agreement,
all of Surviving Corporation's and Chevron's obligations under this
Agreement relating to the making of NGC Tax Loss Payments or Refund
Payments and any and all Tax Returns, audits, examinations, and
proceedings relating thereto shall survive the Closing for a period
ending ninety (90) days after the latest of (i) the lapse of the
applicable period for assessment, imposition, or refund of Tax (as the
same may be extended) with respect thereto, (ii) receipt of the notice
described in SECTION 7.8(E) hereof or the Refund Payment Notice, (iii)
the lapse of the applicable period for assessment, imposition or refund
of Tax (as the same may be extended) relating to the taxable year or
period in which any Tax savings are actually realized pursuant to
SECTION 7.8(B) or SECTION 7.8(I), or (iv) the determination of the
Arbitrator referred to in SECTION 7.8(G). This SECTION 7.8(H) shall not
prejudice the survival of any warranty, representation or covenant
under this Agreement.
(i) If the amount of the Gross Tax Loss decreases as the
result of an increase in the present value of the reasonably expected
Tax savings or refunds taken into account in the previous determination
of the Gross Tax Loss as a result of the reasonable expectation of
either an acceleration in achieving Tax Savings or refunds or the
ability to achieve Tax Savings or refunds not previously expected, then
Chevron shall pay to Surviving Corporation an amount equal to the
product of the decrease in the Gross Tax Loss at such time and the
fraction described in SECTION 14.1(D)(II) as in effect at such time,
but in no event shall such payment (herein referred to as the "Refund
Payment") be in excess of the amount of NGC Tax Loss Payments
previously made to Chevron by Surviving Corporation. Any Refund Payment
shall be increased by an amount of interest at Chevron's effective
borrowing rate as in effect from time-to-time from the date on which
the Refund Payment Notice is received by Chevron until the date the
Refund Payment is due. Upon such a decrease in the Gross Tax Loss,
Surviving Corporation shall give Chevron prompt notice of the decrease
in the Gross Tax Loss and a request for a Refund Payment (the "Refund
Payment Notice"). The Refund Payment Notice shall set forth (i) in
reasonable detail Surviving Corporation's good faith computation of
50
the amount of the Refund Payment required under this paragraph, (ii)
the procedure (as described below) Chevron must follow to respond, and
(iii) a reference to SECTION 7.8 of this Agreement. Within one hundred
twenty (120) days of the receipt of the Refund Payment Notice, Chevron
may contest by written notice to Surviving Corporation the amount of
the requested Refund Payment, in which event Chevron and Surviving
Corporation shall follow the arbitration procedures set forth in
SECTION 7.8(G). If the Arbitrator redetermines that the amount of the
Refund Payment is less than the amount shown in the notice of Surviving
Corporation so contested, the amount of the Refund Payment shall be
such redetermined amount. If such Arbitrator determines that the amount
of the Refund Payment was equal to or higher than the amount shown on
the Refund Payment Notice, the payment requested in such notice shall
be the Refund Payment. The Refund Payment shall be made within thirty
(30) days after the latest of (i) the settlement with the taxing
authority of the claim for NGC Taxes, (ii) the expiration of the period
for appeal of a final adjudication of the claim for NGC Taxes, (iii)
the rendering of a determination by the Arbitrator as to the amount of
the relevant Refund Payment or (iv) the expiration of the period for
Chevron to give notice that it contests the amount of a Refund Payment
requested by Surviving Corporation in a Refund Payment Notice. If the
Refund Payment is not paid when due, then it shall bear interest for
the period that the amount remains unpaid at the rate described in the
penultimate sentence of SECTION 7.8(D).
(j) Notwithstanding any other provisions of this Agreement,
the provisions of this SECTION 7.8 shall apply exclusively to issues
regarding NGC Tax Loss Payments pursuant to SECTION 7.8(A) or Refund
Payments pursuant to SECTION 7.8(I).
ARTICLE 8
EMPLOYEES AND BENEFITS MATTERS
8.1 REPRESENTATIONS AND WARRANTIES OF NGC.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 8.1(A) to this Agreement
includes a correct and complete list of all pension and welfare plans
as defined in Sections 3(1) and 3(2) of ERISA and all other employee
benefit agreements or arrangements, including but not limited to
deferred compensation plans, incentive plans, bonus plans or
arrangements, savings plans, stock option plans, stock purchase plans,
golden parachute agreements, severance pay plans, cafeteria plans,
employee assistance programs, employment contracts and other similar
plans, agreements and arrangements that are currently in effect, or
have been approved before the date of this Agreement but are not yet
effective, for the benefit of directors, officers, employees or former
employees (or their beneficiaries) of NGC or any of its Subsidiaries.
NGC has delivered or made available to Chevron, as to each plan,
agreement or arrangement, as applicable, a true and correct copy of (i)
the plan, agreement or arrangement, (ii) the trust, group annuity
contract or other document that provides the funding for the plan,
agreement or arrangement, if any, (iii) the three most recent annual
Form 990 and 1041 reports, if any, (iv) the Form 5500 returns that have
been prepared and filed for each fiscal year of the plan beginning in
or
51
after 1991, if any, (v) the most recent actuarial report or valuation
statement, if any, (vi) the most current summary plan description,
booklet, or other descriptive written materials, if any, and each
summary of material modifications prepared after the last summary plan
description, (vii) the most recent IRS determination letter, if any,
and all rulings or determinations requested from the IRS after the date
of any exemption letter, if any, and (viii) all other correspondence
from the IRS or the Department of Labor that relates to one or more of
the plans, agreements or arrangements which could reasonably be
expected to result in the disqualification of a plan for tax purposes
under Section 401(a) of the Code or a liability which would have a
Material Adverse Effect on NGC.
(b) Except as set forth on SCHEDULE 8.1(B), every employee
welfare benefit plan and every employee pension benefit plan as defined
in Sections 3(1) and 3(2) of ERISA listed on SCHEDULE 8.1(A) (i) is in
substantial compliance with all material requirements of Parts 1 and 6
of Subtitle B of Title I of ERISA; (ii) has had the appropriate Form
5500 filed, timely, for each year of its existence, if required; (iii)
has not engaged in any prohibited transaction described in Sections 406
or 407 of ERISA or Section 4975 of the Code unless it was exempt under
Section 408 of ERISA or Section 4975 of the Code, as applicable; (iv)
has at all times complied with the bonding requirements of Section 412
of ERISA; (v) has no issue pending (other than the payment of benefits
in the normal course) nor any issue resolved adversely to NGC or any of
its Subsidiaries that may subject NGC or any of its Subsidiaries in the
future to the payment of a penalty, interest or tax and (vi) can be
unilaterally terminated or amended on no more than 90 days' notice;
except, in each such case, where it would not, either individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect on NGC. All voluntary employee benefit associations maintained
or contributed to by NGC or any of its Subsidiaries have been submitted
to and approved by the IRS as exempt from federal income tax under
Section 501(c)(9) of the Code. Except as set forth in SCHEDULE 8.1(B),
neither NGC nor any of its Subsidiaries provides employee
post-retirement medical or health coverage or contributes to or
maintains any employee welfare benefit plan that provides for health
benefit coverage following termination of employment except as is
required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B
of the Code. Except as set forth on SCHEDULE 8.1(B), all employee
pension benefit plans as defined in Section 3(2) of ERISA listed on
SCHEDULE 8.1(A) which are intended to qualify under Section 401(a) of
the Code have been submitted to and approved as qualifying under
Section 401(a) of the Code by the IRS or the applicable remedial
amendment period will not have ended prior to the Closing Date; and to
the knowledge of NGC, no facts have occurred that if known by the IRS
could cause disqualification of those plans. All employee pension
benefit plans listed on SCHEDULE 8.1(A) to which Section 412 of the
Code is applicable have fully complied with the funding requirements of
that Section and there is no accumulated funding deficiency as defined
in Section 302(a)(2) of ERISA (whether or not waived) in any one or
more of those plans. All premiums (and any interest, charges and
penalties for late payment of premiums) due the PBGC with respect to
each employee pension benefit plan listed on SCHEDULE 8.1(A) for which
premiums are required have been paid when due. No employee pension
benefit plan, whether or not listed on SCHEDULE 8.1(A), has been, or is
reasonably expected to be, terminated under circumstances that could
result in a liability by NGC or any of its Subsidiaries to the PBGC
that would reasonably be expected to have a Material Adverse
52
Effect on NGC. There have been no "reportable events" (as defined in
Section 4043(b) of ERISA and the regulations under that Section) with
respect to any employee pension benefit plan subject to Title IV of
ERISA listed on SCHEDULE 8.1(A). Except as set forth on SCHEDULE
8.1(B), neither NGC nor any of its Subsidiaries (i) has ceased
operations at a facility so as to become subject to the provisions of
Section 4062(e) of ERISA, withdrawn as a substantial employer so as to
become subject to the provisions of Section 4063 of ERISA or ceased
making contributions on or before the Closing Date to any employee
pension benefit plan subject to ERISA to which either NGC or any of its
Subsidiaries made contributions at any time during the six years before
the Closing Date or (ii) has made a complete or partial withdrawal from
a multiemployer plan (as defined in Section 3(37) of ERISA) so as to
incur withdrawal liability as defined in Section 4201 of ERISA. Either
the applicable plan document or SCHEDULE 8.1(B) contains a complete and
accurate statement of all actuarial assumptions applied to determine
the present value of accrued benefits under all employee benefit plans
subject to actuarial assumptions. All amounts owed under the deferred
compensation arrangements described in SCHEDULE 8.1(A) are included as
liabilities in the financial statements included in the NGC SEC
Documents. Neither NGC nor any of its Subsidiaries has incurred a
liability for any excise tax (whether or not yet assessed by the IRS)
under Section 4971, 4972, 4975, 4976, 4978B, 4979, 4979A or 4980B of
the Code that would reasonably be expected to have a Material Adverse
Effect on NGC.
(c) LABOR MATTERS. Except as set forth on SCHEDULE 8.1(C), (i)
there are no agreements existing between any member of the NGC Group
and any labor union or association representing any employees of the
NGC Group; (ii) there is no material work stoppage against the NGC
Group with respect to its business or operations pending or, to the
knowledge of NGC, threatened and (iii) there is no material labor
dispute, arbitration, lawsuit or administrative proceeding threatened
relating to labor matters with respect to the business or operations of
NGC or affect the ability of the Surviving Corporation to perform its
obligations under the Ancillary Agreements.
8.2 REPRESENTATIONS AND WARRANTIES OF CHEVRON.
(a) EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Prior to the Closing
Date, Chevron will provide any notification or notice required to be
given to any employee of a member of the Chevron Group pursuant to the
provisions of the Worker Adjustment and Retraining Notification Act
(the "WARN ACT") in connection with or arising out of the contribution
of the Contributed Businesses and the Contributed West Texas LPG
Pipeline Business to Newco. With respect to any "employee benefit plan"
within the meaning of Section 3(3) of ERISA, which is sponsored,
maintained or contributed to, or has been sponsored, maintained or
contributed to within six years prior to the Closing Date, by Chevron
or any corporation, trade, business or entity under common control with
Chevron, within the meaning of Section 414(b), (c) or (m) of the Code
or Section 4001 of the ERISA ("COMMONLY CONTROLLED ENTITY"), (1) no
withdrawal liability, within the meaning of Section 4201 of ERISA, has
been incurred, which withdrawal liability has not been satisfied and
could give rise to a Lien on any of the assets or properties that
comprise the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business, (2) no liability to the PBGC has been incurred by
Chevron or any Commonly
53
Controlled Entity, which liability has not been satisfied and could
give rise to a Lien on the Contributed Businesses, (3) no accumulated
funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred and
(4) all contributions (including installments) to such plan required by
Section 302 of the ERISA and Section 412 of the Code have been timely
made. As of the Closing Date, the Affected Employees will have a fully
vested interest in their accrued benefits under all plans maintained by
the Chevron Group that are intended to be qualified under Section
401(a) of the Code and in which Prospective Employees participate.
(b) LABOR MATTERS. There are no agreements existing between
any member of the Chevron Group and any labor union or association
representing any of the employees of the Warren Petroleum Company, the
employees of the NGBU or any other employee of the Chevron Group who
operates, is employed in connection with, or otherwise supports the
Contributed Businesses or the Contributed West Texas LPG Pipeline
Business. There is no material work stoppage against the Chevron Group
with respect to the business or operations of the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business pending
or, to the knowledge of Chevron, threatened. There is no material labor
dispute, arbitration, lawsuit or administrative proceeding threatened
relating to labor matters with respect to the business or operations of
the Contributed Businesses or the Contributed West Texas LPG Pipeline
Business.
8.3 CONDUCT OF NGC PRIOR TO CLOSING RELATING TO EMPLOYEE BENEFIT PLANS.
During the period from the date of this Agreement through the earlier to occur
of the Effective Time or the Termination Date, except in the ordinary course
consistent with prior practices or as disclosed in NGC's proxy statement
relating to its 1996 annual meeting, NGC shall not, and shall not permit any
Subsidiary of NGC to, adopt or amend (other than amendments that reduce the
amounts payable by NGC or its Subsidiaries or amendments required by law to
preserve the qualified status of a plan or a contract) any collective bargaining
agreement or employee benefit plan or enter into any employment or severance
arrangement with any Person (including, without limitation, contracts with
management of NGC or its Subsidiaries that might require that payments be made
upon the consummation of the transactions contemplated hereby) or amend any
existing contracts to increase any amounts payable thereunder or benefits
provided thereunder. Neither NGC nor any of its Subsidiaries nor any plan listed
on SCHEDULE 8.1(A) will (a) engage in any nonexempt "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975(c) of the Code) that would
reasonably be expected to have a Material Adverse Effect on NGC, (b) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, (c) terminate any plan in a manner that could result in the
imposition of a lien on any property of NGC or any of its Subsidiaries pursuant
to Section 4068 of ERISA or (d) take any action that (1) could adversely affect
the qualification under the Code of any plan or its compliance with the
applicable requirements of ERISA or that might result in any "reportable event"
(as defined in Section 4043(b) of ERISA) and (2) would reasonably be expected to
have a Material Adverse Effect on NGC.
54
8.4 OFFERS OF EMPLOYMENT.
(a) The NGC Group and the Chevron Group shall jointly select
the Prospective Employees who shall receive offers of employment with
the Surviving Corporation and its Subsidiaries (the "NEWCO GROUP") and
the employees of the NGC Group who shall remain employed by the Newco
Group. The term "PROSPECTIVE EMPLOYEES" shall mean the employees of the
Chevron Group who operate, are employed in connection with, or
otherwise are associated with the Contributed Businesses.
(b) The NGC Group shall make offers of employment with the
Newco Group contingent and effective upon Closing to those employees of
the Chevron Group that are selected from among the Prospective
Employees. Such employment offers shall be on terms and conditions to
be determined by the NGC Group, but not inconsistent with the
provisions of this ARTICLE 8. The NGC Group's offers of employment to
the selected Prospective Employees shall be made in writing.
Those employees of the Chevron Group who accept the NGC
Group's employment offers and become employees actively at work with
the Newco Group as of Closing (or at any time within 30 days thereafter
or, if later, the day after the last day of a Family and Medical Leave
Act leave that started on or before the Closing) are the "AFFECTED
EMPLOYEES," and the first date an Affected Employee is actively at work
with the Newco Group on or after Closing is that Affected Employee's
"EMPLOYMENT DATE." The employees who operate, are employed in
connection with, or otherwise are associated with the Contributed
Businesses and who do not become Affected Employees are the "REMAINING
EMPLOYEES."
Nothing in this Agreement shall affect the Newco Group's right
to change the terms and conditions of employment or terminate the
employment of any Affected Employee on or after his or her Employment
Date, with or without cause, provided that the Newco Group shall comply
with (i) the terms of SECTION 8.7(A) below and (ii) the service
recognition provisions of this ARTICLE 8.
Any Prospective Employee selected by the NGC Group who was not
actively at work at Closing shall continue to be the responsibility of
the Chevron Group after such date and shall not become an employee of
the Newco Group until such Employee's Employment Date. The Newco Group
shall have no obligation under this Agreement to employ any Prospective
Employee who has accepted its employment offer but is not actively at
work with the Newco Group at Closing or within the later of 30 days
after Closing or the day after the last day of a Family and Medical
Leave Act leave that started on or before the Closing.
(c) Chevron shall pay the relocation costs incurred in
connection with the first relocation by any Affected Employee who is
required to relocate as a condition to his or her employment offer with
the Newco Group made pursuant to paragraph (b) of this SECTION 8.4.
55
8.5 DEFINED BENEFIT PENSION PLANS.
The Chevron Corporation Retirement Plan and related excess
benefit plan (the "CHEVRON PENSION PLAN") shall retain the liability
for the Affected Employees' pension benefits accrued before their
Employment Dates, shall fully vest as of the Closing Date the Affected
Employees who are participants in the Chevron Pension Plan, and shall
permit distributions to any Affected Employee who is eligible to elect
an immediate distribution as of his or her Employment Date based upon
his or her service and accrued benefit as of such Employment Date.
Chevron shall cause the Chevron Pension Plan to recognize the Affected
Employees' service with the Newco Group on and after their Employment
Dates and before a distribution is received from the Chevron Pension
Plan for purposes of determining eligibility to receive a benefit
(including, without limitation, eligibility to receive subsidized early
retirement benefits, Social Security supplements and ancillary
benefits), but not for the purpose of accruing additional benefits.
8.6 QUALIFIED DEFINED CONTRIBUTION PLANS.
(a) The Chevron Corporation Profit Sharing/Savings Plan shall
fully vest as of the Closing Date the account balances of the Affected
Employees who are participants in such plan, and Chevron shall take
such actions, if any, as may be necessary to provide for the
distribution to or on behalf of the Affected Employees of their vested
account balances. To the extent permitted by applicable law, Affected
Employees with loans outstanding under the Profit Sharing/Savings Plan
as of the Closing may directly rollover any such loan to the NGC Profit
Sharing/401(k) Savings Plan provided the loan has not been accelerated
at the time of the rollover. Chevron shall use its best efforts to (i)
permit each prospective Affected Employee to elect prior to the Closing
Date (with such election to be contingent upon the Closing and such
individual actually becoming an Affected Employee) a direct rollover of
his or her rolloverable Chevron Corporation Profit Sharing/Savings Plan
account balance to the NGC Profit Sharing/401(k) Savings Plan and (ii)
cause the Chevron Corporation Profit Sharing/Savings Plan to deliver to
the NGC Profit Sharing/401(k) Savings Plan on the Closing Date (or as
soon thereafter as reasonably practicable) the promissory notes and
other loan documentation, if any, of the Affected Employees who have
elected such a direct rollover in accordance with the procedures
prescribed by Chevron.
(b) The NGC Profit Sharing/401(k) Savings Plan shall accept
the direct rollover as provided in Code section 401(a)(31) of electing
Affected Employees' benefits in cash and, if applicable, promissory
notes that are not accelerated from the Chevron Corporation Profit
Sharing/Savings Plan and the Chevron Corporation Retirement Plan.
8.7 SEVERANCE PLANS.
(a) If, within twelve months after his or her Employment Date,
any of the Affected Employees is terminated by the Newco Group for
reasons other than cause, or is required to transfer to a job location
that is more than fifty (50) miles from his or her current job location
(other than a transfer that was a condition of the original employment
offer with the Newco Group) or to take a reduction in base rate of pay,
but refuses such
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transfer or reduction and terminates his or her employment with the
Newco Group within 10 days of notice of such transfer or reduction,
then the Newco Group shall (i) pay the Affected Employee one-half of a
month of his or her base rate of pay for each completed or partial year
of service with the Chevron Group and the Newco Group, subject to a
minimum of two (2) months and a maximum of 12 months of such pay; and
(ii) provide for the continuation of the Newco Group's active employee
medical coverage for three months after termination of employment with
the same employee contribution amounts that apply to the Newco Group's
similarly situated active employees. Service used for this purpose
shall be the service recognized by the Newco Group pursuant to SECTION
8.12 below.
(b) NGC and the Newco Group shall pay and be responsible for
any and all severance costs and expenses incurred by NGC or the Newco
Group and the Chevron Group shall pay and be responsible for any and
all severance costs and expenses incurred by any member of the Chevron
Group with respect to any of the Prospective Employees (including the
relocation costs described in SECTION 8.4(C)). If the aggregate amount
of severance costs and expenses paid and to be paid by NGC and the
Newco Group as a result of actions taken to give effect to the
transactions contemplated by this Agreement (excluding the amount paid
and to be paid pursuant to SECTION 8.7(A)), with respect to
terminations that occur during the period beginning on January 21,
1996, and ending on the date that is 90 calendar days after the
Effective Time is less than $8,400,000, then, within 30 calendar days
after the end of such period, the Surviving Corporation shall pay an
amount to Chevron equal to the sum of $8,400,000, less such severance
costs and expenses; provided, however, that the amount of such payment
shall not exceed the aggregate amount of severance costs and expenses
paid and to be paid during such period by the Chevron Group with
respect to the Prospective Employees who are terminated by the Chevron
Group during such period.
8.8 VACATION PAY. Due to differences between Newco's vacation policies
relating to salaried employees and hourly employees, Chevron and NGC agree that
the parties shall take the following actions relating to accrued and unused
vacation time of the Affected Employees. As of the Closing, Chevron shall pay
all Affected Employees who are classified as salaried employees under Newco's
system of classification for their unused and accrued vacation. The Newco Group
shall give all such Affected Employees the right to take a vacation before
December 31, 1996, representing a pro rata amount of vacation earned under the
Newco Group vacation policy, and calculated by dividing the number of full
calendar months remaining in 1996 after the Closing by twelve and multiplying
the result by the number of weeks of vacation to which the Affected Employee
normally would be entitled under the Newco Group's vacation policy. With respect
to Affected Employees who are classified as hourly employees under Newco's
system of classification, the Newco Group shall assume responsibility for such
Affected Employees' accrued vacation as of their respective Employment Dates,
and such Affected Employees' vacation entitlements based on their respective
service after such Employment Dates shall be determined with reference to
Newco's vacation policy.
8.9 MEDICAL AND DENTAL PLANS. Each Affected Employee shall be eligible
to enroll in a medical and dental plan of the Newco Group as of his or her
Employment Date. If such Affected Employee was enrolled in the corresponding
plan of the Chevron Group immediately
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before his or her Employment Date, the Surviving Corporation shall cause the
Newco Group's medical and dental plans to waive any preexisting condition
limitations and to recognize each such Affected Employee's expenditures under
the corresponding Chevron medical, mental health, substance abuse and dental
plans (and those of his or her dependents who were covered under such plans) for
the calendar year in which the Employment Date occurs toward any applicable
deductible and annual out-of-pocket limit for such calendar year.
8.10 POST-RETIREMENT WELFARE BENEFITS.
The Chevron Group shall be responsible for all post-retirement
medical, dental, life insurance coverage and all other benefits for the
Remaining Employees. The Chevron Group also shall make available its
post-retirement medical, dental and life insurance benefit coverage to any
Affected Employee who as of his or her Employment Date is eligible to receive
and enroll in such Chevron post-retirement welfare benefit coverage (the
"ELIGIBLE AFFECTED EMPLOYEES"). The Eligible Affected Employees shall be treated
in the same manner as other similarly situated employees of the Chevron Group
who retired as of the applicable Employment Date (and shall be subject to the
rights of the Chevron Group to amend or terminate such coverage with respect to
such employees).
8.11 THE NEWCO GROUP'S LIFE INSURANCE COVERAGE.
NGC agrees that as of an Affected Employee's Employment Date,
the Affected Employee may elect the Newco Group's supplemental life insurance
coverage on his or her life and dependent life insurance coverage without
evidence of insurability; provided, however, that supplemental life insurance
coverage with respect to an Affected Employee's spouse shall be made available
without evidence of insurability up to a maximum amount equal to the greater of
(a) $50,000 or (b) the level of insurance coverage in effect with respect to
such spouse under the corresponding plan of the Chevron Group immediately prior
to such Employment Date.
8.12 THE NEWCO GROUP'S OTHER EMPLOYEE BENEFITS; SERVICE RECOGNITION.
Except as otherwise specifically provided in this ARTICLE 8,
NGC agrees that as of their respective Employment Dates, the Affected Employees
will be eligible to participate in the employee benefit plans and programs of
the Newco Group that are maintained as of the Closing Date and are generally
applicable to employees of the Newco Group, and each Affected Employee's years
of service for eligibility and vesting (but not benefit accrual) purposes
recognized under the benefit plans and programs maintained by the Chevron Group
for the period preceding such Affected Employee's Employment Date shall be
recognized for such purposes under any comparable benefit plan or program
maintained by the Newco Group as of the Closing Date. If any employee benefit
plan or program established by the Newco Group after the Closing Date will
recognize service with the NGC Group for eligibility, vesting, benefit
eligibility or benefit accrual purposes, then such plan or program shall
likewise recognize for such purpose(s) the service with the Chevron Group for
each similarly situated Affected Employee.
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8.13 GENERAL EMPLOYEE PROVISIONS.
(a) The parties shall give any notices required by law and
take whatever other actions with respect to the plans, programs and
policies described in this ARTICLE 8 as may be necessary to carry out
the arrangements described in this ARTICLE 8.
(b) The parties shall provide each other with such plan
documents and descriptions, employee data or other information as may
be reasonably required to carry out the arrangements described in this
ARTICLE 8.
(c) At Closing, Chevron will provide to the Surviving
Corporation a list of all Affected Employees' service in a form that
shall be sufficient to permit the Newco Group to fulfill its
obligations under SECTION 8.12.
(d) If any of the arrangements described in this ARTICLE 8 are
determined by the IRS or other applicable governmental authority, or by
a court of competent jurisdiction, to be prohibited by law, Chevron and
the Surviving Corporation shall modify such arrangements to as closely
as possible retain the intent and economic benefits and burdens of the
parties as reflected herein in a manner which is not prohibited by law.
(e) In the event that the Newco Group knowingly hires any
Remaining Employee within six months after Closing, the Newco Group
will notify Chevron of such event as soon as possible after the hire
date.
8.14 WARN ACT COMPLIANCE. Chevron shall provide to NGC and the
Surviving Corporation such information relating to any terminations by the
Chevron Group of employees made in respect of the Contributed Businesses or the
Contributed West Texas LPG Pipeline Business (other than Affected Employees) as
is necessary for the Surviving Corporation to comply with the provisions of the
WARN Act.
8.15 SURVIVAL. Notwithstanding any other provisions of this Agreement,
all of the warranties and representations set forth in this ARTICLE 8 shall
survive the Closing for a period ending 90 days after the lapse of the
applicable limitations period for bringing a claim or otherwise filing a
complaint under applicable state or federal law, and all covenants and
agreements set forth in this ARTICLE 8 shall survive the Closing indefinitely.
This SECTION 8.15 shall not prejudice the survival of any other warranty,
representation or covenant under this Agreement.
ARTICLE 9
CERTAIN COVENANTS OF NGC, CHEVRON AND NEWCO
9.1 ACCESS TO INFORMATION. From the date of this Agreement through the
earlier of the Effective Time or the Termination Date, Chevron and NGC shall
(and each shall cause each of its Affiliates to) afford their respective
accountants, counsel and other representatives
59
reasonable access to the properties, books, Contracts, commitments, and records
of the other necessary to evaluate the Combination. Chevron will afford the
Surviving Corporation's accountants, counsel and other representatives
reasonable access to the properties, books, Contracts, commitments and records
of Chevron relating to the Contributed Businesses and the Contributed West Texas
LPG Pipeline Business as is reasonable and necessary for the Surviving
Corporation to prepare and file all reports, schedules and other information
required pursuant to the requirements of the NYSE, the federal securities laws,
any applicable state securities laws or any other Governmental Entity. All
information obtained will be subject to the Confidentiality Agreement, except to
the extent that such information is required to be disclosed pursuant to the
immediately preceding sentence.
9.2 PREPARATION OF THE PRELIMINARY PROXY STATEMENT AND THE DEFINITIVE
PROXY STATEMENT/PROSPECTUS. As promptly as practicable after the execution of
this Agreement, NGC shall prepare and file with the SEC the Preliminary Proxy
Statement and such other registration statements as NGC shall deem necessary in
connection with the transactions contemplated by this Agreement. The parties
shall cooperate with each other in providing any information that NGC or Chevron
may reasonably request to aid in the preparation of the Preliminary Proxy
Statement and the Definitive Proxy Statement/Prospectus. The parties will use
all reasonable efforts to respond to the comments of the SEC on the Preliminary
Proxy Statement and will make any further filings (including amendments and
supplements) in connection therewith that may be necessary, proper, or
advisable, and will use all reasonable efforts to cause the registration
statement of which the Definitive Proxy Statement/Prospectus is a part to be
declared effective by the SEC as soon as reasonably practicable. NGC will
provide Chevron, and Chevron will provide NGC, with whatever information and
assistance in connection with the foregoing filings that the other may
reasonably request. The form, substance, timing and necessity of any such
filings shall be as determined by NGC in its reasonable discretion; provided,
however, that NGC will provide Chevron a reasonable opportunity to review and
comment on the form, substance, timing and necessity of the proposed filing
prior to filing or distribution. NGC, Chevron and Newco will take all actions
that may be necessary, proper, or advisable under state securities laws or
regulations in connection with the public offerings for sale and issuance of the
Surviving Corporation Stock and other securities of the Surviving Corporation as
contemplated herein (other than qualifying to do business as a foreign
corporation in any jurisdiction or executing a general consent to service of
process in any jurisdiction). After taking such necessary actions and
immediately after the SEC declares the registration statement of which the
Definitive Proxy Statement/Prospectus is a part effective under the Securities
Act and/or NGC responds to all comments of the SEC on the Preliminary Proxy
Statement, NGC shall promptly distribute the Definitive Proxy
Statement/Prospectus to the NGC stockholders as required by the SEC, NYSE and
the DGCL. NGC shall call a meeting of its stockholders to be held as promptly as
practicable after the date of this Agreement for the purpose of voting on the
transactions contemplated by this Agreement and obtaining the NGC Stockholder
Approval. NGC shall, through its board of directors, recommend to its
stockholders approval of the Agreement and the transactions contemplated hereby.
Newco, NGC and Chevron will take all actions that may be necessary to list on
the NYSE the shares of Surviving Corporation Common Stock.
9.3 TAKING OF NECESSARY ACTION. Subject to the terms and conditions of
this Agreement and to applicable law, each of NGC and the Chevron shall use all
reasonable efforts promptly to take or cause to be taken all action and promptly
to do or cause to be done all things
60
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the foregoing, each of NGC and Chevron shall, and shall cause
each of its Affiliates to, use all reasonable efforts to obtain and make all
consents, approvals, assurances or filings of or with third parties and
Governmental Entities necessary for the consummation of the transactions
contemplated by this Agreement, including, without limitation, providing any and
all information requested by the Federal Trade Commission pursuant to its letter
dated March 8, 1996; provided that neither NGC nor Chevron shall be obligated
hereby to divest itself of any asset, property or operation in order to obtain
any Requisite Regulatory Approval. It is agreed that the listing of specific
consents on SCHEDULE 12.3(E) shall not affect the covenant of the parties
contained herein to take all actions required under this section regarding other
consents. Each party shall cooperate with the other in good faith to help the
other satisfy its obligations in this SECTION 9.3. Each of NGC and Chevron shall
execute and deliver and cause each of their respective Subsidiaries and
Affiliates to execute and deliver all such instruments of conveyance,
assignments, and other documents as may be required or desirable to transfer and
assign the assets and properties comprising the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business to Newco and to effect the
transactions contemplated of this Agreement and the Ancillary Agreements. If at
any time after the Effective Time any further action is necessary or desirable
to vest the Surviving Corporation with the assets and properties that comprise
the Contributed Businesses, the Contributed West Texas LPG Pipeline Business or
the NGC Assets, the proper officers or directors of each party to this Agreement
shall take that necessary action.
9.4 EXPENSES. Whether or not the Combination is consummated, (i) NGC
shall pay all costs and expenses that it incurs in connection with this
Agreement and the transactions contemplated hereby, including without limitation
the fees and expenses of its counsel, accountants, Lehman Brothers and other
advisors (it being understood and agreed that NGC's costs shall include all
costs and expenses for the printing, filing and distribution of the Preliminary
Proxy Statement, and any amendments or supplements thereto, the Definitive Proxy
Statement/Prospectus and related materials) and (ii) Chevron shall pay all costs
and expenses that Chevron incurs in connection with this Agreement and the
transactions contemplated hereby, including without limitation the fees and
expenses of its counsel, accountants, Goldman Sachs & Co. and other advisors.
9.5 NOTICE OF CERTAIN CHANGES. Each party hereto shall give prompt
written notice to the other party hereto of the occurrence, or non-occurrence,
of any event which would be likely to cause any representation or warranty
herein to be untrue or inaccurate, or any covenant, condition or agreement
herein not to be complied with or satisfied and, upon written consent of the
second party, the first party shall be entitled to update, modify, amend or
replace any schedule hereto in order to rectify any such inaccuracy or breach.
9.6 PRESS RELEASES. Attached as EXHIBIT 9.6 is a joint press release
which shall be issued promptly after the execution of this Agreement, without
any material modification. NGC and Chevron shall consult with each other as to
the form and substance of any other press release or other public disclosure of
matters related to this Agreement or any of the transactions contemplated by
this Agreement; provided, however, that nothing in this SECTION 9.6 shall be
deemed to prohibit any party to this Agreement from making any disclosure that
is required to fulfill that party's disclosure obligations imposed by law or
stock exchange requirements.
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9.7 OPERATION OF CHEVRON FACILITIES. Commencing on the date hereof,
Chevron shall use all reasonable efforts promptly to obtain such consents,
amendments or other modifications to (i) joint operating agreements under which
any Contributing Party currently serves as an operator of a Chevron Facility
that are necessary to cause Newco and, upon consummation of the Combination, the
Surviving Corporation, to become the operator of each such Chevron Facility and
(ii) Joint Operating Agreements relating to the Contributed Businesses that are
necessary for Newco and, upon consummation of the Combination, the Surviving
Corporation, to be credited for Chevron's current share of production under such
Joint Operating Agreements for the purposes of profit distribution.
9.8 INFORMATION SUPPLIED BY NGC. The information in the Definitive
Proxy Statement/Prospectus relating to NGC and its Subsidiaries, as of the date
of its distribution to holders of NGC Corporation Stock, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
9.9 INFORMATION SUPPLIED BY CHEVRON. The information in the Definitive
Proxy Statement/Prospectus provided by Chevron on the Contributed Businesses or
Chevron and its Subsidiaries and Affiliates at the date of the distribution of
the Definitive Proxy Statement to holders of NGC Corporation Stock, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 10
CONDUCT OF THE BUSINESS BY CHEVRON
During the period from the date of this Agreement through the earlier
to occur of the Effective Time or the Termination Date, Chevron agrees (except
to the extent NGC shall otherwise consent in writing, which consent shall not be
unreasonably withheld, and except as otherwise contemplated by this Agreement)
that:
10.1 ORDINARY COURSE. Chevron shall, and shall cause each of its
Subsidiaries and Affiliates to, (a) carry on the business relating to the
Contributed Businesses in the usual, regular and ordinary course and consistent
with past practices, (b) use its commercially reasonable best efforts to
preserve its business organization, maintain its rights and franchises, and
preserve its relationships with customers, suppliers and others having business
dealings with the Contributed Businesses and the Contributed West Texas LPG
Pipeline Business and (c) use its commercially reasonable efforts, consistent
with the terms of this Agreement, to keep available the services of sufficient
officers and employees to operate the Contributed Businesses and the Contributed
West Texas LPG Pipeline Business.
10.2 INCONSISTENT AGREEMENTS. Chevron shall not, and shall not permit
any of its Subsidiaries or Affiliates to, enter into any agreement or incur any
obligation, the terms of which would be violated by the consummation of the
transactions contemplated by this Agreement.
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10.3 NO OTHER BIDS. From the date hereof, until the Termination Date,
Chevron shall not, nor shall it authorize or knowingly permit any officer,
director or employee of, or any investment banker, attorney, accountant or other
representative retained by, Chevron or any Subsidiary of Chevron to solicit,
initiate or encourage the submission or communication of any Alternative
Transaction or Significant Disposition, or participate in any negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person with respect
to an Alternative Transaction or Significant Disposition. Chevron shall promptly
notify NGC in writing upon receipt of a proposal for an Alternative Transaction
or Significant Disposition, such notice to include a description of the material
terms and conditions of such Alternative Transaction or Significant Disposition
and the identity of the Person proposing the Alternative Transaction or
Significant Disposition.
10.4 PROHIBITED DISPOSITIONS. Except for sales of inventory in the
ordinary course of business or sales of other assets or properties which Chevron
reasonably determines, after consultation with NGC, are necessary or advisable
to obtain a Requisite Regulatory Approval, Chevron shall not, and shall not
permit any Subsidiary or Affiliate of Chevron to, sell, lease or otherwise
dispose of any of the assets or properties that comprise the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business having a market
value in excess of $1 million in any one transaction or in excess of $5 million
in the aggregate.
10.5 NEWCO. From the date hereof until immediately prior to the
contribution described in SECTION 2.1, Newco shall be and remain a shell
company, with no assets (other than minimal organizational capital),
liabilities, business or operations. Prior to the Effective Time, Chevron shall
not permit Newco to (a) hire or otherwise employ any individual or (b) adopt,
maintain, contribute to, or assume an obligation to adopt, maintain or
contribute to, any employee benefit plan, policy, program, agreement or
arrangement. Newco shall have three individuals, and no more, serving on its
board of directors at the Effective Time.
10.6 ISSUANCE AND SALE OF NEWCO SECURITIES. During the period
commencing on the date hereof and continuing through and including the Effective
Time, Newco shall not issue, deliver, sell or authorize or otherwise agree to
the issuance, delivery or sale of any stock appreciation rights or of any shares
of its capital stock or any class of securities convertible into, or rights,
warrants or options to acquire any shares of its capital stock, except as
contemplated by ARTICLE 2.
10.7 CAPITAL EXPENDITURES. During the Adjustment Period, neither
Chevron nor its Subsidiaries or Affiliates shall make any capital expenditures
in respect of the Contributed Businesses in an amount that exceeds $1 million
for any single transaction or with respect to any single asset or property
comprising a part of the Contributed Businesses or $5 million in the aggregate,
except for capital expenditures for which Newco or Chevron has received the
prior written consent of NGC, or except as set forth in SCHEDULE 10.7.
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ARTICLE 11
CONDUCT OF BUSINESS BY NGC
During the period from the date of this Agreement through the earlier
to occur of the Effective Time or the Termination Date, NGC agrees (except to
the extent Chevron shall otherwise consent in writing, which consent shall not
be unreasonably withheld, and except as otherwise contemplated by this
Agreement) that:
11.1 ORDINARY COURSE. NGC shall, and shall cause each of its
Subsidiaries to, (a) carry on its businesses in the usual, regular and ordinary
course and consistent with past practices, (b) use its commercially reasonable
best efforts to preserve its business organization, maintain its rights and
franchises, and preserve its relationships with customers, suppliers and others
having business dealings with it, except where the failure to so act would not
result in a Material Adverse Effect on NGC, and (c) use its commercially
reasonable efforts to keep available the services of sufficient officers and
employees to carry on the business of NGC.
11.2 DIVIDENDS AND ISSUANCE AND SALE OF SECURITIES. NGC shall not (a)
except for its regularly scheduled quarterly dividends of $0.0125 per share,
declare or pay any dividend on or make any other distribution in respect of any
of its capital stock, (b) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of, its capital stock, (c) repurchase,
redeem or otherwise acquire any shares of its capital stock, except from
employees or their accounts under the Savings Plan upon the termination of their
employment, (d) issue, deliver, sell or authorize the issuance, delivery or sale
of any stock appreciation rights or of any shares of its capital stock of any
class or any securities convertible into, or rights, warrants or options to
acquire, any shares, except for (i) Options granted under the NGC Plans as of
the date hereof or options relating to an aggregate 100,000 shares which may be
granted in the ordinary course of business hereafter and (ii) the issuance,
delivery or sale of shares of NGC Corporation Stock (A) upon the exercise of
Options granted under the NGC Plans as of the date hereof, in accordance with
their terms, or granted subsequently as permitted by clause (i) above) (B)
pursuant to the Savings Plan, (C) pursuant to the Purchase Plans or (D) upon
exercise of the Warrant, or enter into any agreement or understanding with
respect to the matters referred to in this SECTION 11.2. Neither NGC nor any of
its Subsidiaries shall sell or otherwise dispose of any securities of any
Subsidiary, or enter into any agreement or understanding with respect thereto,
except to the extent otherwise permitted hereunder.
11.3 GOVERNING DOCUMENTS; INCONSISTENT AGREEMENTS. NGC shall not (a)
amend its certificate of incorporation or bylaws, or (b) enter into, or permit
any Subsidiary to enter into, any agreement or incur any obligation, the terms
of which would be violated by the consummation of the transactions contemplated
by this Agreement.
11.4 SUBSTANTIVE ACTIONS; CHEVRON DIRECTORS. To the extent that under
the Certificate of Incorporation or Bylaws of NGC as in effect on the date
hereof, the affirmative vote of eight members of Board of Directors of the
Corporation or unanimous approval of the Executive Committee of NGC would be
required in order to take particular actions, enter into agreements or conduct
operations ("SUBSTANTIVE ACTIONS"), from and after the date of this Agreement
NGC
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shall not take any such Substantive Actions without receiving the consent of
Chevron. In making its determination regarding the granting of such consent,
Chevron shall act in the same manner and with the same fiduciary
responsibilities to the stockholders of NGC as if it were a member of the Board
of Directors considering whether to grant approval to such Substantive Actions.
11.5 PROHIBITED DISPOSITIONS. Except for sales of inventory in the
ordinary course of business and except for sales of other assets and properties
which NGC reasonably determines, after consultation with Chevron, are necessary
or advisable to obtain a Requisite Regulatory Approval, NGC shall not, and shall
not permit any Subsidiary of NGC to, sell, lease or otherwise dispose of any of
its assets having a market value in excess of $5 million in any one transaction
or in excess of $10 million in the aggregate.
11.6 LINES OF BUSINESS. NGC will not and will not permit any Subsidiary
of NGC to enter into any new line of business.
11.7 ACCOUNTING METHODS. NGC will not change in any material respect
its methods of accounting (a) in effect at December 31, 1995, except as required
by law, IRS regulation or changes in generally accepted accounting principles
with which Arthur Andersen LLP, its current independent auditor (or any
successor thereto), concurs, or (b) for income and deductions for federal income
tax purposes from those employed in the preparation of the consolidated federal
income tax return of NGC for the taxable year ending December 31, 1995, except
as required by law or IRS regulation. NGC will not change its fiscal year.
11.8 NO OTHER BIDS. From the date hereof, until the Termination Date,
NGC shall not, nor shall it authorize or knowingly permit any officer, director
or employee of, or any investment banker, attorney, accountant or other
representative retained by, NGC or any Subsidiary of NGC to solicit, initiate or
encourage the submission or communication of any Alternative Transaction or
Significant Disposition, or participate in any negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person with respect to an Alternative
Transaction or Significant Disposition. NGC shall promptly notify Chevron in
writing upon receipt of a proposal for an Alternative Transaction or Significant
Disposition, such notice to include a description of the material terms and
conditions of such Alternative Transaction and the identity of the Person
proposing the Alternative Transaction or Significant Disposition.
ARTICLE 12
CONDITIONS
12.1 CONDITIONS TO ALL PARTIES' OBLIGATIONS REGARDING THE MERGER. The
obligations of all the parties to this Agreement to effect the Merger shall be
subject to the fulfillment of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or restraint issued by any court of competent
jurisdiction, no order, decree,
65
restraint or pronouncement by any Governmental Entity, and no other
legal restraint or prohibition that would prevent or have the effect of
preventing the consummation of the Combination shall be in effect;
PROVIDED, HOWEVER, that no party hereto may invoke this condition
unless such party shall have complied fully with its obligations under
SECTION 9.3 hereof and, in addition shall have used all reasonable
efforts to have any such order, injunction, decree or other restraint
vacated.
(b) The Requisite Regulatory Approvals referenced in SECTION
4.4 and SECTION 5.3 shall have been obtained and shall be in full force
and effect, other than any Requisite Regulatory Approvals that, if not
obtained, would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Surviving Corporation. In addition, no notice shall have been issued
under the Exon- Florio Amendment by the President of the United States
or his designee stating an intention to commence an investigation of
any of the transactions contemplated hereby.
(c) The Definitive Proxy Statement/Prospectus shall have
become effective under the Securities Act, and no stop order suspending
its effectiveness shall have been issued.
(d) The NYSE shall have confirmed in writing that the
Surviving Corporation Common Stock has been accepted for listing,
subject to official notice of issuance.
(e) No action, suit, or proceeding by the U.S. Department of
Justice or the Federal Trade Commission shall be pending or threatened
which would materially and adversely affect the right of British Gas,
NOVA and certain other of the Clearinghouse Owners and Chevron,
collectively, following consummation of the Merger, to control the
Surviving Corporation and its Subsidiaries or for the Surviving
Corporation and its Significant Subsidiaries to own their respective
assets and to operate their respective businesses, including, without
limitation, the Contributed Businesses.
(f) The NGC Stockholder Approval shall have been obtained.
12.2 CONDITIONS TO THE OBLIGATIONS OF CHEVRON REGARDING THE
COMBINATION. The obligation of Chevron to effect the Combination shall be
subject to the prior satisfaction of the following conditions (each of which may
be waived by Chevron in its sole discretion):
(a) The representations and warranties of NGC contained in
this Agreement shall have been true and correct on the date of this
Agreement and at and on the Closing Date as though such representations
and warranties were made at and on such date, other than such breaches
of such representations and warranties which in the aggregate would not
reasonably be expected to have a Material Adverse Effect on NGC in an
aggregate amount exceeding $25 million (including, without duplication,
the effect of any Casualty Loss suffered by NGC); provided, however,
that in evaluating whether there has been a breach of any
representation or warranty for the purposes of this SECTION 12.2(A),
any provision of the applicable representation or warranty limiting it
to matters within the "knowledge" or "best knowledge" of a party or
having a Material Adverse Effect or otherwise containing a limitation
or exception relating to materiality shall be disregarded
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and shall not be taken into account in determining the existence or
magnitude of such a breach.
(b) NGC shall have performed and complied in all material
respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to
the Closing Date.
(c) Chevron shall have received an opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., counsel for NGC, in substantially the
form of EXHIBIT 12.2(C).
(d) Chevron shall have received tax representations in
substantially the form attached hereto as EXHIBIT 12.2(D) from British
Gas, NOVA and C. L. Watson and Steve Bergstrom so that, upon
consummation of the Combination, not less than 80% of the aggregate
issued and outstanding shares of Surviving Corporation Common Stock are
covered by such tax representations (assuming that all of Chevron's
shares of Surviving Corporation Common Stock are covered by such tax
representation).
(e) Each Ancillary Agreement to which NGC or any of its
Subsidiaries or Affiliates is a party shall have been executed and
delivered by NGC and such Subsidiaries and Affiliates (as applicable).
12.3 CONDITIONS TO THE OBLIGATIONS OF NGC REGARDING THE COMBINATION.
The obligations of NGC to effect the Combination shall be subject to the prior
satisfaction of the following conditions (each of which may be waived by NGC in
its sole discretion):
(a) The representations and warranties of Chevron contained in
this Agreement shall have been true and correct on the date of this
Agreement and at and on the Closing Date as though such representations
and warranties were made at and on such date, other than such breaches
of such representations and warranties which in the aggregate would not
reasonably be expected to have a Material Adverse Effect on or with
respect to the Contributed Businesses and the Contributed West Texas
LPG Pipeline Business, taken as a whole, in an aggregate amount
exceeding $25 million (including, without duplication, the effect of
any Casualty Loss suffered by Chevron and the fair value of any
Retained Assets, as described in SECTION 2.4); provided, however, that
in evaluating whether there has been a breach of any representation or
warranty for the purposes of this SECTION 12.3(A), any provision of the
applicable representation or warranty limiting it to matters within the
"knowledge" or "best knowledge" of a party having a Material Adverse
Effect or otherwise containing a limitation or exception relating to
materiality shall be disregarded and shall not be taken into account in
determining the existence or magnitude of such a breach.
(b) Chevron shall have performed and complied in all material
respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to
the Closing Date.
(c) NGC shall have received an opinion of Pillsbury Madison &
Sutro LLP, counsel for Chevron, in substantially the form of EXHIBIT
12.3(C).
67
(d) Chevron and Newco shall have each executed and delivered
the Contribution and Assumption Agreement.
(e) Chevron shall have received all of the material consents
from third parties listed on SCHEDULE 12.3(E) hereto, in form and
substance reasonably satisfactory to NGC, prior to or on the Closing
Date.
(f) Chevron shall have caused each officer of Newco to resign
effective as of the Effective Time, unless any such officer is named in
SCHEDULE 2.2(E), in which case such officer shall remain as an officer
of the Surviving Corporation and shall serve until his successor is
duly elected and qualified.
(g) NGC shall have received tax representations in
substantially the form attached hereto as EXHIBIT 12.3(G)(I) from
Chevron, and shall have received the Code Section 1445 Affidavit
attached hereto as EXHIBIT 12.3(G)(II) from Chevron.
(h) Each Ancillary Agreement to which Chevron or any of its
Subsidiaries or Affiliates is a party shall have been executed and
delivered by Chevron and such Subsidiaries and Affiliates (as
applicable).
ARTICLE 13
TERMINATION
13.1 TERMINATION. This Agreement may be terminated, with the effect set
forth in SECTION 13.3, at any time before the Effective Time:
(a) by written consent of Chevron and NGC, which termination
shall be approved by the board of directors of NGC and Chevron,
respectively;
(b) by either NGC or Chevron, if the Effective Time shall not
have occurred by 5:00 P.M., Houston, Texas time, on September 30, 1996,
PROVIDED, HOWEVER, that the right to terminate this Agreement under
this SECTION 13.1(B) shall not be available to any party whose failure
to fulfill any covenant under SECTION 9.3 under this Agreement has been
the cause of or resulted in the failure of the Combination to occur on
or before such date;
(c) by either NGC or Chevron, if a Governmental Entity shall
have issued an order, decree, or ruling or taken any other action, in
each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Combination;
(d) by NGC, upon a breach of any representation, warranty or
covenant (other than SECTION 10.3) on the part of Chevron set forth in
this Agreement, or if any representation or warranty of Chevron shall
have become untrue, in either case, such that the conditions set forth
in SECTIONS 12.1 OR 12.3 would not be satisfied (a "TERMINATING CHEVRON
BREACH"), provided, that if such Terminating Chevron Breach is cured by
68
Chevron within 30 calendar days after notice thereof through the
continuous exercise of its reasonable best efforts, then NGC may not
terminate this Agreement under this SECTION 13.1(D);
(e) by Chevron, upon a breach of any representation, warranty
or covenant (other than SECTION 11.8) on the part of NGC set forth in
this Agreement, or if any representation or warranty of NGC shall have
become untrue, in either case, such that the conditions set forth in
SECTIONS 12.1 OR 12.2 would not be satisfied (a "TERMINATING NGC
BREACH"), provided, that if such Terminating NGC Breach is cured by NGC
within 30 calendar days after notice thereof through the continuous
exercise of its reasonable best efforts, then Chevron may not terminate
this Agreement under this SECTION 13.1(E);
(f) by NGC, if Chevron is in breach of SECTION 10.3; or
(g) by Chevron, if NGC is in breach of SECTION 11.8.
Termination of this Agreement pursuant to this SECTION 13.1 shall be effected by
written notice by the party terminating the Agreement to the other party setting
forth the basis for such termination. The date such notice is received shall be
deemed the "TERMINATION DATE."
13.2 TERMINATION DUE TO TITLE MATTERS.
(a) During the period prior to and including June 15, 1996,
each party may, to the extent it deems appropriate, conduct, at its
sole cost, such additional title examination or investigation as it may
choose to conduct with respect to the Facilities of the other party to
determine if the representations set forth in SECTIONS 4.16 and 5.18
(as applicable) are true and correct. Each party shall confine its
title examination and investigation of the other party's Facilities to
public records, the files and records of the other party and abstracts
and other title information in the possession of or prepared by third
parties in the business of investigating or examining title. In
connection with such examination and investigation, each of NGC and
Chevron shall make available to the other party all title opinions,
supplemental title opinions and other title information in their
possession relating to the NGC Facilities and the Chevron Facilities
(the "FACILITIES"), as applicable. During the course of each party's
investigation, each party shall confer with the other party concerning
any Defects or potential Defects identified during such investigation.
At the close of business on June 15, 1996, each party shall cease its
title investigation and examination and shall prepare a schedule (a
"DEFECT SCHEDULE") setting forth in reasonable detail each Defect in
title to the other party's Facilities that were identified as a result
of the first party's examination or otherwise. A party's Defect
Schedule shall be delivered to the other party by no later than the
close of business on June 21, 1996. In the event that a party does not
provide a Defect Schedule to the other party on or before June 21,
1996, then such party has no right to terminate this Agreement pursuant
to paragraph (b) below and such party shall be precluded from counting
any Defect detected, discovered or otherwise brought to such party's
attention towards the $25 million Material Adverse Effect threshold set
forth in SECTION 12.2(A) and SECTION 12.3(A), as applicable; provided,
however, that the failure
69
to so provide a Defect Schedule shall in no way prejudice any rights
that either party might have under ARTICLE 14 after the Closing Date.
(b) If either party reasonably believes that the defects
identified in its Defect Schedule would cause a diminution in the value
of the other party's Facilities of $10 million or more (in the
aggregate), then the first party shall set forth in its Defect Schedule
such party's best estimate of the diminution in value in the applicable
Facility caused by each Defect and the aggregate diminution in value of
the applicable Facilities caused by all of the Defects listed in the
schedule. After receipt of the Defect Schedule, the parties shall
confer and may mutually agree for the second party to take such actions
as the first party deems reasonably necessary to cure any such Defects,
including, in the case of Chevron, retaining such asset and its value
as a Retained Asset pursuant to SECTION 2.4 hereof. In the event the
parties are unable to so agree, then the first party may terminate this
Agreement without liability to either party.
(c) If a party provides the other party with a Defect Schedule
but does not believe that the Defects listed thereon would cause a
diminution in the value of the other party's Facilities of $10 million
or more (in the aggregate), then the first party shall not be entitled
to terminate this Agreement as a result of such Defects but shall be
entitled to (i) count any Defect listed on such schedule, along with
other losses for breaches of representations, warranties, covenants and
agreements, towards the $25 million Material Adverse Effect threshold
set forth in SECTION 12.2(A) and SECTION 12.3(A) and (ii) assert a
claim for indemnification relating to each such Defect pursuant to
ARTICLE 14, but only to the extent that such Defect results in a Loss
pursuant to SECTION 14.1(C).
(d) Each party's rights under this Section shall be in
addition to, and not in limitation of, any rights of access or
inspection which such party may otherwise have under this Agreement.
13.3 EFFECT OF TERMINATION.
(a) If this Agreement is terminated by either Chevron or NGC
as provided in SECTION 13.1(A), 13.1(B), 13.1(C), or 13.2 of this
Agreement, then this Agreement shall become void and there shall be no
liability or obligation with respect to the terminated provisions of
this Agreement on the part of Chevron or NGC, or their respective
officers or directors; provided, however, that in the event that this
Agreement is terminated pursuant to SECTION 13.1(B), then the terms of
SECTION 13.3(D) shall survive the termination of this Agreement in
accordance with its terms.
(b) If this Agreement is terminated by NGC pursuant to SECTION
13.1(F), then Chevron shall pay to NGC, on the first Business Day
following such termination, the amount of $30 million by wire transfer
of immediately available funds to an account designated by NGC, as
liquidated damages, but not as a penalty. NGC agrees that said cash
payment shall be its sole and total damages and relief hereunder in the
event of such a breach. The parties to this Agreement acknowledge and
agree that NGC's actual damages, in the event of a termination pursuant
to SECTION 13.1(F), would be difficult to ascertain because of the
uncertainties of estimating the value of NGC's expenses and
70
management time in pursuing the Combination and its lost opportunity
costs. Because of this uncertainty and the differences of opinion with
relating thereto, NGC agrees that such amount is reasonable as
liquidated damages; provided, however, that in no event shall Chevron
be obligated to pay NGC $30 million in liquidated damages under this
SECTION 13.3(B) if NGC, at the time it terminated this Agreement, could
not satisfy the conditions set forth in SECTIONS 12.2(A) and 12.2(B).
(c) If this Agreement is terminated by Chevron pursuant to
SECTION 13.1(G), then NGC shall pay to Chevron, on the first Business
Day following such termination, the amount of $30 million by wire
transfer of immediately available funds to an account designated by
Chevron, as liquidated damages, but not as a penalty. Chevron agrees
that said cash payment shall be its sole and total damages and relief
hereunder in the event of such a breach. The parties to this Agreement
acknowledge and agree that Chevron's actual damages, in the event of a
termination pursuant to SECTION 13.1(G), would be difficult to
ascertain because of the uncertainties of estimating the value of
Chevron's expenses and management time in pursuing the Combination and
its lost opportunity costs. Because of this uncertainty and the
differences of opinion with relating thereto, Chevron agrees that such
amount is reasonable as liquidated damages; provided, however, that in
no event shall NGC be obligated to pay Chevron $30 million in
liquidated damages under this SECTION 13.3(C) if Chevron, at the time
it terminated this Agreement, could not satisfy the conditions set
forth in SECTIONS 12.3(A) and 12.3(B).
(d) If within six (6) months following the Termination Date,
either Chevron or NGC (an "ACTING PARTY") signs a definitive agreement
concerning, or issues a public announcement contemplating consummation
of, an Alternative Transaction or a Significant Disposition with any
Person or Affiliate of such Person who, prior to the Termination Date,
has made or caused to be made a proposal to such Acting Party
communicating price terms for an Alternative Transaction or a
Significant Disposition, then the Acting Party shall pay to the other
party, on the first Business Day following such action, the amount of
$30 million in liquidated damages by wire transfer of immediately
available funds to an account designated by the other party; provided,
however, that in no event shall the Acting Party be obligated to pay
$30 million in liquidated damages under this SECTION 13.3(D) if this
Agreement was terminated by the Acting Party as a result of a failure
by the other party to satisfy any of the conditions set forth in
SECTION 12.2 and 12.3, as applicable.
(e) The parties hereto acknowledge and agree that (i) in no
event shall more than $30 million in liquidated damages be paid under
the provisions of paragraphs (b), (c) or (d) above and (ii) in the
event that either party pays or is obligated to pay $30 million in
liquidated damages under such sections, each party hereto shall
thereafter be free to effect an Alternative Transaction or Significant
Disposition at any time without recourse by any other party.
(f) No termination of this Agreement pursuant to SECTIONS
13.1(D) OR 13.1(E) shall relieve any party hereto of any liability for
any breach or default by such party hereunder and the parties shall
have such rights, if any, against each other in respect of any breach
or default as may exist at law or in equity.
71
(g) The termination of this Agreement shall not relieve any
party of its obligation to pay costs and expenses as provided under
SECTION 9.4 or its obligations under this SECTION 13.3 of this
Agreement.
ARTICLE 14
INDEMNIFICATION
14.1 GENERAL PROVISIONS.
(a) This ARTICLE 14 reflects the parties' agreement to limit
potential recoveries from and after the Closing for breaches of
representations or warranties, or express indemnities made in this
Agreement. Nothing in this Article restricts any party from enforcing
other covenants or other agreements made in this Agreement.
(b) The parties hereto agree that the sole recourse, from and
after the Closing for breach of a representation or warranty made in
this Agreement shall be indemnities for Loss or Losses, or Net Loss or
Losses, as provided for in this ARTICLE 14, except as otherwise
provided in ARTICLE 7 hereof.
(c) As used in this Agreement, "LOSS" or "LOSSES" shall mean
with respect to a specific Discrete Claim (and regardless of whether
one or more of the following pertain to a particular matter), (A) in
the case of a Third-Party Claim (hereinafter defined), the sum of all
actual and reasonable out-of-pocket costs and expenses incurred in
connection with the investigation and defense thereof, any judgments,
fines or amounts paid in settlement thereof, and additional losses,
costs or expenses reasonably incurred to comply with any settlement,
judgment or order imposed thereby, or otherwise resulting from such
Third Party Claim which has been finally adjudicated or settled, (B) in
the case of an Environmental Remediation Claim (hereinafter defined),
all actual out-of-pocket expenses incurred in connection with the
clean-up or remediation of the affected property in accordance with the
terms of the Clean-up Plan but, in all cases, subject to the
limitations set forth in SECTION 14.6(G), and (C) in the case of any
complete or partial absence or loss (or impairment) of use of any
property or asset which is the subject of a representation or warranty
in this Agreement and which absence or loss (or impairment) of use
results from or relates to a breach of such representation or warranty,
an amount equal to the lesser of the damages proximately caused by such
partial or complete absence or loss (or impairment) of use or the
necessary replacement cost of such asset. A Loss suffered by an Equity
Affiliate of a Person shall be deemed suffered by that Person to the
extent of that Person's equity ownership of the Equity Affiliate.
(d) As used in this Agreement, the term "NET LOSSES" shall be
equal to the product of (i) the cumulative amount of all Losses
incurred, suffered or paid by the Surviving Corporation under SECTIONS
6.2 AND 14.3 as of a particular date, MULTIPLIED by (ii) the Chevron
Casualty Loss Ratio; provided, however, that at such time as the
aggregate number of shares of Surviving Corporation Common Stock and
Series A Participating Preferred Stock beneficially owned by the
Contributing Parties represents
72
less than 25% of the aggregate number of shares of Surviving
Corporation Common Stock and Series A Participating Preferred Stock (on
a fully diluted basis), thereafter the ratio used to calculate Net
Losses shall be equal to a fraction, (A) the numerator of which is the
aggregate number of shares of Surviving Corporation Common Stock and
Series A Participating Preferred Stock beneficially owned by the
Contributing Parties on the Closing Date or as of the date on which the
notice covering such claim is provided to the Surviving Corporation,
whichever is less, and (B) the denominator of which is the aggregate
number of shares of Surviving Corporation Common Stock and Series A
Participating Preferred Stock, on a fully diluted basis, on such date,
LESS the number of shares included in the numerator.
(e) For the purposes of this Agreement, the term "DISCRETE
CLAIM" shall mean any (i) (x) discrete or single occurrence, site
specific condition, act or other event, whether a breach of a Contract,
a Release of Hazardous Materials, a violation of an Environmental and
Safety Law or otherwise, that causes a Loss specified in SECTION
14.1(C)(A)-(C) and (y) without limiting the scope of clause (x) above,
in the case of an Environmental Remediation Claim, one or more Releases
of the same or substantially the same Hazardous Material, from or at
the same location regardless of whether such Releases resulted from the
same event or from multiple events over time.
(f) Except as provided in ARTICLES 7 and 8, all
representations and warranties shall survive for a two year period
following the Closing Date and shall terminate at the expiration of
such period except with respect to Discrete Claims for which a valid
notice has been given prior to the expiration of such two year period.
In order for a notice to be considered "valid" for the purposes of the
preceding sentence, such notice shall conform in all material respects
with the applicable requirements set forth in this Agreement,
including, without limitation, SECTION 14.5(A) (in the case of a notice
covering a Third-Party Claim), SECTION 14.6(A) (in the case of a notice
covering an Environmental Remediation Claim) and SECTION 14.7 (in the
case of a notice covering a Use Claim).
(g) Except with respect to matters which are assumed by an
Indemnifying Party pursuant to the provisions of SECTIONS 14.5 or 14.6
(and with respect to a matter to which ARTICLE 7 applies), the
Indemnifying Party shall in no event be obligated to make any payments
to the Indemnified Party with respect to a Loss or Net Loss (as the
case may be) resulting from a Discrete Claim covered by a notice
provided within the survival period of the applicable representation,
warranty, covenant or agreement unless and until an invoice or
statement describing in reasonable detail the costs incurred in respect
of such Loss or Net Loss has been provided by the Indemnified Party to
the Indemnifying Party. The contents of, and time frames prescribed
for, the payment of such statements or invoices are governed by
SECTIONS 14.5(A), 14.6(A) and 14.7 hereof; provided, however, that the
date on which the Indemnifying Party provides the Indemnified Party
with such invoice or statement shall not have any effect on the
survival of the indemnities set forth herein but shall only govern the
date on which the Indemnified Party is entitled to payment for any Net
Loss or Losses covered by such indemnities.
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14.2 INDEMNIFICATION BY CHEVRON. Subject to the limitations in SECTION
16.1 and SECTION 14.4 and the other provisions of this ARTICLE 14, Chevron
agrees to defend, indemnify and hold harmless the Surviving Corporation and its
Subsidiaries and Affiliates and their respective officers, directors, employees,
agents and Affiliates (the "NGC INDEMNITEES") against any and all Losses
suffered, incurred or paid by any of them caused by or arising from a breach of
any representation, warranty, covenant or agreement made by Chevron and
contained in this Agreement; provided, however, that in evaluating whether there
has been a breach of a representation, warranty, covenant or agreement (each, a
"REPRESENTATION") to which the indemnification obligations contained in this
section are applicable, any provision of the applicable Representation limiting
it to matters within the "knowledge" or "best knowledge" of a party or matters
having a Material Adverse Effect shall be disregarded, it being intended that
the limitations on the rights of the parties contained in SECTION 14.4 below
shall determine whether a matter constitutes a breach of the applicable
Representation which is properly a subject of indemnification under this ARTICLE
14. This SECTION 14.2 shall not apply to a breach by Chevron of any
representations and warranties regarding matters specifically covered by ARTICLE
7.
14.3 INDEMNIFICATION BY NGC. Subject to the limitations in SECTION 16.1
and SECTION 14.4 and the other provisions of this ARTICLE 14, NGC agrees to
defend, indemnify and hold harmless Chevron and its Subsidiaries and Affiliates
(other than Newco or, upon consummation of the Merger, the Surviving
Corporation, and their respective officers, directors, employees, agents and
Affiliates (the "CHEVRON INDEMNITEES") against any and all Losses suffered,
incurred or paid by any of them or the Surviving Corporation caused by or
arising from a breach of any representation, warranty, covenant or agreement
contained in this Agreement; provided, however, that in evaluating whether there
has been a breach of a Representation to which the indemnification obligations
contained in this section are applicable, any provision of the applicable
Representation limiting it to within the "knowledge" or "best knowledge" of a
party or matters having a Material Adverse Effect shall be disregarded, it being
intended that the limitations on the rights of the parties contained in SECTION
14.4 below shall determine whether a matter constitutes a breach of the
applicable Representation which is properly a subject of indemnification under
this ARTICLE 14. This SECTION 14.3 shall not apply to a breach by NGC of any
representations and warranties regarding matters specifically covered by ARTICLE
7.
14.4 LIMITATION OF LIABILITY. Except for the indemnities provided in
ARTICLE 7 of this Agreement:
(a) Chevron shall not be obligated to indemnify the NGC
Indemnitees unless and until the cumulative amount of all Losses
incurred, suffered or paid by all of the NGC Indemnitees under SECTION
6.1 AND 14.2 exceeds $10 million in the aggregate or unless the
cumulative amount of (i) all Losses actually incurred, suffered or paid
by all of the Chevron Indemnities hereunder and (ii) all Net Losses
indirectly suffered by the Chevron Indemnities resulting from Losses
suffered by the Surviving Corporation under SECTIONS 6.2, AND 14.3
exceeds $10 million in the aggregate, whereupon the NGC Indemnitees
shall be entitled to indemnification hereunder for the full amount of
all such Losses and shall thereafter be entitled to indemnification of
Losses as such Losses are incurred (subject to paragraph (c) below).
74
(b) The Surviving Corporation shall not be obligated to
indemnify the Chevron Indemnitees under SECTIONS 6.2, AND 14.3 and
unless and until the cumulative amount of (i) all Losses actually
incurred, suffered or paid by all of the Chevron Indemnitees hereunder
and (ii) all Net Losses indirectly suffered by the Chevron Indemnitees
resulting from Losses suffered by the Surviving Corporation under
SECTIONS 6.2 AND 14.3 exceeds $10 million in the aggregate, or unless
the cumulative amount of all Losses actually incurred, suffered or paid
by the NGC Indemnities under SECTIONS 6.1 AND 14.2 exceeds $10 million,
whereupon the Chevron Indemnitees shall be entitled to indemnification
hereunder for the full amount of all such Losses and Net Losses and
shall thereafter be entitled to indemnification of Losses and Net
Losses thereafter as such Losses and Net Losses are incurred (subject
to paragraph (c) below). In computing the amount of any Net Loss
arising from any Environmental Remediation Claim, there shall be
deducted from the amount of the applicable Loss relating to the assets
described in SCHEDULE 14.4 hereto, an amount up to the amount set forth
in such Schedule relating to such asset to take into account the
accruals for environmental purposes previously taken by NGC with
respect to such assets.
(c) Neither Chevron nor the Surviving Corporation shall be
obligated to indemnify the NGC Indemnitees or the Chevron Indemnitees,
respectively, under SECTIONS 6.1, 6.2, 14.2 AND 14.3, as applicable,
for a particular Discrete Claim unless the collective Losses incurred,
suffered or paid by the NGC Indemnitees or the Chevron Indemnitees, as
applicable, with respect to such claim exceeds $200,000. If the amount
of collective Losses incurred, suffered or paid in connection with such
Discrete Claim is less than $200,000, such Losses shall not be counted
in calculating the aggregate amount of all Losses for purposes of
sub-paragraphs (a) and (b) above.
14.5 INDEMNIFICATION PROCEDURES: THIRD PARTY CLAIMS. A party claiming
indemnification under this Agreement (the "INDEMNIFIED PARTY") as a result of a
liability owed by a party hereto to a third party or a claim otherwise advanced
by a third party against a party hereto, either actual or asserted by the third
party, including any claims brought under ARTICLES 6, 8 AND 14 (but specifically
excepting any claim brought under ARTICLE 7) (each, a "THIRD-PARTY CLAIM")
against the Indemnified Party shall follow the following procedures to assert
and resolve such claims for indemnification:
(a) An Indemnified Party claiming indemnification under this
Agreement as a result of a Third-Party Claim shall (i) notify the Party
from whom indemnification is sought (the "INDEMNIFYING PARTY") of any
Third-Party Claim or Claims asserted against the Indemnified Party
which could give rise to a right of indemnification under this
Agreement and (ii) transmit to the Indemnifying Party a written notice
("CLAIM NOTICE") describing in reasonable detail the nature of the
Third Party Claim, a copy of all papers served with respect to such
Third-Party Claim (if any), an estimate of the amount of damages
attributable to the Third-Party Claim and the basis of the Indemnified
Party's request for indemnification under this Agreement.
Within sixty (60) days after receipt of any Claim Notice (the "ELECTION
PERIOD"), the Indemnifying Party shall notify the Indemnified Party (i) whether
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this ARTICLE 14 with respect to such
75
Third-Party Claim and (ii) whether the Indemnifying Party desires to defend the
Indemnified Party against such Third-Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party does not dispute
its potential liability to the Indemnified Party under this SECTION
14.5(B) and that the Indemnifying Party elects to assume the defense of
the Third-Party Claim, then the Indemnifying Party shall have the right
to defend, at its sole cost and expense, such Third-Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled
at the discretion of the Indemnifying Party in accordance with this
SECTION 14.5(B). The Indemnifying Party shall have full control of such
defense and proceedings; provided, however, that the Indemnifying Party
may not settle a Third- Party Claim (unless the settlement contains a
full and complete release of the Indemnified Party) without the written
consent of the Indemnified Party, which consent shall not be
unreasonably withheld. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the
Indemnified Party is actually entitled to indemnification hereunder or
if the Indemnifying Party assumes the defense with respect to the
Third-Party Claim), to file, during the Election Period, any motion,
answer or other pleadings which the Indemnified Party shall deem
necessary or appropriate to protect its interests or those of the
Indemnifying Party and which are not prejudicial to the Indemnifying
Party (it being understood and agreed that if an Indemnified Party
takes any such action which is prejudicial and conclusively causes a
final adjudication which is adverse to the Indemnifying Party, the
Indemnifying Party shall be relieved of its obligations hereunder with
respect to such Third-Party Claim). If requested by the Indemnifying
Party, the Indemnified Party agrees, at the sole cost and expense of
the Indemnifying Party, to cooperate with the Indemnifying Party and
its counsel in contesting any Third-Party Claim which the Indemnifying
Party elects to contest, including, without limitation, the making of
any related counterclaim against the Person asserting the Third-Party
Claim or any cross-complaint against any Person. The Indemnified Party
may participate in, but not control, any defense or settlement of any
Third-Party Claim controlled by the Indemnifying Party pursuant to this
SECTION 14.5(B) and shall bear its own costs and expenses with respect
to such participation.
(c) (i) If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that the Indemnifying
Party elects to defend the Indemnified Party pursuant to SECTION
14.5(B), (ii) if the Indemnifying Party elects to defend the
Indemnified Party pursuant to SECTION 14.5(B) but fails to diligently
and promptly prosecute or settle the Third-Party Claim, or (iii) if the
Indemnified Party shall have reasonably concluded that there is a
conflict of interest between the Indemnifying Party and Indemnified
Party such that joint representation in the conduct of the defense or
settlement of such Third-Party Claim is inappropriate, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third-Party Claim by all
appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Party to a final conclusion or
settled. The Indemnified Party shall have full control of such defense
and proceedings; provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not
be unreasonably withheld, any compromise or settlement of such
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Third-Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the
effect that the Indemnifying Party disputes its potential liability to
the Indemnified Party under this ARTICLE 14 and if such dispute is
resolved in favor of the Indemnifying Party by final, nonappealable
order of a court of competent jurisdiction, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this SECTION 14.5 or of the Indemnifying
Party's participation therein at the Indemnified Party's request and
the Indemnified Party shall reimburse the Indemnifying Party in full
for all costs and expenses of such litigation. The Indemnifying Party
may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this SECTION 14.5, and
the Indemnifying Party shall bear its own costs and expenses with
respect to such participation.
(d) Payments of all amounts owing by the Indemnifying Party
with respect to a Third-Party Claim shall be made within thirty (30)
days after the latest of (i) the settlement of the Third-Party Claim,
(ii) the expiration of the period for appeal of a final adjudication of
such Third-Party Claim or (iii) the expiration of the period for appeal
of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
14.6 INDEMNIFICATION PROCEDURES: ENVIRONMENTAL REMEDIATION CLAIMS. An
Indemnified Party claiming indemnification under this Agreement for costs and
expenses necessary to take corrective action to remediate the assets comprising
the Chevron Facilities or the NGC Facilities or Former NGC Facilities, as
applicable, resulting from the indemnities provided in ARTICLE 6 (an
"ENVIRONMENTAL REMEDIATION CLAIM") shall follow the following procedures to
assert and resolve such claims for indemnification:
(a) An Indemnified Party claiming indemnification under this
Agreement as a result of a Environmental Remediation Claim shall (i)
notify the Indemnifying Party of such Environmental Remediation Claim
or Claims which could give rise to a right of indemnification under
this Agreement and (ii) transmit to the Indemnifying Party a written
plan ("CLEAN-UP PLAN") describing in reasonable detail (i) the nature
of the Environmental Remediation Claim, (ii) the scope and nature of
remedial and clean-up operations proposed to be undertaken by the
Indemnified Party to correct the Environmental Remediation Claim and
(iii) an estimate of the amount of damages attributable to the
Environmental Remediation Claim that are covered by ARTICLE 6 and the
basis of the Indemnified Party's request for indemnification under this
Agreement.
Within sixty (60) days after receipt of any Clean-up
Plan (the "ENVIRONMENTAL ELECTION PERIOD"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party
disputes its potential liability to the Indemnified Party under this
SECTION 14.6 with respect to such Environmental Remediation Claim and
(ii) whether the Indemnifying Party (A) accepts the Clean-up Plan or
(B) desires to take corrective measures, at its sole cost and expense,
to remediate the property associated with the Environmental Remediation
Claim.
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(b) In the event that the Indemnifying Party notifies the
Indemnified Party within the Environmental Election Period that the
Indemnifying Party does not dispute its potential liability to the
Indemnified Party under this ARTICLE 14 and that the Indemnifying Party
accepts the Indemnified Party's Clean-up Plan, then the Indemnified
Party shall have the right to proceed in remediating the property or
properties subject to the Environmental Remediation Claims in
accordance with the Clean-up Plan; provided, however, that the
Indemnified Party shall use its best efforts to conduct such remedial
and clean-up operations in conformity with the Clean-up Plan.
(c) In the event that the Indemnifying Party fails to notify
the Indemnified Party within the Environmental Election Period
regarding the Clean-up Plan, then the Indemnifying Party shall be
deemed to have conclusively approved the Clean-up Plan and the costs
associated with implementing such plan and the Indemnified Party shall
have the right to proceed in remediating the property or properties
subject to the Environmental Remediation Claims in accordance with the
Clean-up Plan; provided, however, that the Indemnified Party shall use
its best efforts to conduct such remedial and clean-up operations in
conformity with the Clean-up Plan.
(d) Subject to the limitations set forth in SECTION 14.4, the
Indemnified Party shall invoice the Indemnifying Party as soon as
practicable following the end of a calendar month for any and all
out-of-pocket costs and expenses incurred by the Indemnified Party in
implementing its Clean-up Plan during such month and the Indemnifying
Party shall promptly reimburse the Indemnified Party for any and all
such costs and expenses immediately after receipt of such invoice.
(e) In the event that the Indemnifying Party notifies the
Indemnified Party within the Environmental Election Period that the
Indemnifying Party does not dispute its potential liability to the
Indemnified Party under this ARTICLE 14 but desires to take corrective
action itself to remediate the property subject to the Environmental
Remediation Claim, then the Indemnifying Party shall have the right to
assume operations for the remediation of the property and shall take
any and all corrective measures, at its sole cost and expense, to
remediate such property and the Indemnified Party shall provide the
Indemnifying Party at the sole cost, risk and expense of the
Indemnifying Party (to the extent necessary) with reasonable access to
such property necessary to take any and all appropriate actions and
measures to remediate such property in accordance with this SECTION
14.6; provided, however, that in the event that the Indemnifying Party
rejects the Clean-up Plan and undertakes to remediate such property,
then the Indemnifying Party shall indemnify and hold harmless the
Indemnified Party for any and all Losses suffered, incurred or paid by
the Indemnified Party arising out of any acts or omissions by the
Indemnifying Party in remediating such property pursuant to this
SECTION 14.6(E), including, without limitation, any failure to fully
remediate the condition that was the subject of the Clean-up Plan; and
provided further, that the Indemnified Party shall have the right to
monitor the progress of the clean-up of the affected property by the
Indemnifying Party and shall have access to all personnel of the
Indemnifying Party (whether employees, agents or otherwise), records,
plans and other information concerning the clean-up of the affected
property that the Indemnified Party deems necessary and advisable under
the circumstances. If requested by the Indemnifying
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Party, the Indemnified Party agrees, at the sole cost and expense of
the Indemnifying Party, to cooperate with the Indemnifying Party and
its experts and agents in conducting any remedial operations on the
property subject to the Environmental Remediation Claim.
(f) Regardless of whether the Indemnified Party or the
Indemnifying Party cleans-up the property that is subject to an
Environmental Remediation Claim, each party recognizes and acknowledges
that it should use its reasonable best efforts to cooperate with the
other party to implement the Clean-up Plan or to otherwise conduct the
clean-up operations.
(g) Regardless of whether the Indemnified Party or the
Indemnifying Party cleans up the property that is subject to the
Environmental Remediation Claim, the Indemnifying Party shall only be
responsible for Losses or costs of clean-up or remediation that are (i)
required to bring such property (as such property is used on the
Closing Date) in compliance with the minimum standards imposed by the
Environmental and Safety Laws in effect on the Closing Date or (ii)
Losses arising from acts or omissions of the Indemnifying Party under
paragraph (e) above. NGC agrees, as a predecessor in interest to the
Surviving Corporation, that the Surviving Corporation shall use
commercially reasonable efforts to complete all Clean-up Plans by the
seventh anniversary of the Closing Date, except to the extent that such
efforts are not in accordance with good and prudent industry standards
or would cause the Surviving Corporation to breach any of its
representations, warranties, covenants or agreements under this
Agreement.
(h) In the event that the Surviving Corporation is expecting
to conduct a Clean-up Plan as of August 30, 2003, then the Surviving
Corporation shall, as soon as practicable after August 30, 2001, but in
any event within 90 calendar days prior to August 30, 2003, provide
Chevron with a schedule (the "ENVIRONMENTAL SCHEDULE") setting forth in
reasonable detail (i) each Clean-up Plan that it expects to still be
conducting on such date by the Surviving Corporation, (ii) an estimate
of the amount of time that will be required to complete each such
Clean-up Plan, (iii) what measures, if any, could be undertaken by the
Surviving Corporation to expedite any of such Clean-up Plans, even if
such measures are not the most economical or cost efficient measures
that can be employed to clean-up or remediate the affected property
("ADDITIONAL MEASURES") and (iv) a reasonable estimate of the
additional costs that would be associated with implementing such
Additional Measures. In order to expedite any Clean-up Plan, Chevron
may request in writing not later than 30 days prior to August 30, 2003,
(i) that the Surviving Corporation modify such Clean-up Plan by
implementing such Additional Measures which are reasonable and
appropriate under the circumstances and the Surviving Corporation shall
use commercially reasonable efforts to implement such Additional
Measures (and the implementation of such measures shall not diminish in
any respect Chevron's indemnification obligations hereunder) or (ii) to
assume clean-up obligations with respect to an affected property
covered by such Clean-up Plan (subject to the provisions of SECTION
14.6(E) above) and, in such event, Chevron may implement such
Additional Measures (at Chevron's sole cost and expense) as Chevron
deems appropriate under the circumstances. In no event shall any
Additional Measures be undertaken by Chevron or the Surviving
Corporation, if such Additional Measures would
79
not be as effective in cleaning up or remediating the affected property
or would expose their employees or other agents or contractors to
increased risk. This paragraph (h) shall in no way diminish Chevron's
indemnification obligations under this SECTION 14.6 but shall only
provide Chevron with certain limited rights with respect to clean-up
operations and remediations being conducted after August 30, 2003 which
are covered by the indemnity of this ARTICLE 14.
(i) All other environmental claims with regard to the Chevron
Facilities or NGC Facilities or Former NGC Facilities that do not
involve corrective or remedial operations shall be addressed under
SECTION 14.5 or SECTION 14.7, as applicable.
14.7 INDEMNIFICATION PROCEDURES: ABSENCE, LOSS OR IMPAIRMENT OF USE OF
PROPERTY. An Indemnified Party claiming indemnification under this Agreement for
Losses resulting from a complete or partial absence or loss (or impairment of
use) of any property or asset ("USE CLAIMS"), shall transmit to the Indemnifying
Party a written notice (the "USE NOTICE") describing in reasonable detail the
nature of the Use Claim, a non-binding estimate of the Loss attributable to such
Use Claim and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within sixty (60) days from its receipt of the Use Notice that the
Indemnifying Party disputes such Use Claim, the Use Claim specified by the
Indemnified Party in the Indemnity Notice shall be deemed to be an admission of
liability of the Indemnifying Party hereunder in at least the amount specified
in the Indemnity Notice. If the Indemnifying Party has timely disputed the
validity or amount of such Use Claim, as provided above, then the parties shall
attempt to resolve through any manner that they deem reasonable under the
circumstances, failing which the Indemnified Party may institute appropriate
legal action. Payments of all amounts owing by the Indemnifying Party with
respect to any Use Claim shall be made within thirty (30) days after the later
of (i) the expiration of the sixty-day (60-day) Indemnity Notice period or (ii)
the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this Agreement.
ARTICLE 15
POST-CLOSING MATTERS
15.1 CORPORATE NAMES. NGC expressly acknowledges and agrees that the
name "Chevron," and any derivation thereof shall not constitute a Contributed
Asset and shall remain the exclusive property of Chevron. Neither NGC nor any
Affiliate of NGC shall, in any way, infringe upon Chevron's use or rights to
such name (and any derivation thereof). Within six months after Closing, NGC
shall remove all trademarks and tradenames containing the name Chevron or the
Chevron logo from any of the assets or properties comprising the Contributed
Businesses. Chevron expressly acknowledges and agrees that the name "Warren
Petroleum Company" and any derivation thereof constitutes a part of Contributed
Businesses and shall become the exclusive property of the Surviving Corporation
upon consummation of the transactions contemplated hereby. Neither Chevron nor
any Affiliate of Chevron (except Newco or the Surviving Corporation or its
Subsidiaries) shall, in any way, infringe upon Surviving Corporation's use or
rights to such name (and any derivation thereof).
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15.2 OPTIONS. NGC and the Surviving Corporation shall, in accordance
with the procedures set forth in Paragraph IX(d) of the NGC Corporation EEP,
Section 13 of the NGC Option Plan and Section 3(a) of the Warrant, cause the
number and class of shares of NGC Corporation Stock covered by each Option
outstanding as of the Effective Time to be amended so that immediately after the
Effective Time such Option shall cover the same number and class of shares of
Surviving Corporation Common Stock to which the holder of such Option would have
been entitled pursuant to the terms of this Agreement if, immediately prior to
the Effective Time, such holder had been the holder of record of the number of
shares of NGC Corporation Stock then covered by such Option.
15.3 DEFINITIVE CONSIDERATION ADJUSTMENT.
(a) As promptly as practicable but in no event later than 90
calendar days after the Closing Date, Chevron shall deliver to
Surviving Corporation (after consultation with Surviving Corporation),
a schedule (the "PRELIMINARY ADJUSTMENT SCHEDULE") setting forth in
reasonable detail the calculation of the actual Consideration
Adjustments contemplated by paragraphs (a) through (h) of SECTION 2.3,
but shall use the actual values and quantities on the Closing Date for
the calculations to be made at Closing pursuant to the applicable
provisions of SECTION 2.3 and shall use the same procedures included in
SECTION 2.3(H) for the calculation relating to the Contributed Warren
Business provided in such section. In the event NGC and Chevron shall
have reached agreement as to the Agreed Value of a Retained Asset for
which a Minimum Value was used for purposes of SECTION 2.4 or pursuant
to the provisions of SECTION 15.4, then such adjustments shall also be
made in the Preliminary Adjustment Schedule.
(b) The Preliminary Adjustment Schedule shall be subject to
review by Surviving Corporation. In reviewing the Preliminary
Adjustment Schedule, Surviving Corporation shall have the right to
communicate with, and to review the work papers, schedules, memoranda
and other documents prepared or reviewed by Chevron during the
preparation of the Preliminary Adjustment Schedule (including, without
limitation, the income statements used to derive net income and
depreciation and amortization included therein) and thereafter shall
have access to all relevant employees of Chevron and to all relevant
books and records, all to the extent reasonably required by Surviving
Corporation in order to complete its review of the Preliminary
Adjustment Schedule. Within 60 calendar days after its receipt of the
Preliminary Adjustment Schedule, Surviving Corporation shall advise
Chevron whether, based on such review, it has any exceptions to the
Preliminary Adjustment Schedule. Unless Surviving Corporation shall
deliver to Chevron within such 30 calendar day period a letter
specifying in reasonable detail any such exceptions, the Preliminary
Adjustment Schedule shall be conclusive and binding on Chevron and the
Surviving Corporation. If Surviving Corporation shall submit a letter
detailing any exceptions to the Preliminary Exception Schedule, then
the Surviving Corporation and Chevron shall mutually agree on which
exceptions shall result in adjustments to the Preliminary Consideration
Adjustment. The "DEFINITIVE CONSIDERATION ADJUSTMENT" shall mean the
Preliminary Consideration Adjustment, with any adjustment required by
the immediately preceding sentence.
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(c)(i) If the Definitive Consideration Adjustment is
greater than the Estimated Consideration Adjustment, Chevron
shall pay the Surviving Corporation the difference, together
with interest thereon at a rate of 6% per annum during the
period commencing on the Closing Date and continuing through
and including the day preceding the payment date.
(ii) If the Definitive Consideration Adjustment is
less than the Estimated Consideration Adjustment, the
Surviving Corporation shall pay Chevron the difference,
together with interest thereon at a rate of 6% per annum
during the period commencing on the Closing Date and
continuing through and
including the day preceding the payment date.
(iii) Any payment required by paragraph (a) or (b) of
this SECTION 15.3 shall be made on the third Business Day
after the Definitive Consideration Adjustment is determined
via wire transfer to an account designated by the party to
whom the payment is owed. Such account shall be designated by
such party on the date the Definitive Consideration Adjustment
is made.
15.4 TRANSFERS OF RETAINED ASSETS DURING THE INTERIM PERIOD. During the
period commencing on the Closing Date and continuing through and
including the first anniversary thereof (the "INTERIM PERIOD"), Chevron
shall use its best efforts to transfer to the Surviving Corporation any
Retained Asset or reasonably equivalent economic value therefor that is
reasonably acceptable to the Surviving Corporation. In the event that
Chevron is able to transfer the Retained Asset to the Surviving
Corporation during the Interim Period, the Surviving Corporation shall
make a cash payment to Chevron equal to (i) the sum of the Minimum
Value or Agreed Value (as the case may be) of the Retained Asset plus
interest thereon at a rate of 6% per annum from the Closing Date
through and including the date on which the Retained Asset is
transferred to the Surviving Corporation, LESS (ii) any net operating
cash flow attributable to such Retained Asset during such period. Any
payment made by the Surviving Corporation pursuant to this SECTION 15.4
shall be made on the third Business Day after the Retained Asset is
transferred to the Surviving Corporation and shall be made to a bank
account designated by Chevron in writing no later than the date on
which such asset is transferred.
15.5 FINAL ADJUSTMENT FOR RETAINED ASSETS.
(a) If NGC and Chevron shall have disagreed as to the fair
value of a Retained Asset pursuant to SECTION 2.4 and such asset was
not transferred during the Interim Period or the value of such asset
was not resolved pursuant to SECTION 15.3, then within five Business
Days after the first anniversary of the Closing Date, the Surviving
Corporation shall refer the matter for resolution by an investment
banking firm without a conflict of interest (the "INDEPENDENT VALUE
EXPERT") to be selected by Lehman Brothers and Goldman Sachs (the
"VALUE EXPERTS") in accordance with the provisions of this SECTION
15.5, by giving notice to Chevron of its election to do so. If the
Surviving Corporation fails to provide Chevron with proper notice under
this SECTION 15.5, then the Minimum Value shall be conclusively deemed
to be the fair value of the Retained Asset and shall be final and
binding on the parties.
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(b) Within ten Business Days after referring a matter to the
Value Experts in accordance with paragraph (a) of this SECTION 15.5,
the Value Experts shall select the Independent Value Expert. Within
five Business Days thereafter, each party shall deliver to the other
party and to the Independent Value Expert a notice setting forth in
reasonable detail the fair value such party ascribes to each Retained
Asset and the basis of such valuation (the "DECISION NOTICE"). Within
five Business Days after receiving the Decision Notices, the
Independent Value Expert shall choose the fair value of the Retained
Asset as set forth in one party's Decision Notice and shall be in no
way empowered to choose a different value. The Independent Value Expert
shall adopt the Decision Notice that, in the best judgment of such
Independent Value Expert, is the closer of the two Decision Notices to
the fair value of the Retained Asset. In making such determination the
Independent Value Expert shall apply the valuation principles utilized
by the parties in connection with the transactions contemplated by this
Agreement.
(c) The decision of the Independent Value Expert shall be in
writing and shall be final and binding upon the parties, and may be
entered in any court of competent jurisdiction upon the application of
either party. If applicable, the expenses of the Independent Value
Expert shall be borne by the party whose Decision Notice is not chosen.
Each party shall bear the costs of its own counsel, witnesses (if any)
and employees.
(d)(i) If the Minimum Value is less than the value chosen by
the Independent Expert with respect to such Retained Asset (the
"DEFINITIVE VALUE"), Chevron shall pay the Surviving Corporation the
difference, together with interest thereon at a rate of 6% per annum
during the period commencing on the Closing Date and continuing through
and including the day preceding the payment date.
(ii) If the Minimum Value is greater than the Definitive
Value, the Surviving Corporation shall pay Chevron the difference,
together with interest thereon at a rate of 6% per annum during the
period commencing on the Closing Date and continuing through and
including the day preceding the payment date.
(iii) Any payment required by this SECTION 15.5 shall be made
on the third Business Day after the Definitive Value is determined via
wire transfer to an account designated by the party to whom the payment
is owed. Such account shall be designated by such party on the date the
Definitive Value is established.
15.6 ADJUSTMENT REGARDING LONDON OPERATIONS.
(a) Chevron agrees, as a contingent reduction to the
Consideration due to Chevron hereunder, that if the London Earnings for
the 1997, 1998 and 1999 calendar years (the "OPERATIVE YEARS"), shall
equal at least a total of $54 million, as reflected in the calculations
contained in a notice sent by Surviving Corporation to Chevron (the
"LONDON NOTICE"), Chevron shall pay to Surviving Corporation, as an
additional adjustment to the Consideration payable hereunder, the sum
of $33 million plus an amount equal to interest on such sum from the
Closing Date to the date of payment at
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a rate of 6% per annum, compounded semi-annually. If the London
Earnings for the Operative Years are less than $30 million, there shall
be no payment under this section. If the London Earnings for the
Operative Years are more than $30 million but less than $54 million (as
reflected in the London Notice), Chevron shall pay to Surviving
Corporation an amount determined by multiplying $33 million by a
fraction, the numerator of which shall be the total London Earnings for
the Operative Years in excess of $30 million and the denominator of
which shall be $24 million, plus an amount equal to interest on such
sum from the Closing Date to the date of payment at a rate of 6% per
annum, compounded semi-annually. As used herein, the term "London
Earnings" shall mean the amounts contributed to NGC's net income from
the London Operations determined on a basis consistent with generally
accepted accounting principles (including reductions for the effect of
any appropriate income taxes); provided, however, that such earnings
shall exclude all earnings (a) derived from or attributable to the
presently existing contracts comprising a part of the Contributed
Warren Business, (b) attributable to any interest in Accord in addition
to NGC's present 49% interest therein, (c) attributable to
contributions made by NGC to Accord or NGC International (other than
the return of earnings distributed after the Closing by Accord or NGC
International to NGC plus an amount equal to interest thereon at 6% per
annum from the time of such distribution to the time of such return)
and (d) derived from or attributable to any project, whether an
acquisition of properties or a project requiring capital expenditures,
which is financed with funds other than internal cash of Accord, NGC
International and their respective Subsidiaries (i) to the extent the
amount so financed exceeds 50% of the total cost of such project (in
which case, London Earnings shall be adjusted by the decreasing the
earnings derived from such project by multiplying such earnings by a
fraction, the numerator of which shall be 50 and the denominator of
which shall be the percentage to which such project has been financed),
or (ii) if there are guarantees given or collateral supplied in
connection with such financing by parties other than Accord, NGC
International and their respective subsidiaries. In addition, earnings
from acquisitions or capital investments shall constitute London
Earnings only to the extent such expenditures are made to facilitate
the application and leverage of NGC's core competencies and sources of
competitive advantage related to marketing and trading energy commodity
products and services. For purposes of this provision, NGC's
international investment philosophy generally will be to minimize its
equity participation and capital projects consistent with establishing
a sufficient position to optimize its trading and marketing businesses.
Chevron shall have a period of 90 days after any such London Notice to
audit the calculation of the adjustments contemplated hereunder. The
payment of the amounts due with respect to the London Notice shall be
made within 15 days after the expiration of such ninety day period.
(b) If Chevron does not agree with the computation of payment
due regarding London Earnings, it shall promptly provide notice to a
Surviving Corporation, and in any event prior to the expiration of such
90 days period set forth in paragraph (a) above. The Parties shall
thereafter negotiate in a good faith attempt to resolve their
differences. If the Parties are unable to resolve such differences,
either Party may elect to refer the matter for resolution by an
Arbitrator, who shall be a partner reasonably acceptable to each Party
of a nationally recognized accounting firm without a conflict of
interest. If the Parties are unable to agree on an Arbitrator under the
provisions of the preceding
84
sentence within 90 additional days after the expiration of such 90 day
period, either Party may file an action in a court of law seeking
judicial resolution of such dispute.
15.7 INSURANCE.
(a) Chevron, Newco and NGC acknowledge that Chevron
Corporation has maintained worldwide programs of property and
liability insurance coverage for itself and its Affiliates,
including with respect to the Contributed Businesses and the
Contributed West Texas LPG Pipeline Business. Such programs
have been designed to achieve a cost-effective, coordinated
risk-management package for the entire corporate group. All of
the insurance policies through which such worldwide programs
of coverage are presently or have previously been provided are
herein called the "CHEVRON CORPORATION POLICIES."
(b) It is the understanding and intention of Chevron,
Newco and NGC that subject to SECTION 15.7(D) below:
(i) from and after the Closing, no insurance
coverage shall be provided under the Chevron
Corporation Policies relating to the Contributed
Businesses and the Contributed West Texas LPG
Pipeline Business; and
(ii) from and after the Closing, no claims
regarding any matter whatsoever, whether or not
arising from events occurring prior to the Closing,
shall be made against or with respect to the Chevron
Corporation Policies by the Surviving Corporation.
(c) Subject to SECTION 15.7(D) below, Newco, NGC and
the Surviving Corporation, on behalf of itself, its successors
and assigns, hereby releases, to the extent permitted by
applicable law, Chevron and its Affiliates from any claim made
after the Closing against or with respect to any of the
Chevron Corporation Policies by or through Newco, NGC or the
Surviving Corporation. Such release shall cover, without
limitation, any claim by an insurer for reinsurance,
retrospective premium payment or prospective premium increases
attributable to any such claim.
(d) Nothing contained in the foregoing provision of
this SECTION 15.7 shall in any way limit, impair or constitute
a release or discharge of any right of Surviving Corporation
or obligation of Chevron with respect to any representation,
warranty, covenant, agreement, indemnity or other obligation
of Chevron contained in this Agreement (regardless of whether
the same was, is or may be covered by any insurance described
herein), all of which rights and obligations shall continue in
full force and effect notwithstanding any other provision of
this SECTION 15.7.
(e) To the best of Chevron's knowledge, neither
Chevron nor any prior owner of Warren Petroleum Company, or
any of the assets comprising Warren
85
Petroleum Company, has purchased Third Party Insurance
Policies specifically covering Warren Petroleum Company or
certain of the assets that comprise Warren Petroleum Company.
In the event that Chevron locates or otherwise identifies any
such Third Party Insurance Policies, Chevron shall promptly
notify the Surviving Corporation and shall use all
commercially reasonable efforts to provide the Surviving
Corporation with any benefits that Chevron may have under such
insurance policies; provided, however, that Surviving
Corporation shall reimburse Chevron for any out-of-pocket
costs incurred by Chevron in assisting the Surviving
Corporation in deriving any such benefits; and provided
further, that in no event shall Chevron be obligated to
provide the Surviving Corporation with any such benefits in
the event that such insurance policies cover assets other than
the Contributed Warren Business or could be included in a
comprehensive settlement that is being contemplated by Chevron
as of the date hereof.
15.8 INDEMNIFICATION PRINCIPLES. NGC acknowledges that upon
consummation of the Combination the Surviving Corporation will assume certain
indemnification obligations to Chevron hereunder as the successor in interest to
NGC after the Combination and that such obligations have been negotiated on the
Surviving Corporation's behalf by NGC to provide recourse to Chevron for
breaches of representations, warranties and agreements of NGC in lieu of Chevron
having such recourse against the stockholders of NGC as of immediately prior to
the Closing. Newco, NGC and Chevron agree (i) that the principles of reciprocal
indemnification under this Agreement are fair to the stockholders of NGC and to
Chevron, and, will be fair, upon consummation of the Combination to the
stockholders of the Surviving Corporation and (ii) that the Surviving
Corporation should be charged to administer such indemnities impartially.
Accordingly NGC and Newco, on their own behalf and as predecessors in interest
to the Surviving Corporation, agree with Chevron that, from and after the
Closing, the Surviving Corporation shall exercise stewardship of its assets and
affairs without regard to the existence, nature or extent of any indemnity to or
from Chevron arising under this Agreement, and in this regard, the Surviving
Corporation will assume a duty to Chevron that is equal to the duty it owes to
its stockholders as a whole; provided however, that the Surviving Corporation
may make claims against Chevron to the extent permitted under this Agreement.
The Surviving Corporation shall make and keep good records of potential claims
for indemnification to or from Chevron, and provide Chevron with access thereto
at all times. Newco and NGC, on their own behalf and as predecessors in interest
to the Surviving Corporation, further agree with Chevron that neither Newco or
NGC nor the Surviving Corporation (upon consummation of the Combination) will
induce or persuade a third party or Governmental Entity to bring, or disclose or
notify or otherwise bring to the attention of a third party or Governmental
Entity, any claim that any such third party or Governmental Entity may have
against the Surviving Corporation if such claim would be subject to
indemnification by Chevron under this Agreement or the Contribution and
Assumption Agreement, except in instances where contractual obligations or
duties or applicable law require or obligate the Surviving Corporation to make
such disclosure or notification, or, if the Board of Directors of the Surviving
Corporation determines in good faith, for reasons unrelated to the provisions of
this Agreement, that it would be in the best interest of the Surviving
Corporation to do so.
15.9 ASSUMPTION OF SENIOR NOTES. As promptly as practicable after the
consummation of the Combination, the Surviving Corporation shall take any and
all actions necessary to assume
86
(a) the 6-3/4% Senior Notes of NGC due December 15, 2005, and (b) all
obligations under the Credit Agreement dated as of March 14, 1995 by and among
NGC, The First National Bank of Chicago, individually and as agent, and the
institutions which are parties thereto.
15.10 REGISTRATION OF CERTAIN SECURITIES. If the issuance of the shares
of Newco Common Stock issued to the PEP Individuals in connection with the
Merger is not registered under the Securities Act pursuant to the registration
statement including the Definitive Information Statement/Prospectus, as soon as
practicable after the Effective Time the Surviving Corporation shall file a
registration statement on the appropriate form to register such shares for
resale under the Securities Act and shall make such other state blue sky filings
as are necessary to register such shares, in each case in accordance with the
Registration Rights Agreement, dated as of October 21, 1994, among NGC (as
successor to Trident Holding), British Gas, NOVA and the PEP Individuals.
ARTICLE 16
GENERAL PROVISIONS
16.1 EFFECT OF DUE DILIGENCE. No investigation by any party to this
Agreement into the business, operations and condition of any other party shall
diminish in any way the effect of any representations or warranties made by such
other party in this Agreement or shall relieve such other party of any of its
obligations under this Agreement. Notwithstanding the foregoing, neither Chevron
nor NGC shall be deemed to be in breach of its representations and warranties
contained herein if and to the extent that the other had actual knowledge on the
date hereof that any such representation or warranty was inaccurate; provided,
however, that such knowledge shall have no effect on any indemnification
obligation hereunder (other than for indemnification for the breach of such
representation or warranty) in the absence of fraud or bad faith. The parties
agree that any item specifically disclosed on any schedule to this Agreement
shall be deemed to be disclosed for all purposes of this Agreement,
notwithstanding the fact that such item was not disclosed on any other schedule
to this Agreement.
16.2 SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit
of and be binding upon the parties to this Agreement and their respective
successors and assigns, and no other Person will have any obligations hereunder;
provided, however, that no party hereto may assign any of its rights or
obligations hereunder without the prior written consent of all other parties
hereto.
16.3 NOTICES. All notices and other communications hereunder shall be
deemed given on the date delivered personally or confirmed as received by
facsimile, or two business days after mailed by registered or certified mail
(return receipt requested) at the number indicated below at the following
addresses:
(a) If to NGC, Newco or the Surviving Corporation:
Mr. Kenneth E. Randolph
Senior Vice President and General Counsel
87
NGC Corporation
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Facsimile No. (713) 507-6808
With a copy to:
Mr. Robert B. Allen
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201-4618
Facsimile No. (214) 969-4343
Mr. David S. Peterman
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place - South Tower
711 Louisiana
Houston, Texas 77002
Facsimile No. (713) 236-0822
(b) If to Chevron or Newco:
Chevron U.S.A. Inc.
1301 McKinney
Houston, Texas 77010
Attention: Mr. David Stevenson
Facsimile No: (713) 754-3366
With a copy to:
Mr. Terry Michael Kee
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Facsimile No: (415) 983-1200
16.4 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same Agreement, and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
16.5 MISCELLANEOUS. This Agreement and the documents and instruments to
which it refers (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral (other than the
Confidentiality Agreement), among any of the parties with respect to the subject
matter of this Agreement, including, without limitation, the Exclusivity
Agreement dated January 21, 1996 between NGC and Chevron; provided, however,
that the
88
Exclusivity Agreement shall survive to the extent, but only to the extent, that
the Exclusivity Agreement modifies, supplements or amends the Confidentiality
Agreement. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
16.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES
OF CONFLICTS OF LAW.
16.7 NO RECOURSE. Notwithstanding any of the terms or provisions of
this Agreement to the contrary, each of the parties hereto agrees that neither
it nor any person acting on its behalf may assert any claim or cause or action
against any officer or director of any other party hereto in connection with or
arising out of this Agreement or any of the transactions contemplated hereby.
16.8 BULK SALES LAWS. Chevron and NGC hereby waive compliance with all
requirements of applicable bulk sales laws.
16.9 NO REMEDY IN CERTAIN CIRCUMSTANCES. To the extent that a party
hereto takes any action pursuant to an order, injunction, decree, judgment or
other restraint of a Governmental Entity of competent authority, which is
inconsistent with this Agreement or failed to take action consistent with or
required under this Agreement, such party shall not incur any liability or
obligation unless such party breached its obligations under SECTION 9.3 hereof
or did not in good faith use reasonable efforts to resist or object to the
imposition or entering of such order, injunction, decree, judgment or other
restraint.
16.10 RECORDING FEES AND SIMILAR COSTS. Chevron and the Surviving
Corporation shall each bear one-half of any recording fees and similar costs
incurred and imposed upon, or with respect to, the Contributed Businesses to be
transferred hereunder.
16.11 AMENDMENT. This Agreement, to the extent permitted by law, may be
amended by the parties to this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties to
this Agreement; PROVIDED that Section 15.10 may not be amended without the
consent of the PEP Individuals.
16.12 WAIVER. Any term or provision of this Agreement may be waived in
writing at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. Any waiver of any term or condition of this Agreement by
any party shall not be construed as a waiver of any subsequent breach or failure
of the same term or condition, or a waiver of any other term or condition of
this Agreement.
16.13 NO THIRD PARTY BENEFICIARIES. Notwithstanding any other provision
of this Agreement, except for the PEP Individuals (which are intended
beneficiaries only for purposes of SECTIONS 15.10 AND 16.11) and the Chevron
Indemnitees or NGC Indemnitees that are not parties hereto, this Agreement shall
not create benefits on behalf of any Person who is not a party to this Agreement
or to the Contribution and Assumption Agreement (including, without limitation,
any broker or finder or any Prospective Employee or Affected Employee,
89
notwithstanding any provisions to the contrary contained herein), and this
Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns.
16.14 REAL PROPERTY DISCLOSURES. In connection with the transfer of
real property constituting part of the Contributed Businesses or the Contributed
West Texas LPG Pipeline Business located in the State of Texas, the Contributing
Parties hereby make the disclosures set forth in EXHIBIT 16.14 to this
Agreement. NGC and Newco represent that they are aware that the disclosures
contained in EXHIBIT 16.14 may be incomplete and agree that Chevron may amend
such disclosures from time to time prior to Closing to comply with disclosure
generally applicable to the transfer of real estate in the state of Texas
("GENERAL DISCLOSURES"). NGC and Newco further waive any rights they may have
arising out of the incompleteness of any General Disclosure given in this
Agreement or the Contribution and Assumption Agreement or the failure to give
any additional General Disclosure required to be given by and state or local
law, statute or ordinance including, but not limited to, Section 230.005 of the
Texas Local Government Code, Section 257.004 of the Texas Transportation Code,
Section 61.025 of the Texas Natural Resources Code, Section 33.135 of the Texas
Natural Resources Code and Section 49.452 of the Texas Water Code. No Uniform
Vendor and Purchaser Risk Act enacted by any state in which any part of the real
property being transferred hereunder is located, including, without limitation,
the Texas Vendor and Purchaser Risk Act in Section 5.007 of the Texas Property
Code, shall be applicable with respect to this Agreement, and NGC, Chevron and
Newco hereby voluntarily waive the provisions of, and any rights under, any such
Vendor and Purchaser Risk Act.
16.15 WAIVER OF CONSUMER RIGHTS. EACH OF NGC, NEWCO, AND CHEVRON HEREBY
WAIVES ITS RESPECTIVE RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS AND COMMERCE CODE, A LAW
WHICH GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS SELECTION, EACH OF NGC, NEWCO AND CHEVRON VOLUNTARILY CONSENT TO
THIS WAIVER. EACH OF NGC AND NEWCO REPRESENTS AND WARRANTS TO CHEVRON AND
CHEVRON WARRANTS TO NGC AND NEWCO, THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED UNDER THIS
AGREEMENT, THAT IT IS REPRESENTED BY LEGAL COUNSEL IN SEEKING OR ACQUIRING THE
GOODS OR SERVICES HEREUNDER, AND THAT ITS LEGAL COUNSEL WAS NOT DIRECTLY OR
INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER PARTIES OR AN AGENT
OF SUCH OTHER PARTIES.
(The remainder of this page is intentionally left blank)
90
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be signed as of the date first above written by its duly authorized
officer.
NGC CORPORATION
By:
Printed Name:
Title: Chairman, CEO, President
CHEVRON U.S.A. INC.
By: R.E. GALVIN
Printed Name: R.E. Galvin
Title: President
MIDSTREAM COMBINATION CORP.
By: DONALD L. PAUL
Printed Name: Donald L. Paul
Title: Vice-President
91
Schedule of Exhibit and Schedules to the Combination Agreement Not Filed as
Exhibits to this Registration Statement.
Exhibit 2.2(a) - Form of Certificate of Merger
Exhibit 3.2(aa) - Form of LPG System Loss/Gain Settlement Agreement
which relates to settling net system losses/gains
and balancing components received from and
delivered to all parties who ship liquid
hydrocarbons on the West Texas LPG System.
Exhibit 3.2(bb) -
Form of Transition Services Agreement pursuant to
which Chevron will provide and New NGC will pay
for certain information technology services
related to the continuing operations of the
contributed assets during the transition period.
Exhibit 3.2(ii) - Form of Term Sheet regarding Fractionation
Agreement (Venice) pursuant to which Chevron, as
the service provider, will deliver butane as
volumes and capacities are available from time to
time to the Venice fractionator.
Exhibit 3.2(jj) - Form of Technical Services Agreement pursuant to
which Chevron and NGC will continue to provide
technical support and consulting to one another.
Exhibit 3.2(kk) - Form of Miscellaneous Master Services Agreement
Warren Petroleum Company and Chevron will continue
to provide various services for each other.
Exhibit 3.2(mm) - Form of Natural Gas Purchase and Sale Agreement
(Canadian - version #1) pursuant to which Chevron
will make available to NGC a specified number of
MMBtu's of gas per day and NGC will take from
Chevron such amount at market responsive prices.
Exhibit 3.2(nn) - Form of Natural Gas Purchase and Sale Agreement
(Canadian - version #2) pursuant to which Chevron
will make available to NGC a specified number of
MMBtu's of gas per day and NGC will take from
Chevron such amount at market responsive prices.
Exhibit 3.2(oo) - Form of Agency Agreement for Administration of
Natural Gas Purchase and Sale Contracts Chevron
designates NGC as Chevron's agent to perform any
and all obligations of Chevron accruing during the
term of this agreement under a natural gas
purchase and sale contract which is covered by
this agreement.
Exhibit 3.2(qq) - Form of Transportation Assignment and Valuation
Agreement pursuant to which Chevron and NGC agree
to assign to NGC certain transportation agreements
between Chevron and certain interstate pipelines
subject to compliance with applicable requirements
and tariff provisions of the applicable pipelines.
Exhibit 3.2(rr) - Form of Interstate Pipeline Capacity Release
Agreement pursuant to which Chevron agrees to
release to NGC certain firm transportation
capacity held by Chevron on interstate pipeline
subject to compliance with applicable regulations
and the tariff provisions of the pipeline and NGC
agrees to accept such capacity from Chevron.
xhibit 3.2(uu) - Form of West Texas LPG Pipeline License Agreement
pursuant to which Chevron Pipe Line Company and
West Texas LPG Pipeline Partnership will continue
the right to conduct the pipeline operations of
the West Texas LPG Pipeline in the existing
rights-of-way in substantially the same manner as
previously conducted.
Exhibit 9.6 - Form of Joint Press Release
Exhibit 12.2(c) - Form of Akin Gump Opinion of Counsel
Exhibit 12.2(d) - Form of NGC Stockholder Tax Representations
Exhibit 12.3(c) - Form of Pillsbury Madison Opinion of Counsel
Exhibit 12.3(g)(i) - Form of Chevron Tax Representations
Exhibit 12.3(g)(ii) - Code Section 1445 Affidavit pursuant to which
Chevron certifies that no withholding of tax is
required in the disposition of its U.S. real
property.
Exhibit 16.14 - Real Property Disclosures in which Chevron
notifies NGC of boundries of the properties and
any legal advice it should seek in relation to the
properties.
Schedule 1.4 - Persons with Actual Knowledge
Schedule 2.1(C) - Adjustments to Newco Note which describe
deductions and additions to the amount of the
Newco Note at the signing of the Combination
Agreement.
Schedule 2.2(e) - Initial Executive Officers of Newco
Schedule 2.3(a) - NGBU Fixed Book Value which details the process
for marking to market the fixed book value of the
assets.
Schedule 2.3(b) - Inventory Adjustment which gives a valuation of
volume differences (actual vs. agreed) as of the
Closing Date for Warren Petroleum Company
inventory.
Schedule 2.3(f) - NGBU Stored Gas detailing the storage inventory
disposition.
Schedule 2.3(g) - NUG Contract Adjustments which shows adjustments
to the three NUG contracts.
Schedule 4.2 - NGC Stock Option Plan summaries and Employee
Equity Option Plan summaries.
Schedule 4.3 - NGC Other Subsidiaries
Schedule 4.6 - NGC No Conflicts
Schedule 4.8 - NGC Litigation
Schedule 4.9 - NGC Compliance with Laws
Schedule 4.10 - NGC Material Agreements
Schedule 4.15 - NGC Personal Property and Title Matters
Schedule 4.16(a)(1) - NGC NGL Fee Properties
Schedule 4.16(a)(2) - NGC Permitted Exceptions
Schedule 4.16(b) - NGC NGL Leased Properties
Schedule 4.16(c) - NGC Pipeline Properties
Schedule 4.16(d) - NGC NGL and Pipeline Facility Data
Schedule 4.17 - NGC Major Customers and Suppliers
Schedule 4.18 - NGC Buildings, Vehicles, Machinery, Equipment
Schedule 4.20 - NGC Preferential Rights
Schedule 4.21 - NGC Intellectual Property
Schedule 4.22 - NGC JOA Related Agreements
Schedule 4.24 - NGC Absence of Changes or Events
Schedule 4.25 - NGC Acquisitions, Capital Expenditures
Schedule 5.3 - Chevron Governmental Approvals
Schedule 5.5 - Chevron No Conflicts
Schedule 5.6 - Chevon Changes to Financial Statements
Schedule 5.8 - Chevron Litigation
Schedule 5.9 - Chevron Compliance with Laws
Schedule 5.12 - Chevron Material Agreements
Schedule 5.18(a)(1) - Chevron NGL Fee Properties
Schedule 5.18(a)(2) - Chevron Permitted Exceptions
Schedule 5.18(b) - Chevron Leased Properties
Schedule 5.18(c) - Chevron Pipeline Facilities
Schedule 5.18(d) - Chevron NGL Facility Data
Schedule 5.19 - Chevron Major Customers and Suppliers
Schedule 5.20 - Chevron Buildings, Vehicles and Major Equipment
Schedule 5.22 - Chevron Preferential Rights
Schedule 5.23 - Chevron Intellectual Property
Schedule 5.24 - Chevron JOA Related Agreements
Schedule 5.25 - Chevron Absence of Changes or Events
Schedule 8.1(a) - NGC Current Benefit Pension and Welfare Plans
Schedule 8.1(b) - NGC ERISA Violations, Non-Terminable Plans,
Post-Retirement Health Plans, Withdrawals From
Plans
Schedule 8.1(c) - NGC Union Contracts, Pending or Threatened Work
Stoppages or Labor Matters
Schedule 10.7 - Chevron Capital Expenditures
Schedule 12.3(e) - Chevron Material Consents
Schedule 14.4 - Description of Assets with Environmental Accruals
The registrant agrees to furnish all of the above exhibits upon
request by the Commission. The remaining exhibits and schedules to the
Combination Agreement have been filed as Exhibits to this Registration
Statement.
Exhibit 2.3
JULY 29, 1996
AMENDMENT
TO
COMBINATION AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO COMBINATION AGREEMENT AND PLAN OF MERGER, dated as of
____________, 1996 (this "Agreement") is by and between NGC Corporation, a
Delaware corporation ("NGC"), Chevron U.S.A. Inc., a Pennsylvania corporation
("Chevron") and Midstream Combination Corp., a Delaware corporation ("Newco").
WITNESSETH
WHEREAS, NGC, Chevron and Newco are parties to the Combination
Agreement and Plan of Merger, dated as of May 22, 1996 (the "Combination
Agreement") which provides for the strategic combination of NGC and
substantially all of Chevron's and certain of its affiliates' midstream assets
and certain other strategic relationships;
NOW THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the receipt and adequacy of which are hereby expressly
acknowledged, the parties hereto hereby agree as follows:
1. Capitalized terms used herein but not otherwise defined shall have
the meanings ascribed to them in the Combination Agreement.
2. AMENDMENT TO SECTION 2.2(A). Paragraph (a) of Section 2.2 is deleted
in its entirety and the following new paragraph (a) of Section 2.2 is inserted
in lieu thereof:
(a) Subject to the terms and conditions of this Agreement, a
certificate of merger in the form of EXHIBIT 2.2(A) (the "CERTIFICATE
OF MERGER") shall be duly prepared, executed and acknowledged by Newco,
which will be the Surviving Corporation in the Merger, and thereafter
delivered to the Secretary of State of the State of Delaware for
filing, as provided in the DGCL, as soon as practicable on the Closing
Date (but in no event before the execution and delivery of the
Contribution and Assumption Agreement by the parties thereto). The
Merger shall become effective on the date and at the time specified in
the Certificate of Merger (the "EFFECTIVE TIME").
3. AMENDMENT TO CERTIFICATE OF MERGER. The Certificate of Merger,
attached to the Combination Agreement as Exhibit 2.2(a), is deleted in its
entirety and the Certificate of Merger attached hereto as EXHIBIT I is inserted
in lieu thereof.
4. CONTINUED EFFECTIVENESS. Except as expressly modified by this
Agreement, the provisions of the Combination Agreement shall remain in full
force and effect.
5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which, when taken together, shall be deemed to constitute
one and the same instrument.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties have caused this Amendment to
Combination Agreement and Plan of Merger to be executed this ___ day of July,
effective as of the date first written above.
NGC CORPORATION
By:
Printed Name:
Title:
CHEVRON U.S.A. INC.
By:
Printed Name:
Title:
MIDSTREAM COMBINATION CORP.
By:
Printed Name:
Title:
EXHIBIT I
CERTIFICATE OF MERGER
MERGING
NGC CORPORATION
WITH AND INTO
MIDSTREAM COMBINATION CORP.
PURSUANT TO SECTION 251 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The undersigned, being a [Title] of Midstream Combination Corp., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That the name of and the state of incorporation of each of the
constituent corporations in the merger is as follows:
STATE OF
NAME INCORPORATION
Midstream Combination Corp. Delaware
NGC Corporation. Delaware
SECOND: That the Combination Agreement and Plan of Merger dated as of
May 22, 1996 (the "COMBINATION AGREEMENT"), among NGC Corporation, Chevron
U.S.A. Inc. and Midstream Combination Corp. has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with Section 251 and Section 228 (by unanimous written consent) of
the General Corporation Law of the State of Delaware.
THIRD: That Midstream Combination Corp. shall be the surviving
corporation, except that the name of the surviving corporation is hereby changed
to NGC Corporation (the "SURVIVING CORPORATION").
FOURTH: That the Certificate of Incorporation of Midstream Combination
Corp. will be the Certificate of Incorporation of the Surviving Corporation
except that Article First of the Certificate of Incorporation of the Surviving
Corporation will be amended by virtue of the Merger to provide that "The name of
the corporation is NGC Corporation (the "Corporation")."
FIFTH: That an executed copy of the Combination Agreement is on file at
the principal place of business of the Surviving Corporation at the following
address:
13430 Northwest Freeway, Suite 1200
Houston, TX 77040
SIXTH: That a copy of the Combination Agreement will be furnished by
the Surviving Corporation, on request, and without cost, to any stockholder of
any constituent corporation.
SEVENTH: The Merger contemplated by this certificate of merger shall
become effective for all purposes at midnight on August 31, 1996 (the "Effective
Time").
IN WITNESS WHEREOF, Midstream Combination Corp. has caused this
Certificate of Merger to be signed by ________________, [Title], this ____th day
of _______, 1996.
MIDSTREAM COMBINATION CORP.
Name:
Printed Name:
Title:
EXHIBIT 3.3
State of Delaware
Office of the Secretary of State
---------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "MIDSTREAM COMBINATION CORP.", FILED IN THIS OFFICE ON THE
TWENTY-SECOND DAY OF MAY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
EDWARD J. FREEL
Edward J. Freel, Secretary of State
AUTHENTICATION: 7956046
DATE: 05-22-96
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MIDSTREAM COMBINATION CORP.
FIRST: The name of the corporation is MIDSTREAM COMBINATION CORP. (the
"Corporation").
SECOND: The registered office of the Corporation in the State of
Delaware is located at Corporation Service Company, 1013 Centre Road, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the Corporation at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH:
A. CAPITAL STOCK. The total number of shares of stock which the
Corporation shall have authority to issue is 450,000,000 shares, divided into
two classes as follows: (i) 50,000,000 shares of Preferred Stock, par value
$0.01 per share ("Preferred Stock"); and (ii) 400,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock of the
Corporation are as follows:
B. PROVISIONS RELATING TO THE PREFERRED STOCK.
1. The Preferred Stock may be issued from time to time in one or more
series, the shares of each series to have such designations and powers,
preferences, and rights, and qualifications, limitations, and restrictions
thereof as are stated and expressed herein and in the resolution or resolutions
providing for the issuance of such series adopted by the board of directors of
the Corporation as hereafter prescribed.
2. Authority is hereby expressly granted to and vested in the board of
directors of the Corporation to authorize the issuance of the Preferred Stock
from time to time in one or more series, and with respect to each such series of
the Preferred Stock, to fix and state by the resolution or
-1-
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not such series is to have voting rights,
full, special, or limited, or is to be without voting rights, and
whether or not such series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other
series or class of stock;
(ii) the number of shares to constitute such series and the
designations thereof;
(iii) the preferences, and relative, participating, optional,
or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any such series;
(iv) whether or not the shares of any such series shall be
redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash,
notes, securities, or other property), and the time or times at which,
and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of such series shall be subject
to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such
retirement or sinking fund or funds are to be established, the annual
amount thereof, and the terms and provisions relative to the operation
thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, or a combination thereof,
the conditions upon which and the times when such dividends are
payable, the preference to or the relation to the payment of dividends
payable on any other class or classes or series of stock, whether such
dividends shall be cumulative or noncumulative, and if cumulative, the
date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which
the holders of any such series shall be entitled to receive upon the
voluntary and involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any such series, at the
option of the Corporation or the holder thereof or upon the happening
of any specified event, shall be convertible into or exchangeable for
the
-2-
shares of any other class or classes or of any other series of the same
or any other class or classes of stock, securities, or other property
of the Corporation and the conversion price or prices or ratio or
ratios or the rate or rates at which such exchange may be made, with
such adjustments, if any, as shall be stated and expressed or provided
for in such resolution or resolutions; and
(ix) such other special rights and provisions with respect to
any such series as may to the board of directors of the Corporation
seem advisable.
3. The shares of each series of the Preferred Stock may vary from the
shares of any other class or series thereof in any or all of the foregoing
respects. The board of directors of the Corporation may increase the number of
shares of the Preferred Stock designated for any existing series by a resolution
adding to such series authorized and unissued shares of the Preferred Stock not
designated for any other series. The board of directors of the Corporation may
decrease the number of shares of the Preferred Stock designated for any existing
series by a resolution, subtracting from such series unissued shares of the
Preferred Stock designated for such series, and the shares so subtracted shall
become authorized, unissued and undesignated shares of the Preferred Stock.
C. PROVISIONS RELATING TO THE SERIES A PARTICIPATING PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The shares of such series of Preferred Stock
shall be designated as "Series A Participating Preferred Stock" (the "Series A
Preferred"), $0.01 par value per share, and the number of shares of Preferred
Stock constituting such series shall be 8,000,000.
2. DIVIDENDS AND DISTRIBUTION. Subject to the provision for adjustment
hereinafter set forth, the holders of the Series A Preferred shall be entitled
to receive dividends or distributions equal per share in amount and kind to any
dividend or distribution payable on shares of Common Stock, when and as the same
are declared by the Board of Directors out of any funds legally available
therefor and paid to the holders of Common Stock, and no dividend may be
declared and paid on Common Stock unless an identical dividend or distribution
is declared and paid concurrently on Series A Preferred. If, however, at any
time after the date of original issuance of Series A Preferred, the Corporation
shall subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in each such case, the amount to which holders of the Series A
Preferred were entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction the numerator
-3-
of which is the number of shares of the Common Stock outstanding immediately
after such event, and the denominator of which is the number of shares of the
Common Stock outstanding immediately prior to such event. The Corporation will
have the right to issue shares of capital stock that are senior or junior to or
on a parity with the Series A Preferred with respect to dividends without the
approval or consent of the holders of Series A Preferred.
3. VOTING RIGHTS. Except as provided by law, the holders of the Series
A Preferred shall have no voting rights on any matter.
4. REDEMPTION. The shares of the Series A Preferred shall not be
redeemable.
5. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, no
distribution shall be made to the holders of Common Stock or any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred unless, prior thereto, the holders of the Series A
Preferred shall have received $1.00 per share. All assets of the Corporation
available for distribution after the liquidation preferences are fully met of
the Series A Preferred and any shares senior to or on a parity with the Series A
Preferred with respect to liquidation preferences shall be distributed ratably
among the holders of the Series A Preferred and Common Stock in proportion to
the number of shares of Series A Preferred and Common Stock outstanding at the
time of such liquidation, dissolution or winding up of the Corporation. The
Corporation will have the right to issue shares of capital stock that are senior
or junior to or on a parity with the Series A Preferred with respect to the
liquidation, winding-up or dissolution of the Corporation without the approval
or consent of the holders of the Series A Preferred.
6. CONVERSION. The Series A Preferred may be converted at the option of
the holder thereof, or shall be converted automatically without any action on
the part of the holder thereof, into shares of Common Stock, on the terms and
conditions set forth in this Section 6. For purposes of this section 6, the term
"affiliate" shall mean any corporation, partnership or other entity that is an
"affiliate" within the meaning of the regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), as such regulations
are in effect on the date hereof, and the term "Person" shall mean any
individual, firm, corporation, partnership, association, trust, joint venture,
legal entity, political subdivision or instrumentality or other organization.
(A) RIGHT TO CONVERT. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A
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Preferred shall be convertible, at the option of the holder, at any time after
the date of issuance of such share, into one share of Common Stock as follows:
(i) To the extent necessary (a) to avoid dilution of
the holder's percentage ownership of the issued Common Stock, provided
that, with respect to dilution resulting from the issuance of
additional compensatory options as approved by not less than
eighty-five percent (85%) of the entire Board of Directors, the holder
would have no such conversion right so long as its ownership of Common
Stock would still be greater than twenty percent (20%) of the issued
Common Stock, assuming for this purpose that all shares of Common Stock
subject to currently exercisable options and warrants were issued and
outstanding, or (b) to maintain a percentage ownership of the issued
Common Stock at least equal to that of the then largest other
stockholder of the Corporation;
(ii) To the extent necessary, if any Person other
than the holder of Series A Preferred or an affiliate of such holder
makes a tender offer for Common Stock and such holder desires to tender
the shares of the Series A Preferred in the same proportion as it
tenders Common Stock;
(iii) Upon approval by the stockholders of the
Corporation of any merger or recapitalization proposal in which the
Series A Preferred would be treated differently than Common Stock; and
(iv) Upon approval by the Corporation's stockholders
of any (a) sale of all or substantially all of the assets of the
Corporation or (b) liquidation, dissolution or winding up of the
Corporation.
(B) AUTOMATIC CONVERSION. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series A Preferred shall be
automatically converted into one share of Common Stock upon a sale or other
transfer (by operation of law, merger or otherwise) by the holder of such shares
to any Person other than an affiliate of the holder.
(C) CONVERSION RATE ADJUSTMENTS. The Conversion Rate of the
Series A Preferred shall be subject to adjustment as hereinafter set forth. If
at any time the Corporation shall subdivide or reclassify the outstanding shares
of Common Stock into a greater number of shares of Common Stock or combine or
reclassify the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, and in each such case, the number of shares of
Common Stock into which each share of the Series A Preferred is convertible
shall be adjusted so that
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the holder of each share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock which the holder of a
share of the Series A Preferred would have been entitled to receive after the
happening of any and all of the events described above had such share been
converted into Common Stock immediately prior to the happening of such event or
the record date therefor, whichever is earlier.
(D) MECHANICS OF CONVERSION. The holder of any shares of the
Series A Preferred may exercise its option to convert such shares into shares of
Common Stock by surrendering for such purpose to the Corporation, at its
principal office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares of the
Series A Preferred to be converted accompanied by a written notice stating that
such holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 6 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. As promptly as practicable, and in any event within five business
days after the surrender of such certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes, the
Corporation shall deliver or cause to be delivered (i) certificates representing
the number of validly issued, fully paid and nonassessable shares of Common
Stock of the Corporation to which the holder of the Series A Preferred so
converted shall be entitled (and/or any other consideration to which the holders
of such shares of Common Stock would then be entitled) and (ii) if less than the
full number of shares of the Series A Preferred evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, for the number of shares evidenced by such surrendered certificate
or certificates less the number of shares converted. Such conversions shall be
deemed to have been made upon receipt by the Corporation of such notice and such
surrendered certificate or certificates representing the shares of the Series A
Preferred to be converted, so that the rights of the holder thereof shall cease
except for the right to receive Common Stock of the Corporation in accordance
herewith (and/or any other consideration to which the holders of such shares of
Common Stock would then be entitled), and such holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
D. PROVISIONS RELATING TO THE COMMON STOCK.
1. Except as otherwise required by law, and subject to any
special voting rights which may be granted any series of Preferred Stock in the
board of directors resolution which
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creates such series, each holder of Common Stock shall be entitled to one vote
for each share of Common Stock standing in such other holder's name on the
records of the Corporation on each matter submitted to a vote of the
stockholders.
2. Subject to the rights of the holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive when, as,
and if declared by the board of directors of the Corporation, out of funds
legally available therefor, dividends payable in cash, stock, or otherwise.
3. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock and the holders of any bonds, debentures, or other obligations
of the Corporation shall have been paid in full the amounts to which they shall
be entitled (if any), or a sum sufficient for such payment in full shall have
been set aside, the remaining net assets of the Corporation shall be distributed
pro rata to the holders of the Common Stock and the holders of Series A
Preferred in accordance with their respective rights and interest, to the
exclusion of the holders of any other series of the Preferred Stock and any
bonds, debentures, or other obligations of the Corporation.
4. Without the consent of the holders of eighty-five percent
(85%) of the outstanding Common Stock, the Corporation may (and may permit any
subsidiary of the Corporation over which it has control to) sell the following
products:
(i) crude oil;
(ii) other products usually and normally refined as petroleum
products from crude oils; and
(iii) natural gas liquids or liquefied petroleum gases;
irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:
(i) the United States or any of its territories or
possessions;
(ii) any country wholly located in the Western Hemisphere
and/or Europe or surrounded by the Mediterranean Sea;
(iii) any country all of the territory of which was formerly
contained within the Union of Soviet Socialist Republics;
(iv) any country whose territory is contained within the
territories constituting as of the date hereof the
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countries known as Algeria, Angola, Benin, Burkina Faso, Cameroon,
Central African Republic, Chad, Congo, Cote D'Ivoire, Equatorial
Guinea, Gabon, Gambia, Ghana, Greenland, Guinea, Guinea Bissau,
Iceland, Liberia, Libya, Mali, Mauritania, Mongolia, Morocco, Niger,
Nigeria, Rio Muni, Senegal, Sierra Leone, Togo, Tunisia, Turkey,
Western Sahara and/or Zaire;
(v) Antarctica; and
(vi) international waters;
unless (a) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between the Corporation and Chevron Corporation,
as the same may from time to time be amended in accordance with the terms
thereof, or (b) such Scope of Business Agreement is terminated pursuant to its
terms, upon which termination the provisions of this paragraph 4 shall be of no
further force and effect. A copy of such Scope of Business Agreement, as the
same may be amended, shall be available for inspection by any stockholder of the
Corporation at the principal offices of the Corporation. Except as indicated
above or as may otherwise be provided in this Certificate of Incorporation or by
Delaware law, stockholders shall have no right to approve specific business
activities of the Corporation, and the above provisions shall not otherwise
affect corporate powers and purposes as stated in Article III.
E. GENERAL.
1. Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (in any form, but not less
in value than the par value thereof) as may be fixed by the board of directors
of the Corporation, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing conditions. Shares
so issued for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
2. The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase or otherwise acquire shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors of
the Corporation shall be empowered to set the exercise price, duration, times
for exercise, and other terms of such options or rights; PROVIDED, HOWEVER, that
the
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consideration to be received (which may be in any form) for any shares of
capital stock subject thereto shall have a value not less than the par value
thereof.
FIFTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any person (as used herein "person" means any other corporation, partnership,
association, firm, trust, joint venture, other legal entity, political
subdivision, or instrumentality or other organization) in which one or more of
its directors, officers, or stockholders are directors, officers, or
stockholders, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board or committee which authorizes the
contract or transaction, or solely because his, her, or their votes are counted
for such purpose, if (i) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board of directors, a committee thereof
(to the extent permitted by applicable law), or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
SIXTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he (i) is or was a director or officer of the Corporation or
(ii) while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, to the fullest extent permitted
under the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. Such right shall be a contract right and shall include the
right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the General Corporation Law of Delaware, as the
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same exists or may hereafter be amended. If a claim for indemnification or
advancement of expenses hereunder is not paid in full by the Corporation within
60 days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim, and if successful in whole or in part, the claimant
shall also be entitled to be paid the expenses of prosecuting such claim. It
shall be a defense to any such action that such indemnification or advancement
of costs of defense are not permitted under the General Corporation Law of
Delaware, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its board of directors or any
committee or directors thereof, independent legal counsel, or stockholders) to
have made its determination prior to the commencement of such action that
indemnification of, or advancement of costs of defense to, the claimant is
permissible in the circumstances nor an actual determination by the Corporation
(including its board of directors or any committee or directors thereof,
independent legal counsel or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. In the
event of the death of any person having a right of indemnification under the
foregoing provisions, such right shall inure to the benefit of his heirs,
executors, administrators, and personal representatives. The rights conferred
above shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, bylaw, resolution of stockholders or
directors, agreement, or otherwise. The Company shall be required to indemnify
an indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if the initiation of such proceeding (or part thereof) by
the indemnitee was authorized by the board of directors of the Company.
The Corporation's obligation, if any, to indemnify or advance expenses
to any person who was or is serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise shall be reduced by any amount such person may collect as
indemnification or advancement from such other foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry
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or investigation that could lead to such an action, suit, or proceeding.
Any repeal or amendment of this Article SIXTH shall be prospective only
and shall not affect the rights of any such director or officer or the
obligations of the Corporation with respect to any claim arising from or related
to the services of such director or officer in any of the foregoing capacities
prior to any such repeal or amendment to this Article SIXTH.
SEVENTH: The board of directors shall have the power to make, adopt,
alter, amend, and repeal from time to time the Bylaws of the Corporation and to
make from time to time new Bylaws of the Corporation (subject to the right of
the stockholders entitled to vote thereon to adopt, alter, amend, and repeal
Bylaws made by the board of directors or to make new Bylaws) to the extent and
in the manner provided in the Bylaws; PROVIDED, HOWEVER, that the stockholders
of the Corporation shall be entitled to adopt, alter, amend, or repeal Bylaws
made by the board of directors or to make new Bylaws solely upon the affirmative
vote of the holders of a majority of the outstanding shares of the Common Stock.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability 1. for any breach of the director's
duty of loyalty to the Corporation or its stockholders, 2. for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, 3. under Section 174 of the General Corporation Law of Delaware, or 4.
for any transaction from which the director derived an improper personal
benefit. Any repeal or amendment of this Article EIGHTH by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation arising
from an act or omission occurring prior to the time of such repeal or amendment.
In addition to the circumstances in which a director of the Corporation is not
personally liable as set forth in the foregoing provisions of this Article
EIGHTH, a director shall not be liable to the Corporation or its stockholders to
such further extent as permitted by any law hereafter enacted, including without
limitation any subsequent amendment to the General Corporation Law of Delaware.
NINTH: The number of directors constituting the board of directors
shall be fixed by, or in the manner provided in, the Bylaws of the Corporation.
Each director of the Corporation shall hold office until the next annual meeting
of stockholders or until his or her successor shall have been duly elected and
qualified. Directors need not be elected by written ballot.
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TENTH: The incorporator of the Corporation is Shannon M. Hernandez,
whose mailing address is 235 Montgomery Street, San Francisco, California 94104.
The power of the incorporator shall terminate upon the filing of this
Certificate of Incorporation, and the names and mailing addresses of the persons
who are to serve as directors until the first annual meeting and until their
successors are elected and qualified are:
NAME ADDRESS
R. E. Galvin 1301 McKinney St., Houston TX 77010
D. L. Paul 1301 McKinney St., Houston TX 77010
D. R. Dunn 1301 McKinney St., Houston TX 77010
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 22nd day of May, 1996.
/s/ SHANNON M. HERNANDEZ
Shannon M. Hernandez
Incorporator
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EXHIBIT 3.4
B Y - L A W S
OF
MIDSTREAM COMBINATION CORP.
(a Delaware corporation)
TABLE OF CONTENTS
ARTICLE 1 Offices......................................................1
1.1 Principal Office.............................................1
1.2 Additional Offices...........................................1
ARTICLE 2 Meeting of Stockholders......................................1
2.1 Place of Meeting.............................................1
2.2 Annual Meeting...............................................1
2.3 Special Meetings.............................................1
2.4 Notice of Meetings...........................................2
2.5 Business Matter of a Special Meeting.........................2
2.6 List of Stockholders.........................................2
2.7 Organization and Conduct of Business.........................2
2.8 Quorum and Adjournments......................................3
2.9 Voting Rights................................................3
2.10 Majority Vote................................................3
2.11 Record Date for Stockholder Notice and Voting................3
2.12 Proxies......................................................4
2.13 Inspectors of Election.......................................4
ARTICLE 3 Directors....................................................4
3.1 Number; Qualifications.......................................4
3.2 Resignation and Vacancies....................................5
3.3 Removal of Directors.........................................5
3.4 Powers.......................................................5
3.5 Place of Meetings............................................6
3.6 Annual Meetings..............................................6
3.7 Regular Meetings.............................................6
3.8 Special Meetings.............................................6
3.9 Quorum and Adjournments......................................7
3.10 Action Without Meeting.......................................7
3.11 Telephone Meetings...........................................7
3.12 Waiver of Notice.............................................7
3.13 Fees and Compensation of Directors...........................7
3.14 Rights of Inspection.........................................7
ARTICLE 4 Committees of Directors......................................8
4.1 Selection....................................................8
4.2 Power........................................................8
4.3 Committee Minutes............................................9
ARTICLE 5 Officers.....................................................9
5.1 Officers Designated..........................................9
5.2 Appointment of Officers......................................9
5.3 Subordinate Officers.........................................9
5.4 Removal and Resignation of Officers..........................9
5.5 Vacancies in Offices.........................................9
5.6 Compensation.................................................9
5.7 The Chairman of the Board...................................10
5.8 The President...............................................10
5.9 The Vice President..........................................10
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5.10 The Secretary...............................................10
5.11 The Assistant Secretary.....................................11
5.12 The Treasurer...............................................11
5.13 The Assistant Treasurer.....................................11
ARTICLE 6 Stock Certificates..........................................11
6.1 Certificates for Shares.....................................11
6.2 Signatures on Certificates..................................12
6.3 Transfer of Stock...........................................12
6.4 Registered Stockholders.....................................12
6.5 Record Date.................................................12
6.6 Lost, Stolen or Destroyed Certificates......................13
ARTICLE 7 Notices.....................................................13
7.1 Notice......................................................13
7.2 Waiver......................................................13
ARTICLE 8 General Provisions..........................................13
8.1 Dividends...................................................13
8.2 Dividend Reserve............................................14
8.3 Checks......................................................14
8.4 Corporate Seal..............................................14
8.5 Execution of Corporate Contracts and
Instruments.................................................14
ARTICLE 9 Amendments..................................................14
-ii-
B Y - L A W S
OF
MIDSTREAM COMBINATION CORP.
(a Delaware corporation)
ARTICLE 1
OFFICES
1.1 PRINCIPAL OFFICE. The principal executive office of the Corporation
shall be 1013 Centre Road, Wilmington, DE 19805, and the name of the registered
agent in charge thereof is Corporation Service Company.
1.2 ADDITIONAL OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors (the "Board") may from time to time designate or the business of the
Corporation may require.
ARTICLE 2
MEETING OF STOCKHOLDERS
2.1 PLACE OF MEETING. All meetings of the stockholders for the election
of directors shall be held at the principal office of the Corporation, at such
place as may be fixed from time to time by the Board or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board and stated in the notice of the meeting. Meetings of
stockholders for any purpose may be held at such time and place within or
without the State of Delaware as the Board may fix from time to time and as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2.2 ANNUAL MEETING. Annual meetings of stockholders shall be held each
year at such date and time as shall be designated from time to time by the Board
and stated in the notice of the meeting. At such annual meetings, the
stockholders shall elect a Board and transact such other business as may
properly be brought before the meetings.
2.3 SPECIAL MEETINGS. Special meetings of the stockholders may be
called for any purpose or purposes, unless otherwise prescribed by the statute
or by the Certificate of Incorporation, at the request of the Chairman of the
Board, the President or the Board. Such request shall state the purpose or
purposes of the proposed meeting.
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2.4 NOTICE OF MEETINGS. Written notice of stockholders' meetings,
stating the place, date and time of the meeting and the purpose or purposes for
which the meeting is called, shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days prior to
the meeting.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
2.5 BUSINESS MATTER OF A SPECIAL MEETING. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
2.6 LIST OF STOCKHOLDERS. The officer in charge of the stock ledger of
the Corporation or the transfer agent shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, at a place within the
city where the meeting is to be held, which place, if other than the place of
the meeting, shall be specified in the notice of the meeting. The list shall
also be produced and kept at the place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person
thereat.
2.7 ORGANIZATION AND CONDUCT OF BUSINESS. The Chairman of the Board or,
in his or her absence, the President of the Corporation or, in their absence,
such person as the Board may have designated or, in the absence of such a
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as Chairman of the meeting. In the absence
of the Secretary of the Corporation, the Secretary of the meeting shall be such
person as the Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting,
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including such regulation of the manner of voting and the conduct of discussion
as seems to him or her in order.
2.8 QUORUM AND ADJOURNMENTS. Except where otherwise provided by law or
the Certificate of Incorporation or these By-Laws, the holders of a majority of
the stock issued and outstanding and entitled to vote, present in person or
represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person or
represented by proxy shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented.
2.9 VOTING RIGHTS. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.
2.10 MAJORITY VOTE. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation or of these By-Laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE AND VOTING. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any dividend or other distribution, or entitled
to exercise any right in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten (10)
days before the date of any such meeting nor more than sixty (60) days before
any other action.
If the Board does not so fix a record date, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on
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the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held.
2.12 PROXIES. Every person entitled to vote for directors or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the Corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the Corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the Corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven months from the date of the proxy,
unless otherwise provided in the proxy.
2.13 INSPECTORS OF ELECTION. Before any meeting of stockholders the
Board may appoint any person other than nominees for office to act as inspectors
of election at the meeting or its adjournment. If no inspectors of election are
so appointed, the Chairman of the meeting may, and on the request of any
stockholder or a stockholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more stockholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the Chairman of the meeting may, and upon the request of any
stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.
ARTICLE 3
DIRECTORS
3.1 NUMBER; QUALIFICATIONS. The Board shall consist of one or more
members, the number thereof to be determined from time to time by resolution of
the Board. At each annual meeting of the stockholders, directors shall be
elected for that class of directors whose terms are then expiring, except as
provided in Section 3.2, and each director so elected shall hold office until
his successor is elected and qualified or until his
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earlier resignation or removal. Directors need not be stockholders.
3.2 RESIGNATION AND VACANCIES. A vacancy or vacancies in the Board
shall be deemed to exist in the case of the death, resignation or removal of any
director, or if the authorized number of directors be increased. Vacancies may
be filled by a majority of the remaining directors, though less than a quorum,
or by a sole remaining director, unless otherwise provided in the Certificate of
Incorporation. The stockholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors. If the Board accepts
the resignation of a director tendered to take effect at a future time, the
Board shall have power to elect a successor to take office when the resignation
is to become effective. If there are no directors in office, then an election of
directors may be held in the manner provided by statute.
3.3 REMOVAL OF DIRECTORS. Unless otherwise restricted by statute, the
Certificate of Incorporation or these By-Laws, any director or the entire Board
may be removed, with or without cause, by the holders of at least a majority of
the shares entitled to vote at an election of directors.
3.4 POWERS. The business of the Corporation shall be managed by or
under the direction of the Board which may exercise all such powers of the
Corporation and do all such lawful acts and things which are not by statute or
by the Certificate of Incorporation or by these By-Laws directed or required to
be exercised or done by the stockholders.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of
the Corporation; prescribe any powers and duties for them that are
consistent with law, with the Certificate of Incorporation, and with
these By-Laws; fix their compensation; and require from them security
for faithful service;
(b) Confer upon any office the power to appoint, remove and
suspend subordinate officers, employees and agents;
(c) Change the principal executive office or the principal
business office in the State of Delaware or any other state from one
location to another; cause the Corporation to be qualified to do
business in any other state, territory, dependency or country and
conduct business within or without the State of Delaware; and designate
any place within or without the State of Delaware for the holding of
any
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stockholders meeting, or meetings, including annual meetings;
(d) Adopt, make, and use a corporate seal; prescribe the forms
of certificates of stock; and alter the form of the seal and
certificates;
(e) Authorize the issuance of shares of stock of the
Corporation on any lawful terms, in consideration of money paid, labor
done, services actually rendered, debts or securities cancelled,
tangible or intangible property actually received;
(f) Borrow money and incur indebtedness on behalf of the
Corporation, and cause to be executed and delivered for the
Corporation's purposes, in the corporate name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations and
other evidences of debt and securities;
(g) Declare dividends from time to time in accordance with
law;
(h) Adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
and
(i) Adopt from time to time regulations not inconsistent with
these By-Laws for the management of the Corporation's business and
affairs.
3.5 PLACE OF MEETINGS. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
3.6 ANNUAL MEETINGS. The annual meetings of the Board shall be held
immediately following the annual meeting of stockholders, and no notice of such
meeting shall be necessary to the Board, provided a quorum shall be present. The
annual meetings shall be for the purposes of organization, and an election of
officers and the transaction of other business.
3.7 REGULAR MEETINGS. Regular meetings of the Board may be held without
notice at such time and place as may be determined from time to time by the
Board.
3.8 SPECIAL MEETINGS. Special meetings of the Board may be called by
the Chairman of the Board, the President, a Vice President or a majority of the
Board upon one (1) day's notice to each director.
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3.9 QUORUM AND ADJOURNMENTS. At all meetings of the Board, a majority
of the directors then in office shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board, except as may otherwise
be specifically provided by law or the Certificate of Incorporation. If a quorum
is not present at any meeting of the Board, the directors present may adjourn
the meeting from time to time, without notice other than announcement at the
meeting at which the adjournment is taken, until a quorum shall be present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved of
by at least a majority of the required quorum for that meeting.
3.10 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
3.11 TELEPHONE MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation or these By-Laws, any member of the Board or any committee may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
3.12 WAIVER OF NOTICE. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
3.13 FEES AND COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, the Board shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board and may be paid a
fixed sum for attendance at each meeting of the Board or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 RIGHTS OF INSPECTION. Every director shall have the absolute right
at any reasonable time to inspect and copy all
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books, records and documents of every kind and to inspect the physical
properties of the Corporation and also of its subsidiary corporations, domestic
or foreign. Such inspection by a director may be made in person or by agent or
attorney and includes the right to copy and obtain extracts.
ARTICLE 4
COMMITTEES OF DIRECTORS
4.1 SELECTION. The Board may, by resolution passed by a majority of the
entire Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may unanimously
appoint another member of the Board to act at the meeting in the place of any
such absent or disqualified member.
4.2 POWER. Any such committee, to the extent provided in the resolution
of the Board, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in Section 151(a)
of the General Corporation Law of Delaware, fix any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the Corporation), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of dissolution, removing or indemnifying directors or amending the
By-Laws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board.
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4.3 COMMITTEE MINUTES. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.
ARTICLE 5
OFFICERS
5.1 OFFICERS DESIGNATED. The officers of the Corporation shall be
chosen by the Board and shall be a President, a Secretary and a Treasurer. The
Board may also choose a Chairman of the Board, one or more Vice Presidents, and
one or more assistant Secretaries and assistant Treasurers. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
5.2 APPOINTMENT OF OFFICERS. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section
5.3 or 5.5 of this Article 5, shall be appointed by the Board, and each shall
serve at the pleasure of the Board, subject to the rights, if any, of an officer
under any contract of employment.
5.3 SUBORDINATE OFFICERS. The Board may appoint, and may empower the
President to appoint, such other officers and agents as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as the
Board may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by an affirmative vote of the majority of the
Board, at any regular or special meeting of the Board, or, except in case of an
officer chosen by the Board, by any officer upon whom such power of removal may
be conferred by the Board.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
5.6 COMPENSATION. The salaries of all officers of the Corporation shall
be fixed from time to time by the Board and no
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officer shall be prevented from receiving a salary because he is also a director
of the Corporation.
5.7 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, perform such other powers and duties as
may be assigned to him from time to time by the Board. If there is no President,
the Chairman of the Board shall also be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in Section 5.8 of
this Article 5.
5.8 THE PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board to the Chairman of the Board, if there be such an officer,
the President shall be the Chief Executive Officer of the Corporation, shall
preside at all meetings of the stockholders and in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board, shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board are carried into effect. He or she
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board to some other officer or agent of the
Corporation.
5.9 THE VICE PRESIDENT. The Vice President (or in the event there be
more than one, the Vice Presidents in the order designated by the directors, or
in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his disability or refusal to
act, perform the duties of the President, and when so acting, shall have the
powers of and subject to all the restrictions upon the President. The Vice
President(s) shall perform such other duties and have such other powers as may
from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these By-Laws.
5.10 THE SECRETARY. The Secretary shall attend all meetings of the
Board and the stockholders and record all votes and the proceedings of the
meetings in a book to be kept for that purpose and shall perform like duties for
the standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board,
and shall perform such other duties as may from time to time be prescribed by
the Board, the Chairman of the Board or the President, under whose supervision
he or she shall act. The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it, and, when so affixed, the seal
may be attested by his or her signature or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing thereof
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by his or her signature. The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board, a share register, or a
duplicate share register, showing the names of all stockholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
5.11 THE ASSISTANT SECRETARY. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order designated by the Board
(or in the absence of any designation, in the order of their election) shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
5.12 THE TREASURER. The Treasurer shall have the custody of the
Corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board. The
Treasurer shall disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and the Board, at its regular meetings, or when the Board so requires,
an account of all his or her transactions as Treasurer and of the financial
condition of the Corporation.
5.13 THE ASSISTANT TREASURER. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order designated by the
Board (or in the absence of any designation, in the order of their election)
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as may from time
to time be prescribed by the Board.
ARTICLE 6
STOCK CERTIFICATES
6.1 CERTIFICATES FOR SHARES. The shares of the Corporation shall be
represented by certificates. Certificates shall be signed by, or in the name of
the Corporation by, the Chairman of the Board, or the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation.
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Within a reasonable time after the issuance or transfer of uncertified
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required by the General Corporation Law of the
State of Delaware or a statement that the Corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
6.2 SIGNATURES ON CERTIFICATES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
6.3 TRANSFER OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate of shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated share, such uncertificated shares shall
be cancelled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation.
6.4 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a percent registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
6.5 RECORD DATE. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or to exercise
any rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board may fix, in advance, a record date which
shall not be more than sixty (60) nor less than ten (10) days prior to the date
of such meeting, nor more than sixty (60) days prior to the date of
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any other action. A determination of stockholders of record entitled to notice
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
6.6 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board may direct that a
new certificate or certificates be issued to replace any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing the issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of the lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require, and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE 7
NOTICES
7.1 NOTICE. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram or telephone.
7.2 WAIVER. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 8
GENERAL PROVISIONS
8.1 DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to any restrictions contained in the General Corporation Laws of
Delaware or the provisions of the Certificate of Incorporation, if any, may be
declared by the Board at any regular or special meeting. Dividends may be paid
in cash, in property or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
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8.2 DIVIDEND RESERVE. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
8.3 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board may from time to time designate.
8.4 CORPORATE SEAL. The Board may provide a suitable seal, containing
the name of the Corporation, which seal shall be in charge of the Secretary. If
and when so directed by the Board or a committee thereof, duplicates of the seal
may be kept and used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
8.5 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. The Board, except
as otherwise provided in these By-Laws, may authorize any officer or officers,
or agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the Board or
within the agency power of an officer, no officer, agent or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
ARTICLE 9
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted as provided for in the Certificate of Incorporation.
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CERTIFICATE OF SECRETARY
I, the undersigned, hereby certify:
1. That I am the duly elected, acting and qualified Secretary of
MIDSTREAM COMBINATION CORP., a Delaware corporation; and
2. That the foregoing By-Laws, comprising 14 pages, constitute the
By-Laws of such Corporation as duly adopted by action of the board of directors
of such Corporation pursuant to the Action by Unanimous Written Consent of the
Board of Directors, dated May 22, 1996.
Dated: May 22, 1996
/s/ R. E. GALVIN,
R. E. Galvin,
Secretary
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation this 22nd day of May, 1996.
/s/ D.L. PAUL
D.l. Paul
Secretary
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
NGC CORPORATION
FIRST: The name of the corporation is NGC CORPORATION (the
"Corporation").
SECOND: The registered office of the Corporation in the State of
Delaware is located at Corporation Service Company, 1013 Centre Road, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the Corporation at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH:
A. CAPITAL STOCK. The total number of shares of stock which the
Corporation shall have authority to issue is 450,000,000 shares, divided into
two classes as follows: (i) 50,000,000 shares of Preferred Stock, par value
$0.01 per share ("Preferred Stock"); and (ii) 400,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock of the
Corporation are as follows:
B. PROVISIONS RELATING TO THE PREFERRED STOCK.
1. The Preferred Stock may be issued from time to time in one
or more series, the shares of each series to have such designations and powers,
preferences, and rights, and qualifications, limitations, and restrictions
thereof as are stated and expressed herein and in the resolution or resolutions
providing for the issuance of such series adopted by the board of directors of
the Corporation as hereafter prescribed.
2. Authority is hereby expressly granted to and vested in the
board of directors of the Corporation to authorize the issuance of the Preferred
Stock from time to time in one or more series, and with respect to each such
series of the Preferred Stock, to fix and state by the resolution or resolutions
from time to time adopted providing for the issuance thereof the following:
(i) whether or not such series is to have voting rights, full,
special, or limited, or is to be without voting rights, and whether or
not such series is to be entitled to vote as a separate class either
alone or together with the holders of one or more other series or class
of stock;
(ii) the number of shares to constitute such series and the
designations thereof;
(iii) the preferences, and relative, participating, optional,
or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any such series;
(iv) whether or not the shares of any such series shall be
redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash,
notes, securities, or other property), and the time or times at which,
and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of such series shall be subject
to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such
retirement or sinking fund or funds are to be established, the annual
amount thereof, and the terms and provisions relative to the operation
thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, or a combination thereof,
the conditions upon which and the times when such dividends are
payable, the preference to or the relation to the payment of dividends
payable on any other class or classes or series of stock, whether such
dividends shall be cumulative or noncumulative, and if cumulative, the
date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which
the holders of any such series shall be entitled to receive upon the
voluntary and involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any such series, at the
option of the Corporation or the holder thereof or upon the happening
of any specified event, shall be convertible into or exchangeable for
the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other
property of the Corporation and the conversion price or prices or ratio
or ratios or the rate or rates at which such exchange may be made, with
such adjustments, if any, as shall be stated and expressed or provided
for in such resolution or resolutions; and
(ix) such other special rights and provisions with respect to
any such series as may to the board of directors of the Corporation
seem advisable.
3. The shares of each series of the Preferred Stock may vary from the
shares of any other class or series thereof in any or all of the foregoing
respects. The board of directors of the Corporation may increase the number of
shares of the Preferred Stock designated for any existing series by a resolution
adding to such series authorized and unissued shares of the Preferred Stock not
designated for any other series. The board of directors of the Corporation may
decrease the number of shares of the Preferred Stock designated for any existing
series by a resolution, subtracting from such series unissued shares of the
Preferred Stock designated for such series, and the shares so subtracted shall
become authorized, unissued and undesignated shares of the Preferred Stock.
C. PROVISIONS RELATING TO THE SERIES A PARTICIPATING PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The shares of such series of Preferred Stock
shall be designated as "Series A Participating Preferred Stock" (the "Series A
Preferred"), $0.01 par value per share, and the number of shares of Preferred
Stock constituting such series shall be 8,000,000.
2. DIVIDENDS AND DISTRIBUTION. Subject to the provision for adjustment
hereinafter set forth, the holders of the Series A Preferred shall be entitled
to receive dividends or distributions equal per share in amount and kind to any
dividend or distribution payable on shares of Common Stock, when and as the same
are declared by the Board of Directors out of any funds legally available
therefor and paid to the holders of Common Stock, and no dividend may be
declared and paid on Common Stock unless an identical dividend or distribution
is declared and paid concurrently on Series A Preferred. If, however, at any
time after the date of original issuance of Series A Preferred, the Corporation
shall subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in each such case, the amount to which holders of the Series A
Preferred were entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of the Common Stock outstanding immediately after such event, and the
denominator of which is the number of shares of the Common Stock outstanding
immediately prior to such event. The Corporation will have the right to issue
shares of capital stock that are senior or junior to or on a parity with the
Series A Preferred with respect to dividends without the approval or consent of
the holders of Series A Preferred.
3. VOTING RIGHTS. Except as provided by law, the holders of the Series
A Preferred shall have no voting rights on any matter.
4. REDEMPTION. The shares of the Series A Preferred shall not be
redeemable.
5. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, no
distribution shall be made to the holders of Common Stock or any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred unless, prior thereto, the holders of the Series A
Preferred shall have received $1.00 per share. All assets of the Corporation
available for distribution after the liquidation preferences are fully met of
the Series A Preferred and any shares senior to or on a parity with the Series A
Preferred with respect to liquidation preferences shall be distributed ratably
among the holders of the Series A Preferred and Common Stock in proportion to
the number of shares of Series A Preferred and Common Stock outstanding at the
time of such liquidation, dissolution or winding up of the Corporation. The
Corporation will have the right to issue shares of capital stock that are senior
or junior to or on a parity with the Series A Preferred with respect to the
liquidation, winding-up or dissolution of the Corporation without the approval
or consent of the holders of the Series A Preferred.
6. CONVERSION. The Series A Preferred may be converted at the option of
the holder thereof, or shall be converted automatically without any action on
the part of the holder thereof, into shares of Common Stock, on the terms and
conditions set forth in this Section 6. For purposes of this section 6, the term
"affiliate" shall mean any corporation, partnership or other entity that is an
"affiliate" within the meaning of the regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), as such regulations
are in effect on the date hereof, and the term "Person" shall mean any
individual, firm, corporation, partnership, association, trust, joint venture,
legal entity, political subdivision or instrumentality or other organization.
(A) RIGHT TO CONVERT. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A Preferred shall be
convertible, at the option of the holder, at any time after the date of issuance
of such share, into one share of Common Stock as follows:
(i) To the extent necessary (a) to avoid dilution of
the holder's percentage ownership of the issued Common Stock, provided
that, with respect to dilution resulting from the issuance of
additional compensatory options as approved by not less than
eighty-five percent (85%) of the entire Board of Directors, the holder
would have no such conversion right so long as its ownership of Common
Stock would still be greater than twenty percent (20%) of the issued
Common Stock, assuming for this purpose that all shares of Common Stock
subject to currently exercisable options and warrants were issued and
outstanding, or (b) to maintain a percentage ownership of the issued
Common Stock at least equal to that of the then largest other
stockholder of the Corporation;
(ii) To the extent necessary, if any Person other
than the holder of Series A Preferred or an affiliate of such holder
makes a tender offer for Common Stock and such holder desires to tender
the shares of the Series A Preferred in the same proportion as it
tenders Common Stock;
(iii) Upon approval by the stockholders of the
Corporation of any merger or recapitalization proposal in which the
Series A Preferred would be treated differently than Common Stock; and
(iv) Upon approval by the Corporation's stockholders
of any (a) sale of all or substantially all of the assets of the
Corporation or (b) liquidation, dissolution or winding up of the
Corporation.
(B) AUTOMATIC CONVERSION. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A Preferred shall be
automatically converted into one share of Common Stock upon a sale or other
transfer (by operation of law, merger or otherwise) by the holder of such shares
to any Person other than an affiliate of the holder.
(C) CONVERSION RATE ADJUSTMENTS. The Conversion Rate of the
Series A Preferred shall be subject to adjustment as hereinafter set forth. If
at any time the Corporation shall subdivide or reclassify the outstanding shares
of Common Stock into a greater number of shares of Common Stock or combine or
reclassify the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, and in each such case, the number of shares of
Common Stock into which each share of the Series A Preferred is convertible
shall be adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of Common Stock which
the holder of a share of the Series A Preferred would have been entitled to
receive after the happening of any and all of the events described above had
such share been converted into Common Stock immediately prior to the happening
of such event or the record date therefor, whichever is earlier.
(D) MECHANICS OF CONVERSION. The holder of any shares of the
Series A Preferred may exercise its option to convert such shares into shares of
Common Stock by surrendering for such purpose to the Corporation, at its
principal office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares of the
Series A Preferred to be converted accompanied by a written notice stating that
such holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 6 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. As promptly as practicable, and in any event within five business
days after the surrender of such certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes, the
Corporation shall deliver or cause to be delivered (i) certificates representing
the number of validly issued, fully paid and nonassessable shares of Common
Stock of the Corporation to which the holder of the Series A Preferred so
converted shall be entitled (and/or any other consideration to which the holders
of such shares of Common Stock would then be entitled) and (ii) if less than the
full number of shares of the Series A Preferred evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, for the number of shares evidenced by such surrendered certificate
or certificates less the number of shares converted. Such conversions shall be
deemed to have been made upon receipt by the Corporation of such notice and such
surrendered certificate or certificates representing the shares of the Series A
Preferred to be converted, so that the rights of the holder thereof shall cease
except for the right to receive Common Stock of the Corporation in accordance
herewith (and/or any other consideration to which the holders of such shares of
Common Stock would then be entitled), and such holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
D. PROVISIONS RELATING TO THE COMMON STOCK.
1. Except as otherwise required by law, and subject to any
special voting rights which may be granted any series of Preferred Stock in the
board of directors resolution which creates such series, each holder of Common
Stock shall be entitled to one vote for each share of Common Stock standing in
such other holder's name on the records of the Corporation on each matter
submitted to a vote of the stockholders.
2. Subject to the rights of the holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive when, as,
and if declared by the board of directors of the Corporation, out of funds
legally available therefor, dividends payable in cash, stock, or otherwise.
3. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock and the holders of any bonds, debentures, or other obligations
of the Corporation shall have been paid in full the amounts to which they shall
be entitled (if any), or a sum sufficient for such payment in full shall have
been set aside, the remaining net assets of the Corporation shall be distributed
pro rata to the holders of the Common Stock and the holders of Series A
Preferred in accordance with their respective rights and interest, to the
exclusion of the holders of any other series of the Preferred Stock and any
bonds, debentures, or other obligations of the Corporation.
4. Without the consent of the holders of eighty-five percent
(85%) of the outstanding Common Stock, the Corporation may (and may permit any
subsidiary of the Corporation over which it has control to) sell the following
products:
(i) crude oil;
(ii) other products usually and normally refined as petroleum
products from crude oils; and
(iii) natural gas liquids or liquefied petroleum gases;
irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:
(i) the United States or any of its territories or
possessions;
(ii) any country wholly located in the Western Hemisphere
and/or Europe or surrounded by the Mediterranean Sea;
(iii) any country all of the territory of which was formerly
contained within the Union of Soviet Socialist Republics;
(iv) any country whose territory is contained within the
territories constituting as of the date hereof the countries known as
Algeria, Angola, Benin, Burkina Faso, Cameroon, Central African
Republic, Chad, Congo, Cote D'Ivoire, Equatorial Guinea, Gabon, Gambia,
Ghana, Greenland, Guinea, Guinea Bissau, Iceland, Liberia, Libya, Mali,
Mauritania, Mongolia, Morocco, Niger, Nigeria, Rio Muni, Senegal,
Sierra Leone, Togo, Tunisia, Turkey, Western Sahara and/or Zaire;
(v) Antarctica; and
(vi) international waters;
unless (a) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between the Corporation and Chevron Corporation,
as the same may from time to time be amended in accordance with the terms
thereof, or (b) such Scope of Business Agreement is terminated pursuant to its
terms, upon which termination the provisions of this paragraph 4 shall be of no
further force and effect. A copy of such Scope of Business Agreement, as the
same may be amended, shall be available for inspection by any stockholder of the
Corporation at the principal offices of the Corporation. Except as indicated
above or as may otherwise be provided in this Certificate of Incorporation or by
Delaware law, stockholders shall have no right to approve specific business
activities of the Corporation, and the above provisions shall not otherwise
affect corporate powers and purposes as stated in Article III.
E. GENERAL.
1. Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (in any form, but not less
in value than the par value thereof) as may be fixed by the board of directors
of the Corporation, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing conditions. Shares
so issued for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
2. The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase or otherwise acquire shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors of
the Corporation shall be empowered to set the exercise price, duration, times
for exercise, and other terms of such options or rights; PROVIDED, HOWEVER, that
the consideration to be received (which may be in any form) for any shares of
capital stock subject thereto shall have a value not less than the par value
thereof.
FIFTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any person (as used herein "person" means any other corporation, partnership,
association, firm, trust, joint venture, other legal entity, political
subdivision, or instrumentality or other organization) in which one or more of
its directors, officers, or stockholders are directors, officers, or
stockholders, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board or committee which authorizes the
contract or transaction, or solely because his, her, or their votes are counted
for such purpose, if (i) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board of directors, a committee thereof
(to the extent permitted by applicable law), or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
SIXTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he (i) is or was a director or officer of the Corporation or
(ii) while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, to the fullest extent permitted
under the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. Such right shall be a contract right and shall include the
right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense are not permitted under the General Corporation Law of Delaware, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its board of directors or any committee or
directors thereof, independent legal counsel, or stockholders) to have made its
determination prior to the commencement of such action that indemnification of,
or advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors or any committee or directors thereof, independent legal
counsel or stockholders) that such indemnification or advancement is not
permissible shall be a defense to the action or create a presumption that such
indemnification or advancement is not permissible. In the event of the death of
any person having a right of indemnification under the foregoing provisions,
such right shall inure to the benefit of his heirs, executors, administrators,
and personal representatives. The rights conferred above shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, bylaw, resolution of stockholders or directors, agreement, or
otherwise. The Company shall be required to indemnify an indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if the initiation of such proceeding (or part thereof) by the indemnitee was
authorized by the board of directors of the Company.
The Corporation's obligation, if any, to indemnify or advance expenses
to any person who was or is serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise shall be reduced by any amount such person may collect as
indemnification or advancement from such other foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
Any repeal or amendment of this Article SIXTH shall be prospective only
and shall not affect the rights of any such director or officer or the
obligations of the Corporation with respect to any claim arising from or related
to the services of such director or officer in any of the foregoing capacities
prior to any such repeal or amendment to this Article SIXTH.
SEVENTH: The board of directors shall have the power to make, adopt,
alter, amend, and repeal from time to time the Bylaws of the Corporation and to
make from time to time new Bylaws of the Corporation (subject to the right of
the stockholders entitled to vote thereon to adopt, alter, amend, and repeal
Bylaws made by the board of directors or to make new Bylaws) to the extent and
in the manner provided in the Bylaws; PROVIDED, HOWEVER, that the stockholders
of the Corporation shall be entitled to adopt, alter, amend, or repeal Bylaws
made by the board of directors or to make new Bylaws solely upon the affirmative
vote of the holders of a majority of the outstanding shares of the Common Stock.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article EIGHTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article EIGHTH, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the General Corporation
Law of Delaware.
NINTH: The number of directors constituting the board of directors
shall be fixed by, or in the manner provided in, the Bylaws of the Corporation.
Each director of the Corporation shall hold office until the next annual meeting
of stockholders or until his or her successor shall have been duly elected and
qualified. Directors need not be elected by written ballot.
EXHIBIT 3.6
BYLAWS
OF
NGC CORPORATION
A Delaware Corporation
TABLE OF CONTENTS
SECTION PAGE
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent........................................ 1
1.2 Other Offices...................................................... 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting..................................................... 1
2.2 Special Meeting.................................................... 1
2.3 Place of Meetings.................................................. 2
2.4 Notice............................................................. 2
2.5 Voting List........................................................ 2
2.6 Quorum............................................................. 2
2.7 Required Vote; Withdrawal of Quorum................................ 3
2.8 Method of Voting; Proxies.......................................... 3
2.9 Record Date........................................................ 3
2.10 Conduct of Meeting................................................. 4
2.11 Inspectors......................................................... 4
ARTICLE THREE: DIRECTORS
3.1 Management......................................................... 5
3.2 Number; Term....................................................... 5
3.3 Removal; Vacancies................................................. 5
3.4 Meetings of Directors.............................................. 5
3.5 First Meeting...................................................... 5
3.6 Election of Officers............................................... 6
3.7 Regular Meetings................................................... 6
3.8 Special Meetings................................................... 6
3.9 Notice............................................................. 6
3.10 Quorum; Vote Required; Actions Requiring Approval.................. 6
3.11 Procedure.......................................................... 9
3.12 Presumption of Assent.............................................. 9
3.13 Compensation....................................................... 9
3.14 Interested Directors............................................... 9
i
ARTICLE FOUR: COMMITTEES
4.1 Executive Committee................................................ 10
4.2 Other Committees................................................... 10
4.3 Number; Qualification; Term........................................ 10
4.4 Authority.......................................................... 10
4.5 Committee Changes.................................................. 11
4.6 Alternate Members of Committees.................................... 11
4.7 Regular Meetings................................................... 11
4.8 Special Meetings................................................... 11
4.9 Quorum; Majority Vote.............................................. 11
4.10 Minutes............................................................ 11
4.11 Compensation....................................................... 11
4.12 Responsibility..................................................... 12
ARTICLE FIVE: NOTICE
5.1 Method............................................................. 12
5.2 Waiver............................................................. 12
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office..................................... 12
6.2 Removal............................................................ 13
6.3 Vacancies.......................................................... 13
6.4 Authority.......................................................... 13
6.5 Compensation....................................................... 13
6.6 Chairman of the Board.............................................. 13
6.7 President.......................................................... 13
6.8 Vice Presidents.................................................... 14
6.9 Treasurer.......................................................... 14
6.10 Assistant Treasurer................................................ 14
6.11 Secretary.......................................................... 14
6.12 Assistant Secretaries.............................................. 14
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares............................................ 15
7.2 Replacement of Lost or Destroyed Certificates...................... 15
7.3 Transfer of Shares................................................. 15
7.4 Registered Stockholders............................................ 15
7.5 Regulations........................................................ 16
7.6 Legends............................................................ 16
ii
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Reserves........................................................... 16
8.2 Books and Records.................................................. 16
8.3 Fiscal Year........................................................ 16
8.4 Seal............................................................... 16
8.5 Resignations....................................................... 16
8.6 Securities of Other Corporations................................... 17
8.7 Telephone Meetings................................................. 17
8.8 Invalid Provisions................................................. 17
8.9 Mortgages, etc..................................................... 17
8.10 Headings........................................................... 17
8.11 References......................................................... 17
8.12 Amendments......................................................... 17
iii
BYLAWS
OF
NGC CORPORATION
A Delaware Corporation
ARTICLE ONE: OFFICES
1.1 REGISTERED OFFICE AND AGENT. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.
1.2 OTHER OFFICES. the Corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 ANNUAL MEETING. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may be properly brought before the meeting.
2.2 SPECIAL MEETING. A special meeting of the stockholders may
be called by the board of directors pursuant to a resolution adopted by a
majority of the directors, by the Chairman of the Board, by the President, or by
any holder or holders of record of at least 10% of the outstanding shares of
capital stock of the Corporation then entitled to vote on any matter for which
the respective special meeting is being called (considered for this purpose as
one class). Subject to applicable law, a special meeting shall be held on such
date and at such time as shall be designated by the persons(s) calling the
meeting and stated in the notice of the meeting or in a duly executed waiver of
notice of such meeting. Only such business shall be transacted at a special
meeting as may be stated or indicated in the notice of such meeting given in
accordance with these Bylaws or in a duly executed waiver of notice of such
meeting.
2
2.3 PLACE OF MEETINGS. An annual meeting of stockholders may
be held at any place within or without the State of Delaware designated by the
board of directors. A special meeting of stockholders may be held at any place
within or without the State of Delaware designated in the notice of the meeting
or a duly executed waiver of notice of such meeting. Meetings of stockholders
shall be held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 NOTICE. A written or printed notice stating the place, day
and time of each meeting of the stockholders and, in the case of a special
meeting, the purpose or purposes for which the meeting is called shall be
delivered not less than ten nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman of
the Board, the President, the Secretary or the officer or person(s) calling the
meeting, to each stockholder of record entitled to vote at such meeting. If such
notice is to be sent by mail, it shall be directed to such stockholder at such
stockholder's address as it appears on the records of the Corporation, unless
such stockholder shall have filed with the Secretary of the Corporation a
written request that notices to such stockholder be mailed to some other
address, in which case it shall be directed to such stockholder at such other
address. Notice of any meeting of stockholders shall not be required to be given
to any stockholder who shall attend such meeting in person or by proxy and shall
not, at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
2.5 VOTING LIST. At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by such officer or through a transfer agent appointed by the board of
directors, shall prepare a complete list of stockholders entitled to vote
thereat arranged in alphabetical order and showing the address of each
stockholder and number of shares of capital stock registered in the name of each
stockholder. For a period of ten days prior to such meeting, such list shall be
kept on file at a place within the city where the meeting is to be held, which
place shall be specified in the notice of meeting or a duly executed waiver of
notice of such meeting or, if not so specified, at the place where the meeting
is to be held, and shall be open to examination by any stockholder during
ordinary business hours. Such list shall be produced at such meeting and kept at
the meeting at all times during such meeting and may be inspected by any
stockholder who is present.
2.6 QUORUM. The holders of a majority of the voting power of
the outstanding shares of capital stock entitled to vote on a matter, present in
person or by proxy, shall constitute a quorum at any meeting of stockholders,
except as otherwise provided by law, the certificate of incorporation of the
Corporation, these Bylaws, or any rule or regulation applicable to the
Corporation or of any applicable national securities
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exchange. If a quorum shall not be present, in person or by proxy, at any
meeting of stockholders, the stockholders entitled to vote thereat who are
present, in person or by proxy (or, if no stockholder entitled to vote is
present, any officer of the Corporation), may adjourn the meeting from time to
time without notice other than announcement at the meeting (unless the board of
directors, after such adjournment, fixes a new record date for the adjourned
meeting), until a quorum shall be present, in person or by proxy. At any
adjourned meeting at which a quorum shall be present, in person or by proxy, any
business may be transacted which may have been transacted at the original
meeting had a quorum been present; provided that, if the adjournment is for more
than 30 days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
2.7 REQUIRED VOTE; WITHDRAWAL OF QUORUM. When a quorum is
present at any meeting, the vote of the holders of at least a majority of the
voting power of the outstanding shares of capital stock entitled to vote thereat
who are present, in person or by proxy, shall decide any questions brought
before such meeting, unless the question is one on which, by express provision
of law, the certificate of incorporation of the Corporation, these Bylaws, or
any rule or regulation applicable to the Corporation or of any applicable
national securities exchange, a different vote is required, in which cases such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough shares of
capital stock to leave less than a quorum.
2.8 METHOD OF VOTING; PROXIES. Except as otherwise provided in
the certificate of incorporation of the Corporation or by law, each outstanding
share of capital stock, regardless of class, shall be entitled to one vote on
each matter submitted to a vote at a meeting of stockholders. Elections of
directors need not be by written ballot. At any meeting of stockholders, every
stockholder having the right to vote may vote either in person or by proxy
executed in writing by the stockholder or by such stockholder's duly authorized
attorney-in-fact. Each such proxy shall be filed with the Secretary of
Corporation before or at the time of the meeting. No proxy shall be valid after
three years from the date of its execution, unless otherwise provided in the
proxy. If no date is stated in a proxy, such proxy shall be presumed to have
been executed on the date of the meeting at which it is to be voted. Each proxy
shall be revocable unless expressly provided therein to be irrevocable and
coupled with an interest sufficient in law to support an irrevocable power or
unless otherwise made irrevocable by law.
2.9 RECORD DATE. For the purposes of determine stockholders
entitled (a) to notice of or to vote at any meeting of stockholders or any
adjournment thereof, (b) to receive payment of any dividend or other
distribution or allotment of any rights, or (c) to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix a record date, which
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record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors for any such determination of
stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date of the adjourned meeting.
2.10 CONDUCT OF MEETING. The Chairman of the Board, if such
office has been filed, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall chair all meetings of stockholders.
The Secretary shall keep the records of each meeting of stockholders. In the
absence or inability to act of any such officer, such officer's duties shall be
performed by the officer given the authority to act for such absent or
non-acting officer under these Bylaws or by a person appointed by the meeting.
2.11 INSPECTORS. The board of directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his or her ability. The inspectors shall determine the number of shares of
capital stock of the Corporation outstanding and the voting power of each, the
number of shares represented at the meeting, the existence of a quorum, and the
validity and effect of proxies and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
results and certify their determination of the number of shares represented at
the meeting and their count of all votes and ballots, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
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of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 MANAGEMENT. The business and property of the Corporation
shall be managed by the board of directors. Subject to the restrictions imposed
by law, the certificate of incorporation of the Corporation or these Bylaws, the
board of directors may exercise all the powers of the Corporation.
3.2 NUMBER; TERM. The number of directors constituting the
board of directors shall be thirteen. Each director shall hold office until the
next annual meeting of stockholders following his or her election, and until his
or her successor shall have been duly elected and qualified, or until his or her
earlier death, resignation or removal.
3.3 REMOVAL; VACANCIES. Any or all of the directors may be
removed, with or without cause, upon the affirmative vote or consent of the
holders of a majority of the voting power of the outstanding shares of each
class of capital stock then entitled to vote in person or by proxy at an
election of such directors. Any vacancies occurring in the board of directors
caused by death, resignation, retirement, disqualification, removal or other
termination from office of any director may be filled by the vote of at least
eleven directors then in office or by the affirmative vote, at any annual
meeting or any special meeting of the stockholders called for the purpose of
filing such directorship or directorships, of the holders of a majority of the
outstanding shares of each class of capital stock then entitled to vote in
person or by proxy at an election of such directors. Each successor director so
chosen shall hold office for the unexpired term of his or her predecessor in
office.
3.4 MEETINGS OF DIRECTORS. The directors may hold their
meetings and may have an office and keep the records of the Corporation, except
as otherwise provided by law, in such place or places within or without the
State of Delaware as the board of directors may from time to time determine or
as shall be specified in the notice of such meeting or duly executed waiver of
notice of such meeting.
3.5 FIRST MEETING. Each newly elected board of directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of stockholders, and no notice of such meeting shall be
necessary.
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3.6 ELECTION OF OFFICERS. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.7 REGULAR MEETINGS. Regular meetings of the board of
directors shall be held at such times and places as shall be designated from
time to time by resolution of the board of directors. Notice of such regular
meetings shall not be required.
3.8 SPECIAL MEETINGS. Special meetings of the board of
directors shall be held whenever called by the Chairman of the Board or any two
or more directors.
3.9 NOTICE. The Secretary shall give notice of each special
meeting to each director at least five business days before the meeting. Notice
of any such meeting need not be given to any director who, either before or
after the meeting, submits a signed waiver of notice or who shall attend such
meeting without protesting, prior to or at its commencement, the lack of notice
to him or her. The purpose of any special meeting shall be specified in the
notice or waiver of notice of such meeting.
3.10 QUORUM; VOTE REQUIRED; ACTIONS REQUIRING APPROVAL. (a)
Except as provided in Section 3.10(b), at all meetings of the board of
directors, seven directors shall constitute a quorum for the transaction of
business. If at any meeting of the board of directors there is less than a
quorum present, a majority of those present or any director solely present may
adjourn the meeting from time to time without further notice. Unless the act of
a greater number is required by law, the certificate of incorporation of the
Corporation or these Bylaws, the act of a majority of the directors present at a
meeting at which a quorum is in attendance shall be the act of the board of
directors.
(b) Notwithstanding anything to the contrary herein (and
subject to the provisions of Section 4.1 of these Bylaws), the Corporation shall
not take (or permit to be taken in its capacity as a shareholder or partner or
otherwise permit any Subsidiary of the Corporation to take) any of the following
actions unless approved by the affirmative vote of at least eleven directors:
(i) any sale of all or substantially all of the assets of the
Corporation or any Subsidiary;
(ii) any merger, consolidation, liquidation or dissolution of
the Corporation or any Subsidiary or any purchase or other acquisition
of any common stock or preferred stock of the Corporation;
(iii) adopting any resolution proposing an amendment to the
certificate of incorporation of the Corporation;
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(iv) the Corporation or any Subsidiary entering into any line
of business that neither the Corporation nor any Subsidiary is engaged
in on Effective Time (as such term is defined in that certain
Combination Agreement and Plan of Merger among the Corporation and
certain other parties dated as of May 22, 1996);
(v) the Corporation or any Subsidiary paying any dividend or
otherwise making any distribution to any person;
(vi) the Corporation or any Subsidiary issuing any stock or
other security or ownership interests to any person;
(vii) the Corporation or any Subsidiary engaging in any oil or
gas futures activities, or other trading activities relating to oil or
gas pricing, including, without limitation, hedging, swaps, options or
speculation (such activities referred to herein as "trading
activities"), that, based on the average oil or gas pricing during the
6 months preceding the date of such activity, could result in exposure
to loss to the Corporation in excess of $10,000,000 as to any single
transaction, other than trading activities which offset physical
transactions and are accounted for as a hedge, and in no event shall
the uncovered portion of the trading activities of the Corporation and
its subsidiaries, in the aggregate, result in an exposure to loss to
the Corporation in excess of $10,000,000;
(viii) amending or terminating any contract, commitment or
employee compensation plan if the execution of or entering into such
contract, commitment or plan was approved by the board of directors
pursuant to this Section 3.10(b) (or would have been subject to board
of director approval pursuant to this Section 3.10(b) if this Section
3.10 had been in effect at the time of execution of or entering into
such contract, commitment or plan);
(ix) approving a different method in which the Corporation
keeps its books;
(x) the commencement by the Corporation or any Subsidiary of a
voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other voluntary case or proceeding to be adjudicated a bankrupt or
insolvent or the consent by it to the entry of a decree or order for
relief against it in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it to the filing
of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of any substantial part of its
8
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of action in
furtherance of any such action;
(xi) the Corporation or any Subsidiary taking any action in
its capacity as a shareholder, partner, member or owner of any interest
in a person which, if taken by the Corporation itself, would require
the approval of the board of directors pursuant to this Section
3.10(b);
(xii) the Corporation or any Subsidiary (A) making, or
committing to make, any payment in excess of $10,000,000 per
transaction or contract (or series of related transaction or
contracts), whether as or in connection with a capital expenditure,
asset purchase, purchase of goods or services, investment, rental,
settlement, equity contribution, loan, guaranty or otherwise, (B)
borrowing any amount in excess of $10,000,000 per transaction or
contract (or series of related transactions or contracts), (c)
disposing of or otherwise transferring any asset (or related assets)
whose fair market value exceeds $10,000,000 or (D) entering into any
contract or transaction (or series of contracts or transactions)
pursuant to which the Corporation or any Subsidiary is to receive more
than $10,000,000; provided, however, if the amount in question is in
excess of $10,000,000 but less than $25,000,000, any action referred to
in (A), (B), (C) or (D) (including any such action that is also subject
to Section 3.10(b)(vii) and any other such action that is subject to
any of the other provisions of Section 3.10(b) except for the
Corporation issuing any stock or other security or ownership interests
to any person or paying any dividend or otherwise making any
distribution to any person) need not be approved as aforesaid by the
board of directors if approved by the unanimous vote of the Executive
Committee;
(xiii) any change in the fiscal year of the Corporation;
(xiv) the appointment or removal of the Corporation's Chief
Executive Officer, President, Chief Financial Officer or any Senior
Vice President;
(xv) the filling of any vacancy in the board of directors of
the Corporation; and
(xvi) the establishment of any committee of the board of
directors of the Corporation.
Notwithstanding the foregoing, if one or more directors give written notice to
the Secretary that such director or directors intend to abstain pursuant to
Section 3.14 of these Bylaws on a matter that is subject to this Section
3.10(b), then in lieu of the approval otherwise required herein such action may
be approved by the affirmative vote of at least such number of
9
directors equal to eleven less the number of directors that have given such
notice. For purposes of these Bylaws, "Subsidiary" means (i) any corporation or
other entity a majority of the capital stock of which having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is at the time owned, directly or indirectly, with power to
vote, by the Corporation, or (ii) a partnership, joint venture or limited
liability company in which the Corporation holds, directly or indirectly, a
majority interest with respect to voting power, rights to receive distributions
or report earnings, or capital accounts, PROVIDED that none of Novagas
Clearinghouse Limited Partnership, Novagas Clearinghouse Limited, Novagas
Clearinghouse Pipelines Limited Partnership or Novagas Clearinghouse Pipelines
Limited shall be deemed to be a Subsidiary as currently constituted or as
changed in connection with the transactions contemplated by that certain
Combination Agreement and Plan of Merger dated as of May 22, 1996 among NGC
Corporation, Chevron U.S.A. Inc. and Midstream Combination Corp. and shall not
be considered a Subsidiary solely by reason of an increase in the Corporation's
equity interest in any one or more of the foregoing entities from approximately
49% to approximately 51%.
3.11 PROCEDURE. At meetings of the board of directors,
business shall be transacted in such order as from time to time the board of
directors may determine. The Chairman of the Board, if such office has been
filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, the President shall preside at all meetings of the board of
directors. In the absence or inability to act of either such officer, a chairman
shall be chosen by the board of directors from among the directors present. The
Secretary of the Corporation shall act as the secretary of each meeting of the
board of directors unless the board of directors appoints another person to act
as secretary of the meeting. The board of directors shall keep regular minutes
of its proceedings which shall be placed in the minute book of the Corporation.
3.12 PRESUMPTION OF ASSENT. A director of the Corporation who
is present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his abstention or dissent shall be entered in the minutes of the meeting
or unless he shall file his written dissent to such action with the person
acting as secretary of the meeting before the adjournment thereof or shall
forward any dissent or abstention by certified or registered mail to the
Secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
3.13 COMPENSATION. The board of directors shall have the
authority to fix the compensation, including fees and reimbursement of expenses,
paid to directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, however, that nothing contained
herein shall be construed to preclude any director from serving the Corporation
in any other capacity and receiving compensation therefor.
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3.14 INTERESTED DIRECTORS. A director who has an interest in a
transaction or matter within the meaning of Section 144 of the Delaware General
Corporation Law (or in which the Stockholder that nominated such director
pursuant to that certain Stockholders Agreement dated May 22, 1996 among the
Corporation and certain other persons (the "Stockholders Agreement") has an
interest) that is the subject of review or action by the board of directors
shall (i) disclose such interest to the board of directors (ii) abstain from
voting with respect to such transaction or matter and (iii) give written notice
to the Secretary of the Corporation that he or she intends to so abstain. If one
or more directors give written notice to the Secretary that such director or
directors intend to abstain pursuant to this Section 3.14 with respect to any
action by the Board of Directors, then in lieu of the approval otherwise
required under these Bylaws for such action, such action may be approved by the
affirmative vote of at least the number of directors that would otherwise have
been required less the number of directors that have given such notice.
ARTICLE FOUR: COMMITTEES
4.1 EXECUTIVE COMMITTEE. The board of directors, acting by
resolution adopted by at least eleven directors, may elect from among its
members an Executive Committee of four members, which committee shall have the
authority to approve actions to the extent specified in Section 3.10(b) of these
Bylaws and, with respect to actions not subject to Section 3.10(b), any other
actions that a majority of the board of directors could approve except to the
extent restricted by law or the certificate of incorporation of the Corporation.
In the event of a vacancy, the Executive Committee shall have no authority to
take any action until such vacancy is filled.
4.2 OTHER COMMITTEES. In addition to the Executive Committee,
the board of directors may, by resolution adopted by at least eleven directors,
designate one or more other committees (an "Additional Committee").
4.3 NUMBER; QUALIFICATION; TERM. Each Additional Committee
shall consist of one or more directors appointed by resolution adopted by at
least eleven directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by at least eleven directors.
Each committee member shall serve as such until the earliest of (i) the
expiration of his or her term as director, (ii) his or her resignation as a
committee member or as a director, or (iii) his or her removal as a committee
member or as a director.
4.4 AUTHORITY. Each Additional Committee, to the extent
expressly provided in the resolution adopted by at least eleven directors
establishing such committee, shall have and may exercise all of the authority of
the board of directors in the management
11
of the business and property of the Corporation except to the extent expressly
restricted by such resolution or by law, the certificate of incorporation of the
Corporation, or these Bylaws. Notwithstanding the foregoing, no committee (other
than the Executive Committee as provided in, but only to the extent provided in,
Section 3.10(b)) may approve or authorize the actions specified in Section
3.10(b).
4.5 COMMITTEE CHANGES. The board of directors by resolution
adopted by at least eleven directors shall have the power at any time to fill
vacancies in, to change the membership of, and to discharge any committee.
4.6 ALTERNATE MEMBERS OF COMMITTEES. The board of directors
may designate one or more directors as alternate members of any committee.
4.7 REGULAR MEETINGS. Regular meetings of any committee may be
held without notice at such time and place as may be designated from time to
time by the committee and communicated to all members thereof.
4.8 SPECIAL MEETINGS. Special meetings of any committee may be
held whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. The purpose of any special
meeting shall be specified in the notice or waiver of notice of such meeting.
4.9 QUORUM; MAJORITY VOTE. At meetings of any committee, a
majority of the number of members designated by the board of directors shall
constitute a quorum for the transaction of business; provided, however, that the
quorum for the transaction of business by the Executive Committee shall be all
members thereof. If a quorum is not present at a meeting of any committee, a
majority of the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present. The act of a majority of the members present at any meeting at which a
quorum is in attendance shall be the act of a committee, unless the act of a
greater number is required by law, the certificate of incorporation of the
Corporation, or Section 3.10(b) or any other provision of these Bylaws.
4.10 MINUTES. Each committee shall cause minutes of its
proceedings to be prepared and shall report the same to the board of directors
upon the request of the board of directors. The minutes of the proceedings of
each committee shall be delivered to the Secretary of the Corporation for
placement in the minute books of the Corporation.
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4.11 COMPENSATION. Committee members may, by resolution of the
board of directors, be allowed a stated salary or a fixed sum and expenses of
attendance, if any, for attending any committee meetings.
4.12 RESPONSIBILITY. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE FIVE: NOTICE
5.1 METHOD. Whenever by statute, the certificate of
incorporation of the Corporation, or these Bylaws, notice is required to be
given to any committee member, director, or stockholder and no provision is made
as to how such notice shall be given, personal notice shall not be required and
any such notice may be given (i) in writing, by mail, postage prepaid, addressed
to such committee member, director, or stockholder at his or her address as it
appears on the books or (in the case of stockholder) the stock transfer records
of the Corporation, or (ii) by any other method permitted by law (including but
not limited to overnight courier service, telegram, telex, or telefax). Any
notice required or permitted to be given by mail shall be deemed to be delivered
and given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice required
or permitted to be given by telegram, telex, or telefax shall be deemed to be
delivered and given at the time transmitted with all charges prepaid and
addressed as aforesaid.
5.2 WAIVER. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
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ARTICLE SIX: OFFICERS
6.1 NUMBER; TITLES; TERM OF OFFICE. The officers of the
Corporation shall be a Chairman of the Board, a President, a Secretary, and such
other officers as the board of directors may from time to time elect or appoint,
including one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine) and a
Treasurer. The board of directors may also from time to time elect or appoint a
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, or
Principal Accounting Officers, each with such powers and duties as may be
assigned by the board of directors. Each officer shall hold office until his or
her successor shall have been duly elected and shall have qualified, until his
or her death, or until he or she shall resign or shall have been removed in the
manner hereinafter provided. Any two or more offices may be held by the same
person. None of the officers need be a stockholder or a director of the
Corporation or a resident of the State of Delaware, but the Chairman shall be a
director.
6.2 REMOVAL. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interest of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
6.3 VACANCIES. Any vacancy occurring in any office of the
Corporation (by death, resignation, removal, or otherwise) may be filled by the
board of directors.
6.4 AUTHORITY. Officers shall have such authority and perform
such duties in the management of the Corporation as are provided in these Bylaws
or as may be determined by resolution of the board of directors not inconsistent
with these Bylaws.
6.5 COMPENSATION. The compensation, if any, of officers and
agents shall be fixed from time to time by the board of directors or a committee
of directors appointed for such purpose by the board of directors: provided,
however, that the board of directors may delegate the power to determine the
compensation of any officer and agent (other than the officer to whom such power
is delegated) to the Chairman of the Board or the President.
6.6 CHAIRMAN OF THE BOARD. The Chairman of the Board shall,
subject to the supervision of the board of directors of the Corporation, have
the general management and control of the Corporation. Such officer shall
preside at all meetings of the stockholders and of the board of directors and
shall have such duties as may from time to time be assigned by the board of
directors.
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6.7 PRESIDENT. The President shall, subject to the supervision
of the board of directors of the Corporation, have general charge, management,
and control of the properties and operations of the Corporation in the ordinary
course of its business, with all such powers with respect to such properties and
operations as may be reasonably incident to such responsibilities. In the
absence or inability to act of the Chairman of the Board, the President shall
exercise all of the powers and discharge all of the duties of the Chairman of
the Board. As between the Corporation and third parties, any action taken by the
President in the performance of the duties of the Chairman of the Board shall be
conclusive evidence that the Chairman of the Board is absent or unable to act.
6.8 VICE PRESIDENTS. Each Vice President shall have such
powers and duties as may be assigned to him or her by the board of directors,
the Chairman of the Board, or the President, and (in order of their seniority as
determined by the board of directors or, in the absence of such determination,
as determined by the length of time they have held the office of Vice President)
shall exercise the powers of the President during that officer's absence or
inability to act, As between the Corporation and third parties, any action taken
by a Vice President in the performance of the duties of the President shall be
conclusive evidence of the absence or inability to act of the President at the
time such action was taken.
6.9 TREASURER. The Treasurer shall have custody of the
Corporation's funds and securities, shall keep full and accurate account of
receipts and disbursements, shall deposit all monies and valuable effects in the
name and to the credit of the Corporation in such depository or depositories as
may be designed by the board of directors, and shall perform such other duties
as may be prescribed by the board of directors, the Chairman of the Board, or
the President.
6.10 ASSISTANT TREASURER. Each Assistant Treasurer shall have
such powers and duties as may be assigned to him or her by the board of
directors, the Chairman of Board or the President. The Assistant Treasurer (in
the order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Treasurer) shall exercise that powers of the
Treasurer during that officer's absence or liability to act.
6.11 SECRETARY. Except as otherwise provided in these Bylaws,
the Secretary shall keep the minutes of all meetings of the board of directors
and of the stockholders in books provided for that purpose, and he or she shall
attend to the giving and service of all notices. The Secretary may sign with the
Chairman of the Board or the President or any other authorized officer of the
Corporation, in the name of the Corporation, all contracts of the Corporation
and affix the seal of the Corporation thereto. The Secretary shall have charge
of the certificate books, transfer books, and stock papers as the board of
directors may direct, all of which shall at all reasonable times be open to
inspection by any officer of
15
the Corporation upon application at the office of the Corporation during
business hours. The Secretary shall in general perform all duties incident to
the office of the Secretary, subject to the control of the board of directors,
the Chairman of the Board, and the President.
6.12 ASSISTANT SECRETARIES. Each Assistant Secretary shall
have such powers and duties as may be assigned to him or her by the board of
directors, the Chairman of the Board, or the President. The Assistant
Secretaries (in the order of their seniority as determined by the board of
directors or, in the absence of such a determination, as determined by the
length of time they have held the office of Assistant Secretary) shall exercise
the powers of the Secretary during that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 CERTIFICATES FOR SHARES. Certificates representing shares
of stock of the Corporation shall be in such form as shall be approved by the
board of directors. The certificates shall be signed by the Chairman of the
Board or the President or a Vice President and also by the Secretary or as
Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any and all
signatures on the certificate may be a facsimile and may be sealed with the seal
of the Corporation or a facsimile thereof. If any officer, transfer agent, or
registrar who has signed, or whose facsimile signature has been placed upon, a
certificate has ceased to be such officer, transfer agent, or registrar before
such certificate is issued, such certificate may be issued by the Corporation
with the same effect as if he or she were such Officer, transfer agent, or
registrar at the date of issue. The certificates shall be consecutively numbered
and shall be entered in the books of the Corporation as they are issued and
shall exhibit the holder's name and the number of shares.
7.2 REPLACEMENT OF LOST OR DESTROYED CERTIFICATES. The board
of directors may direct a new certificate or certificates to be issued in place
of a certificate or certificates theretofore issued by the Corporation and
alleged to have been lost or destroyed, upon the making of an affidavit of the
fact by the person claiming the certificate or certificates representing shares
to be lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or such owner's legal representative, to advertise
the same in such a manner as it shall require and/or to give the Corporation a
bond with a surety or sureties satisfactory to the Corporation in such sum as it
may direct as indemnity against any claim, or expense resulting from a claim,
that be made against the Corporation with respect to the certificate or
certificates alleged to have been lost or destroyed.
16
7.3 TRANSFER OF SHARES. Shares of stock of the Corporation
shall be transferrable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment, or authority to transfer, the
Corporation or its transfer agent shall issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction upon
its books.
7.4 REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 REGULATIONS. The board of directors shall have the power
and authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, registration and replacement of certificates for
shares of stock of the Corporation.
7.6 LEGENDS. The board of directors shall have the power and
authority to provide that certificates representing shares of stock bear such
legends as the board of directors deems appropriate to insure that the
Corporation does not become liable for violations of federal or state securities
laws or other applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 RESERVES. There may be created by the board of directors
out of funds of the Corporation legally available therefor such reserve or
reserves as the directors from time to time, in their discretion, consider
proper to provide for contingencies, to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other purpose as the board
of directors shall consider beneficial to the Corporation, and the board of
directors shall consider beneficial to the Corporation, and the board of
directors may modify or abolish any such reserve in the manner in which it was
created.
8.2 BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of account, shall keep minutes of the proceedings of
its stockholders and board of directors and shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
17
8.3 FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by the board of directors.
8.4 SEAL. The seal of the Corporation shall be such as from
time to time may be approved by the board of directors.
8.5 RESIGNATIONS. Any director, committee member, or officer
may resign by so stating at any meeting of the board of directors or by giving
written notice to the board of directors, the Chairman of the Board, the
President or the Secretary. Such resignation shall take effect at the time
specified therein or, if no time is specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
8.6 SECURITIES OF OTHER CORPORATIONS. Except as otherwise
provided in these Bylaws or resolution of the board of directors, the Chairman
of the Board, the President, or any Vice President of the Corporation shall have
the power and authority to transfer, endorse for transfer, vote, consent, or
take any other action with respect to any securities of another issuer which may
be held or owned by the Corporation and to make, execute, and deliver any
waiver, proxy, or consent with respect to any such securities.
8.7 TELEPHONE MEETINGS. Members of the board of directors and
members of a committee of the board of directors may participate in and hold a
meeting of the board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall continue presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
8.8 INVALID PROVISIONS. If any part of these Bylaws shall be
held invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.9 MORTGAGES, ETC. With respect to any deed, deed of trust,
mortgage, or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation of
the Corporation unless the resolutions, if any, of the board of directors
authorizing such execution expressly state that such attestation is necessary.
8.10 HEADINGS. The headings used in these Bylaws have been
inserted for administrative convenience only and do not constitute matter to be
construed in interpretation.
18
8.11 REFERENCES. Whenever herein the singular number is used,
the same shall include the plural here appropriate, and words of one gender
should include other genders where appropriate.
8.12 AMENDMENTS. These Bylaws may only be amended or repealed
by the affirmative vote or consent of at least eleven directors of the
Corporation or by the holders of a majority of the outstanding Common Stock.
EXHIBIT 5.1
July 31, 1996
Midstream Combination Corp.
1301 McKinney
Houston, Texas 77010
Ladies and Gentlemen:
With reference to the Registration Statement on Form S-4 to be filed
by Midstream Combination Corp., a Delaware corporation ("Midstream"), with the
Securities and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of 33,928,605 shares of Midstream Common
Stock (the "Shares") to be issued in connection with the transactions
contemplated by the Combination Agreement and Plan of Merger dated as of May 22,
1996, by and among NGC Corporation, Chevron U.S.A. Inc. and Midstream (the
"Combination Agreement"), which Combination Agreement is described therein and
filed as an exhibit thereto:
We are of the opinion that the Shares have been duly authorized and,
when issued in accordance with the Combination Agreement, will be legally
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
PILLSBURY MADISON & SUTRO LLP
EXHIBIT 7.1
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone (302) 658-6541
Telecopier (302) 658-6548
July 29, 1996
Midstream Combination Corp.
13430 Northwest Freeway, Suite 1200
Houston, TX 77040
Ladies and Gentlemen:
You have requested our opinion as special Delaware counsel to Midstream
Combination Corp., a Delaware corporation (the "Company"), whether there exists
any restriction upon the surplus of the Company available for the payment of
dividends on the capital stock of the Company by reason of the fact that the
liquidation preference of the Series A Participating Preferred Stock, par value
$.01 per share, of the Company (the "Series A Preferred Stock"), exceeds the par
value of such stock, and whether any remedy would be available to holders of the
Series A Preferred Stock before or after payment of any such dividend which
would reduce or reduces the surplus of the Company to an amount less than the
amount of such excess.
For the purpose of rendering our opinions as expressed herein, we have
examined and have relied upon: (i) the Certificate of Incorporation of the
Company filed with the Secretary of State of the State of Delaware (the
"Secretary of State") on May 22, 1996 (the "Certificate"); and (ii) the By-laws
of the Company, as amended through the date hereof (the "By-laws"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Certificate.
With respect to the foregoing documents, we have assumed the
authenticity of all documents submitted to us as authentic originals, the
conformity to authentic
Midstream Combination Corp.
July 29, 1996
Page 2
originals of all documents submitted to us as copies or forms, the genuineness
of all signatures, the legal capacity of natural persons, and that the foregoing
documents, in the forms furnished to us for our review, have not been and will
not be altered or amended in any respect material to our opinions as expressed
herein. In addition, we have assumed for purposes of our opinions as expressed
herein that the Certificate and the By-laws constitute the certificate of
incorporation and the by-laws, respectively, of the Company as presently in
effect. We have not reviewed any other documents of or applicable to the Company
for purposes hereof (including the Scope of Business Agreement, dated May 22,
1996 between the Company and Chevron Corporation), and we assume there exists no
provision of any such other document that bears upon or is inconsistent with our
opinions as expressed herein. We have made no independent factual investigation
of our own for purposes hereof but, rather have relied solely upon the foregoing
documents, the statements and information set forth therein, and the additional
facts recited or assumed herein, all of which we assume to be true, complete and
accurate in all material respects.
Paragraph 3(5) of Section C, Article FOURTH of the Certificate provides
that, in the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, no distribution shall be made to the holders
of Common Stock of the Company or any stock ranking junior to the Series A
Preferred Stock unless, prior thereto, the holders of of the Series A Preferred
Stock shall have received $1.00 per share to be paid out of the assets of the
Company available for distribution to its shareholders. The amount so payable by
the Company to holders of the Series A Preferred Stock upon the liquidation,
dissolution or winding up of the Company is hereinafter referred to as the
"Series A Liquidation Preference."
In this respect, you have requested our opinion under the General
Corporation Law of the State of Delaware (the "General Corporation Law"): (1)
whether, as a matter of law, prior to a liquidation, dissolution or winding up
of the Company, there will be any restriction upon the surplus of the Company
available for the payment of dividends on the capital stock of the Company
solely by reason of the fact that the Series A Liquidation Preference exceeds
the par value of the Series A Preferred Stock; and (2) whether, as a matter of
law, any remedy would be available to holders of the Series A Preferred Stock
either before or after payment of any dividend, prior to a liquidation,
dissolution or winding up of the Company, solely by reason of the fact that
payment of such dividend would reduce or reduces the surplus of the Company to
an amount less than the difference between the Series A Liquidation Preference
and the par value of the Series A Preferred Stock.
Section 170 of the General Corporation Law authorizes a Delaware
corporation to pay dividends out of its surplus. Surplus is defined by Section
154 of the
Midstream Combination Corp.
July 29, 1996
Page 3
General Corporation Law as the amount by which the net assets of a corporation
exceed its capital. Both net assets, as defined in Section 154, and capital, as
defined in and determined in accordance with Sections 154 and 244 of the General
Corporation Law, are determined without reference to the amount of any
liquidation preference of any class of the corporation's stock. Accordingly, the
authorization in Section 170 of the General Corporation Law for payment of
dividends out of surplus is not in any way limited or restricted solely by
reason of the fact that a series or class of stock of a corporation has a
liquidation preference in excess of the par value of such stock.
We are aware of no controlling decision of any court of the State of
Delaware that addresses the question presented for our consideration, but we
believe that our courts would adopt the reasoning set forth herein should the
question be litigated. We note in addition that our opinion as expressed herein
is supported by the discussion of the Court in BAILEY V. TUBIZE RAYON CORP., 56
F. Supp. 418, 423 (D. Del. 1944) (applying Delaware law).
Based upon and subject to the foregoing, and subject to the limitations
stated hereinbelow, it is our opinion that, solely as a matter of law, under the
General Corporation Law as in effect on the date hereof: (1) prior to a
liquidation, dissolution or winding up of the Company, there will be no
restriction upon the surplus of the Company available for the payment of
dividends on the capital stock of the Company solely by reason of the fact that
the Series A Liquidation Preference exceeds the par value of the Series A
Preferred Stock; and (2) no remedy would be available to holders of the Series A
Preferred Stock, either before or after payment of any dividend, prior to a
liquidation, dissolution or winding up of the Company, solely by reason of the
fact that payment of such dividend would reduce or reduces the surplus of the
Company to an amount less than the difference between the Series A Liquidation
Preference and the par value of the Series A Preferred Stock.
The foregoing opinions are limited to the General Corporation Law, and
we have not considered and express no opinion on the effect of any other laws or
the laws of any other state or jurisdiction, including federal laws regulating
securities or other federal laws, or the rules and regulations of stock
exchanges or of any other regulatory body. In addition, our opinions as
expressed herein address only the following questions: (1) whether, as a matter
of law, prior to a liquidation, dissolution or winding up of the Company, there
will be any restriction upon the surplus of the Company available for the
payment of dividends on the capital stock of the Company solely by reason of the
fact that the Series A Liquidation Preference exceeds the par value of the
Series A Preferred Stock; and (2) whether, as a matter of law, any remedy would
be available to holders of the Series A Preferred Stock either before or after
payment of any dividend, prior to a
Midstream Combination Corp.
July 29, 1996
Page 4
liquidation, dissolution or winding up of the Company, solely by reason of the
fact that payment of such dividend would reduce or reduces the surplus of the
Company to an amount less than the difference between the Series A Liquidation
Preference and the par value of the Series A Preferred Stock. We render no
opinion on the effect of any charter restrictions on payment of dividends on
other stock of the Company prior to payment of dividends on the Series A
Preferred Stock, or the effect of any other charter restrictions regarding
payment of dividends or remedies relating thereto.
We hereby consent to the use and filing of this opinion letter as an
exhibit to the Form S-4 Registration Statement filed by the Company with the
Securities and Exchange Commission (the "SEC") relating to the issuance of
shares of Common Stock provided, however, that in giving such consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the Rules and Regulations of
the SEC thereunder. Except as provided in the immediately preceding sentence,
without our prior written consent, this opinion may not be furnished or quoted
to, or relied upon by, any other person or entity for any purpose.
Very truly yours,
EXHIBIT 8.1
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
ATTORNEYS AT LAW
A REGISTERED LIMITED LIABILITY PARTNERSHIP
INCLUDING PROFESSIONAL CORPORATIONS
4100 FIRST CITY CENTER
1700 PACIFIC AVENUE
DALLAS, TEXAS 75201-4618
(214) 969-2800
TELEX 732324
FAX (214) 969-4343
May 22, 1996
NGC Corporation
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
Dear Sir or Madam:
You have requested our opinion regarding whether the merger of NGC
Corporation (the "Company") into Midstream Combination Corp. ("Newco")
(hereinafter referred to as the "Merger") will be treated as a reorganization
within the meaning of section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code").
In rendering our opinion, we have examined the Combination Agreement
and Plan of Merger dated as of May 22, 1996, executed by the Company, Newco, and
Chevron U.S.A. Inc. ("Chevron") and such other documents as we have deemed
necessary. For purposes of rendering such opinion, we have assumed that (i) the
management shareholders of NGC, BG Holdings, Inc., and NOVA Gas Services (U.S.)
Inc. will continue to hold the NGC shares currently held by them until the
Effective Time; (ii) the management shareholders of NGC, BG Holdings, Inc., and
NOVA Gas Services (U.S.) Inc. will not acquire additional shares of NGC prior to
the Effective Time; and (iii) the transactions contemplated by the Combination
Agreement and Plan of Merger and agreements referenced therein will be
consummated in compliance with all material terms and conditions as described in
such agreements, none of which will have been waived or modified by Chevron and
Newco.
Our opinion is based upon the current and continued correctness of
certain representations made to us by the Company, as well as representations
made in the Combination Agreement and Plan of Merger. Further, our opinion is
based upon and assumes the accuracy of the letters to the Company from (i)
Chevron, dated May 22, 1996, (ii) NOVA Gas Services (U.S.) Inc, dated May 22,
1996, and (iii) BG Holdings, Inc., dated May 22, 1996, each of which sets forth
certain representations. Where any such factual representation is made to the
"best knowledge" of a person, the factual representation is assumed to be
correct without such qualification. Our opinion is also based upon current law,
which is subject to change (possibly retroactively). Any change in the facts or
law could change our conclusions and render our opinion inapplicable.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
NGC Corporation
BG Holdings, Inc.
NOVA Gas Services (U.S.) Inc.
May 22, 1996
Page 2
In addition, if any of the assumptions made herein are incorrect, our opinion
could also be rendered inapplicable.
Based on the foregoing, it is our opinion that:
(i) The Merger of the Company into Newco pursuant to the
Combination Agreement and Plan of Merger will be treated as a
"reorganization" within the meaning of section 368(a)(1) of the Code;
(ii) No gain or loss will be recognized by the Company or
shareholders of the Company, as a result of the Merger pursuant to
sections 361(a), 357(a), and 354(a) of the Code, except with respect to
any cash received for fractional shares or in connection with the
exercise of dissenters' rights;
(iii) The aggregate adjusted tax basis of the stock of
Surviving Corporation received by each NGC stockholder will be the same
as the aggregate adjusted tax basis of the Company stock exchanged
therefor, increased to the extent gain is recognized upon such exchange
and decreased to the extent of cash or other property received upon
such exchange, pursuant to Section 358(a); and
(iv) Pursuant to Section 1223(1), the holding period of the
Surviving Corporation stock received by each Company stockholder will
include the period for which the Company stock was held by such
stockholder, provided that the Company stock is held as a capital asset
at the Effective Time of the Merger.
This opinion represents our best legal judgment and has no binding effect on the
Internal Revenue Service (the "IRS"). Accordingly, no assurance can be given
that the IRS or a court would concur with the conclusions reached herein.
Except as explicitly set forth above, we express no opinion as to the
tax consequences to any party, whether federal, state, local, or foreign, of the
Merger or any transactions related thereto. No reference may be made to this
opinion letter in any financial statement, registration statement (except with
respect to the Prospectus related to the Combination Agreement and Plan of
Merger), or other document, nor may this opinion letter be distributed in any
manner without our prior written consent.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
EXHIBIT 10.15
NGC CORPORATION
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
I. PURPOSES
NGC Corporation, a Delaware corporation (the "Company"), desires to
afford certain of its directors and key employees (herein, "Key Persons") and
the Key Persons of any Related Entity (as defined below) who are responsible for
the continued growth of the Company an opportunity to acquire a proprietary
interest in the Company, and thus to create in such Key Persons an increased
interest in and a greater concern for the welfare of the Company and its
stockholders.
From and after December 8, 1995, for all purposes under the Plan,
the term "Related Entity" shall mean (i) Novagas Clearinghouse Ltd., (ii) Accord
Energy Ltd., and (iii) any corporation, partnership, limited liability company
or partnership, association, trust or other organization now existing or
hereafter formed or acquired which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company; provided, however,
that (1) for purposes of Articles V, VI, and VIII of the Plan and (2) with
respect to Incentive Options (as defined below) granted prior to May 10, 1996,
for purposes of Article XII of the Plan, the term "Related Entity" shall mean a
subsidiary corporation or parent corporation of the Company now existing or
hereafter formed or acquired. For purposes of the preceding sentence, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any entity or organization, shall
mean the possession, directly or indirectly, of the power (A) to vote more than
50% of the securities having ordinary voting power for the election of directors
of the controlled entity or organization, or (B) to direct or cause the
direction of the management and policies of the controlled entity or
organization, whether through the ownership of voting securities or by contract
or otherwise. As used in the Plan, the terms "subsidiary corporation" and
"parent corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Sections 424(f) and 424(e) of the Internal
Revenue Code of 1986, as amended (the "Code").
The stock options ("Options") offered pursuant to this Amended and
Restated 1991 Stock Option Plan (the "Plan") are a matter of separate inducement
and are not in lieu of any salary or other compensation for services of any Key
Person.
The Company, by means of the Plan, seeks to retain the services of
persons now holding key positions and to secure the services of persons capable
of filling such positions.
The Options granted under the Plan are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Code, or options that do not meet the requirements for Incentive Options
("Non-Qualified Options"), but the Company makes no warranty as to the
qualification of any Option as an Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
Subject to the adjustments provided in Article XIII hereof, the
total number of shares of capital stock of the Company that may be purchased
pursuant to the exercise of Options granted under the Plan shall not exceed, in
the aggregate, 9,892,610 shares of authorized voting common stock, par value
$0.01 per share, of the Company (the "Shares"); provided, however, that
notwithstanding any provision in the Plan to the contrary, the Committee (as
defined below) may not grant Options under the Plan that could result in more
than 6,692,610 Shares (subject to adjustment in the same manner as provided in
Article XIII hereof with respect to the maximum number of Shares subject to the
Plan) being issued upon the exercise of such Options unless the proposed
transaction with Chevron U.S.A. Inc. ("Chevron") to combine substantially all of
Chevron's gas gathering, processing and marketing operations with the Company is
consummated. As used herein, the authorized common stock of the Company shall be
referred to as "Company Stock."
Shares that may be acquired under the Plan may be authorized but
unissued Shares, Shares of issued stock held in the Company's treasury, issued
Shares reacquired by the Company, or a combination thereof, in each case as the
Committee may determine from time to time at its sole option. If and to the
extent that Options granted under the Plan expire or terminate without having
been exercised, new Options may be granted with respect to the Shares covered by
such expired or terminated Options, provided that the grant and the terms of
such new Options shall in all respects comply with the provisions of the Plan;
provided, however, that no Option shall be granted under the Plan after the
Termination Date (as defined below).
The Company may from time to time grant to certain Key Persons of
the Company or a Related Entity Options under the terms hereinafter set forth;
provided, however, that, except with respect to Options then outstanding, if not
sooner terminated under the provisions of Article XX, the Plan shall terminate
upon and no further Options shall be granted after May 9, 2006 (the "Termination
Date"). Notwithstanding any provision in the Plan to the contrary, Incentive
Options may be granted only to Key Persons who are employed by the Company or a
Related Entity that is a subsidiary corporation or parent corporation of the
Company on the date of grant of any such Option.
III. ADMINISTRATION
The Plan shall be administered by the Option committee, or any
successor thereto, of the Board of Directors of the Company (the "Board of
Directors"), or by any other committee appointed by the Board of Directors to
administer this Plan (the "Committee"). The number of individuals that shall
constitute the Committee shall be no less than two individuals. A majority of
the Committee shall constitute a quorum (or if the Committee consists of only
two members, then both members shall constitute a quorum), and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee, shall be the acts of
the Committee. The Committee shall be comprised exclusively of "outside
directors", as such term is used pursuant to Section 162(m) of the Code and any
-2-
rules and regulations promulgated thereunder. At any time that the Company shall
have a class of equity securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i) each
member of the Committee shall be required to also be a "disinterested person" to
administer the Plan within the meaning of Rule 16b-3, as amended (herein so
called), or other applicable rules under Section 16(b) of the Exchange Act, and
the Committee shall administer the Plan so as to comply at all times with the
Exchange Act and (ii) no member of the Committee shall be eligible for grants or
awards hereunder.
The members of the Committee shall serve at the pleasure of the
Board of Directors, which shall have the power, at any time and from time to
time, to remove members from or add members to the Committee. Removal from the
Committee may be with or without cause. Any individual serving as a member of
the Committee shall have the right to resign from membership in the Committee by
written notice to the Board of Directors. The Board of Directors, and not the
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused. The Board of Directors shall
promptly fill any vacancy that causes the number of members of the Committee to
be below two or any other number that Rule 16b-3 or Section 162(m) of the Code
(or other applicable rules or regulations) may require from time to time.
Subject to the express provisions of the Plan, the Committee shall
have authority, in its discretion, to determine the Key Persons to whom Options
shall be granted, the time when such Options shall be granted to Key Persons,
the number of Shares which shall be subject to each Option, the purchase price
of each Share which shall be subject to each Option, the period(s) during which
such Options shall be exercisable (whether in whole or in part), and the other
terms and provisions thereof. In determining the Key Persons to whom Options
shall be granted and the number of Shares for which Options shall be granted to
each Key Person, the Committee shall consider the length of service, the
contributions to the Company, its parents and subsidiaries taken as a whole, and
the responsibilities and duties of each Key Person.
Subject to the express provisions of the Plan, the Committee also
shall have authority to construe the Plan and Options granted thereunder, to
amend, or in the case of material amendments to the Plan, to recommend to the
Board of Directors and the stockholders of the Company the amendment of, the
Plan, to amend Options granted thereunder, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
the respective Options (which need not be identical) and to make all other
determinations necessary or advisable for administering the Plan. The Committee
also shall have the authority to require, in its discretion, as a condition of
the granting of any such Option, that an employee recipient agree (i) not to
sell or otherwise dispose of Shares acquired pursuant to the exercise of an
Incentive Option for a period of two (2) years from the grant of such Incentive
Option nor within one (1) year from the date of the acquisition of such Shares
pursuant to the exercise of such Incentive Option and (ii) that in the event of
termination of employment of such employee, other than as a result of dismissal
without cause, such employee will not, for a period to be fixed at the time of
the grant of the Option, enter into any other employment or participate directly
or indirectly in any other business or enterprise which is competitive with the
business
-3-
of the Company or any Related Entity, or enter into any employment in which such
employee will be called upon to utilize special knowledge obtained through
employment with the Company or any Related Entity. The Committee shall also have
the authority to require, as a condition to the granting of any Option, that the
person receiving such Option agree not to sell or otherwise dispose of such
Option, any Company Stock acquired pursuant to such Option or any other
"derivative security" (as defined by Rule 16a-l(c) under the Exchange Act) for a
period of six (6) months following the later of (i) the date of the grant of
such Option or (ii) the date when the exercise price of such Option is fixed if
such exercise price is not fixed at the date of grant of such Option.
Subject to and consistent with the express provisions of the Code
and Rule 16b-3 promulgated under the Exchange Act, the Committee shall have
plenary authority, in lieu of requiring a cash payment from the Key Person upon
the exercise of an Option, to:
(a) provide the establishment of procedures for a Key Person
(1) to have withheld from the total number of Shares to be acquired
upon the exercise of an Option that number of Shares having a fair
market value (as defined herein) which, together with such cash as
shall be paid in respect of fractional Shares, shall equal the
Option exercise price, (2) to exercise an Option by delivering that
number of Shares of Company Stock already owned by such Key Person
having a fair market value which shall equal the Option exercise
price, (3) to exercise a portion of an Option by delivering that
number of Shares or Share of Company Stock already owned by such Key
Person having a fair market value which shall equal the partial
Option exercise price and to deliver the Shares thus acquired by
such Key Person in payment of Shares to be received pursuant to the
exercise of additional portions of such Option, the effect of which
shall be that such Key Person can in sequence utilize such newly
acquired Shares in payment of the exercise price of the entire
Option, together with such cash as shall be paid in respect of
fractional Shares, if any, or (4) to utilize a combination of the
methods stated in clauses (1) and (3) above, or of cash and one or
both of such methods, in payment of the exercise price of all or a
portion of such Option; PROVIDED, HOWEVER, that in the case of an
Incentive Option, no Shares shall be used to pay the exercise price
unless such Shares were not acquired through the exercise of an
Incentive Option or, if so acquired, have been held for more than
two years since the grant of such Option and for more than one year
since the exercise of such Option; and
(b) if appropriate, to provide an arrangement through
registered broker-dealers whereby temporary financing may be made
available by the broker-dealer to a Key Person who wishes to deliver
Shares of the Company in partial or full payment of the exercise
price of such Key Person's Option, under the rules and regulations
of the Board of Governors of the Federal Reserve, for the purpose of
assisting the Key Person in the exercise of an Option, such
authority to include the payment by the Company of the commissions
of the broker-dealer.
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The determination of the Committee on matters referred to in this
Article III shall be conclusive.
The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company. No member or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted hereunder.
IV. ELIGIBILITY
Grants of Incentive Options and Non-Qualified Options may be made
under the Plan, subject to and in accordance with the terms of the Plan, to Key
Employees. As used herein, the term "Key Employee" shall mean any employee of
the Company or any Related Entity, including officers and directors of the
Company or any Related Entity who are also employees of the Company or any
Related Entity, who are regularly employed on a salaried basis and who are so
employed on the date of such grant, whom the Committee identifies as having a
direct and significant effect on the performance of the Company or any Related
Entity. Notwithstanding the preceding provisions of this Article IV, Incentive
Options may be granted only to Key Employees who are employed by the Company or
a Related Entity that is a subsidiary corporation or parent corporation of the
Company on the date of grant of any such Option.
Grants of Non-Qualified Options shall be made, subject to and in
accordance with the terms hereof, to individuals not regularly employed by the
Company who serve as directors of the Company ("Outside Director Participants").
The adoption of this Plan shall not be deemed to give any person a
right to be granted any Options.
Subject to the adjustment provisions contained in Article XIII, the
aggregate number of Shares with respect to which Options granted to any Key
Employee (which for purposes of this sentence shall include the Chairman of the
Board, whether or not such person would otherwise be considered an Key Employee)
are exercisable shall not exceed 1,063,083.
V. LIMITATION ON EXERCISE OF INCENTIVE OPTIONS
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock with respect to which Incentive Options are
exercisable for the first time by an employee during any calendar year (under
all stock Option plans of the Company and any Related Entity) exceeds $100,000,
such Options shall be treated as Non-Qualified Options. For purposes of this
limitation (i) the fair market value of stock is determined as of the time the
-5-
Option is granted, and (ii) the limitation will be applied by taking into
account Options in the order in which they were granted.
VI. OPTION PRICE AND PAYMENT
The price ("Exercise Price") for each Share purchasable under any
Option granted hereunder shall be such amount as the Committee shall, in its
best judgment made in good faith, determine on the basis of facts and
circumstances and the requirements, if any, of Section 162(m) of the Code and
any rules or regulations promulgated thereunder to be not less than one hundred
percent (100%) of the fair market value per Share at the date such Option is
granted; provided, however, that in the case of an Incentive Option granted to a
person who, at the time such Incentive Option is granted, owns shares of the
Company or any Related Entity which possesses more than ten percent (10%) of the
total combined voting power of all classes of shares of the Company or of any
Related Entity, the Exercise Price for each Share purchasable thereunder shall
be such amount as the Committee, in its best judgment, shall determine to be not
less than one hundred ten percent (110%) of the fair market value per Share at
the date the Incentive Option is granted. In determining stock ownership of a
Key Employee for any purposes under the Plan, the rules of Section 424(d) of the
Code shall be applied, and the Committee may rely on representations of fact
made to it by the Key Employee and believed by it to be true.
If the Shares are listed on a national securities exchange in the
United States on the date any Option is granted, the fair market value per share
shall be deemed to be the average of the high and low quotations at which such
Shares are sold on such national securities exchange on the date such Option is
granted. If the Shares are listed on a national securities exchange in the
United States on such date but the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair
market value per Share shall be determined as of the closest preceding date on
which such exchange shall have been open for business and the Shares were
traded. If the Shares are listed on more than one national securities exchange
in the United States on the date any such Option is granted, the Committee shall
determine which national securities exchange shall be used for the purpose of
determining the fair market value per Share. If the Shares are not listed on a
national securities exchange on such date, the last reported bid price in the
over-the-counter market shall be the fair market value per share, or if the
Shares are not traded on the over-the-counter market on such date, the fair
market value per share shall be determined by the Committee in good faith.
Notwithstanding the prior provisions of this paragraph, to the extent that
Section 162(m) of the Code or any rule or regulation promulgated thereunder
provides a different or inconsistent definition of "fair market value," such
definition shall be applied in determining the fair market value per share of
Options issued hereunder. For purposes of establishing the fair market value of
Shares or underlying Options, the fair market value shall be determined without
regard to any restriction on transfer thereof.
For purposes of this Plan, the determination by the Committee of the
fair market value of a Share shall be conclusive.
-6-
Upon the exercise of an Option granted hereunder, the Company shall
cause the purchased Shares to be issued only when it shall have received the
full purchase price for the Shares in cash or by certified check, except as
otherwise provided in Article III hereof.
VII. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the Options
granted hereunder are to be added to the general funds of the Company and used
for its general corporate purposes as the Board of Directors shall determine.
VIII. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Subject to Article V, any Incentive Option granted hereunder shall
be exercisable during a period of not more than ten (10) years from the date of
grant of such Option at such times and in such amounts as the Committee shall
determine at such date of grant; provided, however, that in the case of an
Incentive Option granted to a person who, at the time the Incentive Option is
granted, owns shares in the Company or in any Related Entity which possesses
more than ten percent (10%) of the total combined voting power of all classes of
shares of the Company or of any Related Entity, such Option shall expire not
more than five (5) years from the date of grant.
Any Non-Qualified Option granted hereunder shall be exercisable at
such times, in such amounts and during such period or periods as the Committee
shall determine at the date of the grant of such Option.
The Committee shall have the right to accelerate, in whole or in
part, from time to time, conditionally or unconditionally, rights to exercise
any Option granted hereunder.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part. If any Option granted hereunder shall terminate prior to the Termination
Date, the Committee shall have the right to use the Shares as to which such
Option shall not have been exercised to grant one or more additional Options to
any eligible Key Person, but any such grant of an additional Option shall be
made prior to the close of business on the Termination Date.
In no event shall an Option granted hereunder be exercised for a
fraction of a share.
IX. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as
to all or part of the Shares covered thereby by the giving of written notice of
the exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date such
notice is given, for the payment of the purchase price against delivery
-7-
of the Shares being purchased. Subject to the terms of Articles III, XV, XVII
and XVIII, the Company shall cause certificates for the Shares so purchased to
be delivered to the Optionee at the principal business office of the Company,
against payment of the full purchase price in cash or by certified check except
as otherwise provided in Article III.
X. STOCK APPRECIATION RIGHTS
[DELETED]
XI. NONTRANSFERABILITY OF OPTIONS
An Option granted hereunder shall not be transferable, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution, and any Option granted hereunder shall be exercisable, during the
lifetime of the holder, only by such holder.
XII. TERMINATION OF EMPLOYMENT AND SERVICE
Upon termination of a Key Person's service with the Company and all
Related Entities, any Option previously granted hereunder, unless otherwise
specified by the Committee in the Option, shall, to the extent not theretofore
exercised, terminate and become null and void, provided that:
(a) if the recipient shall die while in the service of the
Company or a Related Entity or during either the three (3) month or
one (1) year period, whichever is applicable, specified in clause
(b) below and at a time when such recipient was entitled to exercise
an Option as herein provided, the legal representative of such
recipient, or such person who acquired such Option by bequest or
inheritance or by reason of the death of the recipient, may, not
later than one (1) year from the date of death, exercise such
Option, to the extent not theretofore exercised, in respect of any
or all of such number of Shares as specified by the Committee in
such Option; and
(b) if the service of any recipient to whom such Option shall
have been granted shall terminate by reason of the recipient's
retirement (at such age or upon such conditions as shall be
specified by the Committee), disability (as described in Section
22(e)(3) of the Code) or dismissal by the Company or a Related
Entity other than for cause (as defined below), and while such
recipient is entitled to exercise such Option as herein provided,
such recipient shall have the right to exercise such Option so
granted, to the extent not theretofore exercised, in respect of any
or all of such number of Shares as specified by the Committee in
such Option, at any time up to and including (i) three (3) months
after the date of such termination in the case of termination by
reason of retirement or dismissal other than for cause and (ii) one
(1) year after the date of termination in the case of termination by
reason of disability.
-8-
If a recipient voluntarily terminates his or her employment or
service as an Outside Director Participant, or is discharged for cause, any
Option granted hereunder shall, unless otherwise specified by the Committee in
the Option, forthwith terminate with respect to any unexercised portion thereof.
Each Incentive Option by its terms shall require the recipient to
remain in the continuous employ of the Company or any subsidiary corporation or
parent corporation of the Company from the date of grant of the Incentive Option
until no more than three (3) months prior to the date of exercise of the
Incentive Option (except as otherwise provided herein in the event of death or
disability).
Notwithstanding the preceding paragraphs of this Article XII, if the
service of any recipient with the Company and all Related Entities is
terminated, whether voluntarily or involuntarily, within a one-year period
following a change in control of the Company (as defined in Article XIII), other
than a termination of such service for cause, such recipient shall have the
right to exercise all or any portion of the Option, whether vested or unvested,
at any time up and to and including three (3) months after the date of such
termination, at which time such Option shall cease to be exercisable.
Notwithstanding the immediately preceding paragraphs of this Article
XII, no Option may be exercised after the expiration of the period of
exercisability provided for in such Option.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased recipient or former recipient, or by a person who
acquired an Option granted hereunder by bequest or inheritance or by reason of
the death of any recipient or former recipient, written notice of such exercise
shall be accompanied by a certified copy of letters testamentary or equivalent
proof of the right of such legal representative or other person to exercise such
Option.
For the purposes of the Plan, the term "for cause" shall mean (i)
with respect to an employee who is a party to a written agreement with, or
alternatively, participates in a compensation or benefit plan of the Company or
a Related Entity, which agreement or plan contains a definition of "for cause"
or "cause" (or words of like import) for purposes of termination of employment
thereunder by the Company or such Related Entity, "for cause" or "cause" as
defined in the most recent of such agreements or plans, or (ii) in all other
cases, as determined by the Committee, in its sole discretion, (a) the willful
commission by an employee of a criminal or other act that causes or will
probably cause substantial economic damage to the Company or a Related Entity or
substantial injury to the business reputation of the Company or a Related
Entity; (b) the continuing willful failure of an employee to perform the duties
of such employee to the Company or a Related Entity (other than such failure
resulting from the employee's incapacity due to physical or mental illness)
after written notice thereof (specifying the particulars thereof in reasonable
detail) and a reasonable opportunity to be heard and cure such failure are given
to the employee by the Committee; (c) the order of a court of competent
jurisdiction requiring the termination of the employee's employment; or (d) in
the case of an Outside Director Participant, the failure of such Outside
Director Participant to act in good faith
-9-
or the taking of any action that constitutes a material breach of such person's
fiduciary duty to the Company. For purposes of the Plan, no act, or failure to
act, on the employee's part shall be considered "willful" unless done or omitted
to be done by the employee not in good faith and without reasonable belief that
the employee's action or omission was in the best interest of the Company or a
Related Entity.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and the Company or a Related Entity if, at
the time of the determination, the individual was an "employee" of the Company
or such Related Entity. If an individual is on military, sick leave or other
bona fide leave of absence such individual shall be considered an "employee" for
purposes of the exercise of an Option and shall be entitled to exercise such
Option during such leave if the period of such leave does not exceed 90 days,
or, if longer, so long as the individual's right to reemployment with the
Company (or a Related Entity) is guaranteed either by statute or by contract. If
the period of leave exceeds ninety (90) days, the employment relationship shall
be deemed to have terminated on the ninety-first (91) day of such leave, unless
the individuals right to reemployment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of
(i) the transfer of an employee from employment by the Company to employment by
a Related Entity or (ii) the transfer of an employee from employment by a
Related Entity to employment by the Company or by another Related Entity.
XIII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTION
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination of shares, exchange of shares, or
other like change in capital structure of the Company, an adjustment shall be
made to each outstanding Option such that each such Option shall thereafter be
exercisable for such securities, cash and/or other property as would have been
received in respect of the Shares subject to such Option had such Option been
exercised in full immediately prior to such change, and such an adjustment shall
be made successively each time any such change shall occur. The term "Shares"
shall after any such change refer to the securities, cash and/or property then
receivable upon exercise of an Option. In addition, in the event of any such
change, the Committee shall make any further adjustment as may be appropriate to
the maximum number of Shares subject to the Plan, the maximum number of Shares
of which Options may be granted to any one recipient, and the number of Shares
and price per Share subject to outstanding Options as shall be equitable to
prevent dilution or enlargement of rights under such Options, and the
determination of the Committee as to these matters shall be conclusive.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Option shall comply with the rules of Section 424(a) of the Code, and
(ii) in no event shall any adjustment be made which would render any Incentive
Option granted hereunder other than an incentive stock option for purposes of
Section 422 of the Code.
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In the event of a change in control of the Company, all then
outstanding vested Options shall immediately become exercisable. For purposes of
the Plan, a "change in control" of the Company occurs if: (a) any "person"
(defined as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act, as amended), other than a stockholder of the Company as of the date of the
adoption of the Plan by the Board of Directors or any affiliate of any such
stockholder, is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing fifty percent or more of the combined
voting power of the Company's outstanding securities then entitled to vote for
the election of directors; (b) the Board of Directors shall approve the sale of
all or substantially all of the assets of the Company; or (c) the Board of
Directors shall approve any merger, consolidation, issuance of securities or
purchase of assets, the result of which would be the occurrence of any event
described in clause (a) above.
The Committee in its discretion may determine that, upon the
occurrence of a transaction described in the preceding paragraph, each Option
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each Share
subject to such Option, cash in an amount equal to the excess of the fair market
value of such Share immediately prior to the occurrence of such transaction over
the exercise price per Share of such Option immediately prior to the occurrence
of such transaction. The provisions contained in the preceding sentence shall be
inapplicable to an Option granted within six (6) months before the occurrence of
a transaction described above if the holder of such Option is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
XIV. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
Related Entity thereof to continue the employment of any holder of an Option;
and it shall not impose any obligation on the part of any holder of an Option to
remain in the employ of the Company or of any Related Entity.
XV. PURCHASE FOR INVESTMENT
Except as hereafter provided, the holder of an Option granted
hereunder shall, upon any exercise thereof, execute and deliver to the Company a
written statement, in form satisfactory to the Company, in which such holder
represents and warrants that such holder is purchasing or acquiring the Shares
acquired thereunder for such holder's own account, for investment only and not
with a view to the resale or distribution thereof, and agrees that any
subsequent offer for sale or sale or distribution of any of such Shares shall be
made pursuant to either (a) a Registration Statement on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard to the
Shares being offered or sold, or (b) a specific exemption from the registration
requirements of the Securities Act and any applicable state securities law or
regulation, but in claiming such exemption the holder shall, prior to any offer
for sale or sale
-11-
of such Shares, obtain a prior favorable written opinion, in form and substance
satisfactory to the Company, from counsel for or approved by the Company, as to
the applicability of such exemption thereto. Notwithstanding the prior sentence,
no exercise of an Option shall be deemed to be effective if the Company, in its
sole discretion, determines that a violation of any federal or state securities
law, or rule or regulation promulgated thereunder, would result therefrom. The
foregoing restrictions shall not apply to (i) issuances by the Company so long
as the Shares being issued are registered under the Securities Act and a
prospectus in respect thereof is current or (ii) reofferings of Shares by
affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) if the Shares being reoffered
are registered under the Securities Act and a prospectus in respect thereof is
current.
XVI. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Subject to the provisions of Articles III, XV and XVIII hereof, upon
any exercise of an Option which may be granted hereunder and payment of the
purchase price in full in cash or by certified check, a certificate or
certificates for the Shares as to which the Option has been exercised shall be
issued by the Company in the name of the person exercising the Option and shall
be delivered to or upon the order of such person.
The Company may endorse such legend or legends upon the certificates
for Shares issued upon exercise of an Option granted hereunder and may issue
such "stop transfer" instructions to its transfer agent in respect of such
Shares as, in its discretion, it determines to be necessary or appropriate to
(i) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or any state "blue sky" law or regulation,
(ii) implement the provisions of the Plan and any agreement between the Company
and the optionee or grantee with respect to such Shares, or (iii) permit the
Company to determine the occurrence of a disqualifying disposition, as described
in Section 421(b) of the Code, of Shares transferred upon exercise of an
Incentive Option granted under the Plan.
The Company shall pay all issue taxes with respect to the issuance
of Shares to the person exercising the Option, as well as all fees and expenses
necessarily incurred by the Company in connection with such issuance.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XVII. WITHHOLDING TAXES
The Company may require a Key Person exercising a Non-Qualified
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Option in a disqualifying disposition (within the
meaning of Section 421(b) of the Code), to reimburse the Company or Related
Entity, as appropriate, for any taxes required by any governmental authority to
be withheld or otherwise deducted and paid by such corporation in respect of the
issuance or disposition of Shares. In lieu thereof, the Company or Related
Entity, as
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appropriate, shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such Corporation to the Key Person upon
such terms and conditions as the Committee shall prescribe. At any time that the
Company or a Related Entity becomes subject to a withholding obligation under
applicable law with respect to the exercise of a Non- Qualified Option except as
set forth below, a Key Person may elect to satisfy, in whole or in part, the Key
Person's related personal tax liabilities (an "Election") by (i) the payment of
cash, (ii) electing to have such amount withheld from sums otherwise due to the
Key Person, (iii) subject to the other requirements of this Section XVII,
directing the Company or the subsidiary to withhold from Shares issuable in the
related exercise either a specified number of Shares or Shares having a
specified value in each case with a value not in excess of such tax liabilities,
(iv) subject to the requirements of Section 16(b) of the Exchange Act and the
rules promulgated thereunder, tendering Shares previously issued pursuant to an
exercise or other shares of the Company's common stock owned by the Key Person
or (v) combining any or all of the foregoing options; PROVIDED, that the Company
will not be required to redeem any Shares or shares of nonvoting or other common
stock in violation of applicable laws. An Election shall be irrevocable. The
withheld Shares and other shares tendered in payment should be valued at their
fair market value on the date that the withholding obligation arises (the "Tax
Date"). The Committee may disapprove of any Election, suspend, or terminate the
right to make Elections or provide that the right to make Elections shall not
apply to particular grants, Shares or exercises. If a Key Person is a person
subject to Section 16 of the Exchange Act and such Key Person intends to satisfy
all or any portion of such withholding obligation by directing the withholding
of Shares issuable or tendering Shares, then (1) any Election by such Key Person
must be made (i) at least six months prior to the relevant Tax Date or (ii) on
or prior to the relevant Tax Date and during a period that begins on the third
business day following the date of release for publication of the Company's
quarterly or annual summary statements of sales and earnings and that ends on
the twelfth business day following such date and (2) the Election may not be
made with respect to an exercise, or the withholding obligation arising thereon,
if the relevant Non-Qualified Option was granted six months or less prior to the
date of Election. The Committee may impose any other conditions or restrictions
on the right to make an Election as it shall deem appropriate. If the Key Person
has informed the Company in writing that such withholding would subject such Key
Person to liability under Section 16(b) of the Exchange Act, the Company shall
not be authorized to effect any such withholding without the prior written
consent of the Key Person. The Committee may prescribe such rules as it
determines with respect to Key Persons subject to the reporting requirements of
Section 16(a) of the Exchange Act to effect such tax withholding in compliance
with the Rules established by the Securities and Exchange Commission (the
"Commission") under Section 16 of the Exchange Act and the positions of the
staff of the Commission thereunder expressed in no-action letters exempting such
tax withholding from liability under Section 16(b) of the Exchange Act.
XVIII. LISTING OF SHARES AND RELATED MATTERS
Upon the consummation of a public offering of voting common stock of
the Company which is underwritten on a firm commitment basis by a
nationally-recognized investment banking firm, (i) each granted but unexercised
Option shall be deemed from the date thereof to be an
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option to purchase voting common stock of the Company instead of an option to
purchase nonvoting common stock of the Company, and (ii) all Options granted
after the date thereof shall be options to purchase voting common stock of the
Company and not nonvoting common stock of the Company.
If at any time the Board of Directors shall determine in its
discretion that the listing, registration or qualification of the Shares covered
by the Plan upon any national securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares under the Plan, no Shares shall be issued unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors. During such suspension of the issuance of
Shares, neither the Company nor its parents or subsidiaries shall be liable for
any payment of interest or fees of any kind on Shares not yet issued. Under no
circumstances shall the Company be required to effect any registration or
qualification of any Shares under any federal or state securities laws.
XIX. AMENDMENT OF THE PLAN
The Board of Directors or the Committee, as the case may be, may,
from time to time, amend the Plan, provided that no amendment shall be made,
without the approval of the stockholders of the Company, that will (i) increase
the total number of Shares reserved for Options under the Plan (other than an
increase resulting from an adjustment provided for in Article XIII), (ii) reduce
the exercise price of any Option granted hereunder below the price required by
Article VI, (iii) modify the provisions of the Plan relating to eligibility,
(iv) materially increase the benefits accruing to participants under the Plan,
(v) increase the number of Shares which may be granted to an individual Key
Employee under the Plan, (vi) adversely affect the Plan's qualification under
Section 162(m)(4)(C) of the Code, (vii) adversely affect the qualification of
Incentive Options under Section 422 of the Code or (viii) otherwise materially
modify the Plan. The Committee shall be authorized to amend the Plan and the
Options granted thereunder to permit the Incentive Options granted thereunder to
qualify as incentive stock Options within the meaning of Section 422 of the Code
and to qualify the Plan under Section 162(m)(4)(C) of the Code. The rights and
obligations under any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or the Option without the consent of the holder of the Option.
XX. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the
Plan. The Plan, unless sooner terminated by action of the Board of Directors,
shall terminate at the close of business on the Termination Date. An Option may
not be granted while the Plan is suspended or after it is terminated. Rights and
obligations under any Option granted while the Plan is in effect shall not be
altered or impaired by suspension or termination of the Plan, except upon the
consent of the person to whom the Option was granted. The power of the Committee
to
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construe and administer any Options granted prior to the termination or
suspension of the Plan under Article III nevertheless shall continue after such
termination or during such suspension.
XXI. SAVINGS PROVISION
With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
XXII. GOVERNING LAW
The Plan, such Options as may be granted thereunder and all related
matters shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware from time to time obtaining.
XXIII. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be
deemed to affect the validity of any other provision.
XXIV. EFFECTIVE DATE OF AMENDMENT AND RESTATEMENT OF THE PLAN
The Plan as set forth herein constitutes an amendment and
restatement of the Trident NGL Holding, Inc. Amended and Restated 1991 Stock
Option Plan, as previously adopted by Trident NGL Holding, Inc. (a predecessor
to the Company). This amendment and restatement of the Plan shall be effective
as of May 10, 1996, provided this amendment and restatement of the Plan is
approved by the stockholders of the Company on such date at the Company's 1996
Annual Meeting of Stockholders.
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EXHIBIT 10.17
NGC CORPORATION
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
1. PURPOSE. The purpose of this NGC Corporation Non-Employee Director
Compensation Plan (this "Plan") is to promote the interests of NGC Corporation,
a Delaware corporation (the "Company"), and its subsidiaries by helping to
attract and retain highly qualified independent directors. This Plan shall be
interpreted and implemented such that the eligible directors will not fail, by
reason of this Plan as written or its implementation, to be "disinterested
persons" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
2. DEFINITIONS. For purposes of this Plan, the following shall have the meaning
set forth below:
a. "ANNUAL RETAINER" means the annual dollar amount, designated from time
to time by the Board, payable to each Non-Employee Director for services as a
Director of the Company.
b. "BOARD" means the Board of Directors of the Company, as constituted from
time to time.
c. "CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law.
d "COMMON STOCK" means the class of stock which, as of the effective date
of this Plan, is designated as Common Stock of the Company.
e. "COMPANY" shall have the meaning set forth in SECTION 1.
f. "DIRECTOR" means a member of the Board.
g. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law.
h. "ELECTION NOTICE" means a notice in the form of EXHIBIT A.
i. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor law.
j. "MARKET VALUE" means the closing price of the Common Stock as reported
by the New York Stock Exchange (or other quotation system or stock exchange on
which the Common Stock then trades), or, if on such date no closing price was
reported, on the last preceding date on which a closing price of the Common
Stock was reported. In the event the Common Stock is not publicly traded an
applicable date, the determination of its Market Value shall be made by the
Board in such manner as it deems appropriate.
k. "MEETING FEE" means the fee payable to each Non-Employee Director for
attending each meeting of the Board, or committee thereof on which the
Non-Employee Director then serves, designated from time to time by the Board.
l. "NON-EMPLOYEE DIRECTOR" means a Director who is not an employee of the
Company or any of its Subsidiaries.
m. "PLAN" shall have the meaning set forth in SECTION 1.
n. "PLAN ADMINISTRATOR" shall have the meaning set forth in SECTION 7.
o. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law.
p. "SUBSIDIARY" shall mean any corporation, partnership, limited liability
company or partnership, association, trust or other organization now existing or
hereafter formed or acquired which directly or indirectly controls, or is
controlled by, or is under common control with, the Company.
3. TERM OF PLAN The Plan as set forth herein constitutes an amendment and
restatement of the NGC Corporation Non-Employee Director Compensation Plan, as
previously adopted by the Company. This amendment and restatement of the Plan
shall become effective as of April 1, 1996, provided this amendment and
restatement of the Plan is approved by the holders of the majority of the Common
Stock present and represented at the Company's 1996 Annual Meeting of
Stockholders. Unless earlier terminated pursuant to the provisions of SECTION 9,
this Plan shall continue in effect through December 31, 2005.
4. COMPENSATION
a. ANNUAL RETAINER. Each Non-Employee Director shall be paid the Annual
Retainer, payable quarterly in arrears. The initial Annual Retainer shall be
$22,000 and may be changed by resolution of the Board from time to time in its
discretion.
b. MEETING FEES. Each Non-Employee Director shall be paid the Meeting Fee,
payable quarterly in arrears, for each meeting of the Board attended by such
Non-Employee Director. In addition, for serving on a committee of the Board each
Non-Employee Director shall receive the Meeting Fee, payable quarterly in
arrears for each meeting of a committee of the Board which the Non-Employee
Director then serves attended by such Non-Employee Director. The foregoing
notwithstanding, no meeting fees shall be paid for participation in a meeting
via telephone. The initial Meeting Fee shall be $1,250 and may be changed by
resolution of the Board from time to time in its discretion.
c. ELECTION TO RECEIVE CASH OR COMMON STOCK. Each year, within 10 days of
his or her election or appointment as a Director, each Non-Employee Director
shall submit to the Plan Administrator an Election Notice evidencing such
Non-Employee Director's irrevocable election to receive his or her Annual
Retainer and Meeting Fees in cash or in Common Stock for the Qualifying Period.
A "Qualifying Period" shall be the four-calendar quarter period commencing in
the second full calendar quarter after the date of the Election Notice;
PROVIDED, HOWEVER, (i) with respect to each Election Notice due following the
election of Directors at the 1996 Annual Meeting of Stockholders, a "Qualifying
Period" shall be the period commencing upon a Non-Employee Director's election
as a Director and ending on the last day of the fifth full calendar quarter
thereafter and (ii) with respect to an Election Notice due following the
appointment of a Non-Employee Director to fill a vacancy on the Board of
Directors of the Company, a "Qualifying Period" shall be the period commencing
upon such Non-Employee Director's appointment as a Director and ending upon the
expiration of the Qualifying Period set forth in the Election Notices submitted
by the Non-Employee Directors elected at the immediately preceding Annual
Meeting of Stockholders.
Notwithstanding any provision contained in this SECTION 4.C or any
other provision of this Plan, no Non-Employee Director shall be eligible to
receive an Annual Retainer or Meeting Fees after his or her removal, resignation
or other termination as a Director.
d. DETERMINATION OF NUMBER OF SHARES. As promptly as practicable following
the expiration of each calendar quarter, for each of the Non-Employee Directors
that have elected to receive their Annual Retainer and Meeting Fees in Common
Stock, the Plan Administrator shall determine the number of shares of Common
Stock to be issued to each Non-Employee Director in accordance with the
following formula:
i. the quotient of:
A. the sum of (1) one-quarter of the Annual Retainer and (2) the
number of meetings of the Board and meetings of committees of the
Board upon which such Non-Employee Director then served attended by
each Non-Employee Director during the applicable calendar quarter
multiplied by the Meeting Fee; divided by
B. the Market Value of the Common Stock on the last day of the
applicable calendar quarter.
e. DELIVERY OF CASH OR COMMON STOCK. As promptly as is practicable
following the end of each calendar quarter, the Plan Administrator shall deliver
to each Non-Employee Director (i) a stock certificate or certificates evidencing
the number of shares of Common Stock issuable in accordance with the formula set
forth in SECTION 4(D) or (ii) a Company check in the aggregate amount of Annual
Retainer and Meeting Fees payable to such Non-Employee Director for the
applicable calendar quarter.
5. LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No shares of the Common
Stock shall be issued under this Plan unless legal counsel for the Company shall
be satisfied that such issuance will be in compliance with all applicable
federal and state securities laws and regulations and any other applicable laws
or regulations. The Committee may require, as a condition of any payment or
share issuance, that
2
certain agreements, undertakings, representations, certificates, and/or
information, as the Committee may deem necessary or advisable, be executed or
provided to the Company to assure compliance with all such applicable laws or
regulations. Certificates for shares of Common Stock delivered under this Plan
may be subject to such stock-transfer orders and such other restrictions as the
Committee may deem advisable under the rules, regulations, or other requirements
of the Securities and Exchange Commission, any stock exchange or quotation
system upon which the Common Stock is then traded, and any applicable federal or
state securities law. In addition, if, at any time specified herein for (i) the
making of any determination or (ii) the issuance or other distribution of
Restricted Stock and/or Common Stock to an Eligible Participant, any law, rule,
regulation or other requirement of any governmental authority or agency shall
require either the Company, its subsidiaries or any Eligible Participant (or any
estate, designated beneficiary or other legal representative thereof) to take
any action in connection with any such determination, any such shares to be
issued or distributed, or the making of any such determination, as the case may
be, shall be deferred until such required action is taken.
a. LEGEND. The Eligible Participants are hereby advised that all
certificates representing shares of Common Stock purchased pursuant to this Plan
shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED WITHOUT
A VIEW TO THE DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE RULES AND
REGULATIONS THEREUNDER AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THE COMPANY WILL NOT TRANSFER SUCH SHARES EXCEPT UPON RECEIPT OF
EVIDENCE SATISFACTORY TO THE COMPANY THAT THE REGISTRATION PROVISIONS OF
SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED
AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES
LAWS.
6. SHARES SUBJECT TO PLAN. The maximum number of shares of Common Stock issuable
under this Plan shall be 100,000. The aggregate number of shares which are the
subject of grants of Common Stock described herein shall be adjusted as
appropriate to reflect any reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, issuance of rights or
any other change in the capital structure of the Company.
7. ADMINISTRATION
a. PLAN ADMINISTRATION AND PLAN RULES. This Plan shall be administered by
the Board. The Board is authorized to construe and interpret this Plan and to
promulgate, amend and rescind rules and regulations relating to the
implementation, administration and maintenance of this Plan. Subject to the
terms and conditions of this Plan, the Board shall make all determinations
necessary or advisable for the implementation, administration and maintenance of
this Plan including, without limitation, (i) imposing such restrictions, terms
and conditions upon purchases of Common Stock pursuant to this Plan as the Board
shall deem appropriate and (ii) correcting any technical defect or technical
omission or reconciling any technical inconsistency in this Plan. The Board may
appoint a plan administrator (the "Plan Administrator") to carry out the
day-to-day administration of this Plan under such conditions and limitations as
it may prescribe. Any determination, decision or action of the Board in
connection with the construction, interpretation, administration, implementation
or maintenance of this Plan shall be final, conclusive and binding upon all
Non-Employee Directors and any person(s) claiming under or through any
Non-Employee Directors.
b. LIABILITY LIMITATION. Neither the Board nor any member thereof shall
be liable for any act, omission, interpretation, construction or determination
made in good faith in connection with this Plan, and the members of the Board
shall be entitled to indemnification and reimbursement by the Company in respect
of any claim, loss, damage or expense (including, without limitation, attorneys'
fees) arising or
3
resulting therefrom to the fullest extent permitted by law and/or under any
directors' and officers' liability insurance coverage which may be in effect
from time to time.
8. AMENDMENT AND TERMINATION The Board shall have complete power and authority
to terminate or amend this Plan; PROVIDED, HOWEVER, that the Board shall not,
without the approval of the stockholders of the Company (i) except as provided
in SECTION 6, increase the maximum number of shares of Common Stock which may be
issued under this Plan, (ii) modify requirements as to the class of persons
eligible to participate in this Plan or (iii) extend the terms of this Plan. The
foregoing notwithstanding, this Plan may not be amended more than once in any
six-month period, except when necessary to comply with the Code or ERISA.
9. MISCELLANEOUS
a. GOVERNING LAW. THIS PLAN AND ALL ACTIONS TAKEN HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THEREUNDER. ANY TITLES AND
HEADINGS HEREIN ARE FOR REFERENCE PURPOSES ONLY, AND SHALL IN NO WAY LIMIT,
DEFINE OR OTHERWISE AFFECT THE MEANING, CONSTRUCTION OR INTERPRETATION OF ANY
PROVISIONS OF THIS PLAN.
b. REGULATIONS. The issuance of shares to Non-Employee Directors or to
their legal representatives shall be subject to any applicable tax and other
laws or regulations of the United States or any state or commonwealth having
jurisdiction thereover.
c. INSUFFICIENT SHARES. In the event that there are not sufficient shares
available under the Plan to allow for the grant to a Non-Employee Director of
the shares of Common Stock provided for herein, such Non-Employee Director shall
receive a grant of the remaining shares that are reserved for issuance under the
Plan. If two or more Non-Employee Directors are entitled to a grant hereunder
under such circumstances, then such Directors shall receive grants for shares of
Stock equal to their respective equal pro rata shares of the total number shares
of Stock remaining and available under the Plan.
d. SECTION 83(B) ELECTIONS. In the event that a Non-Employee Director makes
an election under Section 83(b) of the Code with respect to a grant of Common
Stock hereunder, such Non-Employee Director shall notify the Company immediately
upon the making of such election and shall forward to the Company a copy of any
such Section 83(b) election.
e. NO RIGHT TO COMPANY ASSETS. No Non-Employee Director, and no beneficiary
or other person claiming under or through the Non-Employee Director, shall have
any right, title or interest by reason of any compensation paid in the form of
Common Stock hereunder to any particular assets of the Company or any shares of
Common Stock allocated or reserved for the purposes of this Plan, except as set
forth herein; and the Company shall not be required to establish any fund or
make any other segregation of assets to assure the grant or transfer of any
Common Stock hereunder.
f. ENCUMBRANCES ON PLAN COMPENSATION. No right to compensation under the
Plan shall be subject to anticipation, sale, assignment, pledge, encumbrance, or
charge, except by will or the laws of descent and distribution.
Exhibit A: Form of Election Notice
4
EXHIBIT A
Each Non-Employee Director shall complete and deliver the following
form (i) by telecopy to at telecopy number (713) 507-6834, and confirm the
receipt thereof by telephone at (713) 507- and (ii) by overnight courier to the
address specified below:
FORM OF ELECTION NOTICE
___________ , 19__
NGC Corporation
13430 Northwest Freeway
Houston, Texas 77040
Attention:
Dear Sir:
The undersigned, currently an Non-Employee Director of NGC Corporation,
hereby advises you that I hereby elect to receive my Annual Retainer and Meeting
Fees set forth under the provisions of the NGC Corporation Non-Employee Director
Compensation Plan (the "Plan") for service as a Non-Employee Director for the
period commencing on ______________, 199__ and ending on _____________, 199__ in
the form of _____________ (Insert: Cash or Common Stock).
In addition, I hereby represent and warrant that I have read the Plan,
and fully understand the rights, restrictions and limitations provided for
therein.
Very truly yours,
_____________________________
Printed Name:
5
EXHIBIT 10.40
EXHIBIT 2.1
CONTRIBUTION AND ASSUMPTION AGREEMENT
This CONTRIBUTION AND ASSUMPTION AGREEMENT is entered into as of
[__________, 1996] by and among CHEVRON U.S.A. INC., a Pennsylvania corporation
("Chevron"), CHEVRON PIPE LINE COMPANY, a Delaware corporation ("CPL"), CHEVRON
CHEMICAL COMPANY, a Delaware corporation ("CCC")(Chevron, CPL and CCC are
hereinafter sometimes referred to collectively as the "Contributing Parties")
and MIDSTREAM COMBINATION CORP., a Delaware corporation ("Newco").
WITNESSETH:
WHEREAS, Chevron, Newco and NGC Corporation, a Delaware corporation
("NGC"), have entered into a Combination Agreement and Plan of Merger dated as
of May 22, 1996 (the "Combination Agreement"), pursuant to which the
Contributing Parties will contribute the Contributed Businesses (hereinafter
defined) and the Contributed West Texas LPG Pipeline Business (as hereinafter
defined) to Newco in exchange for shares of Common Stock and Preferred Stock of
Newco and the assumption by Newco of liabilities relating to the Contributed
Businesses, including the indebtedness described in paragraph 4 hereof, as
hereinafter in this Agreement provided;
NOW THEREFORE, in consideration of the mutual promises contained
herein, the mutual benefits to be derived for each party hereunder and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Contributing Parties and Newco hereby agree as follows:
1. CONTRIBUTION OF WARREN BUSINESS. The Contributing Parties hereby
contribute, assign, transfer, convey and deliver to Newco the following assets,
properties, contracts and other rights, titles and interests (all such assets
and rights other than the Excluded Warren Assets described below are hereinafter
collectively referred to as the "Contributed Warren Business"):
a. FACILITIES. The natural gas and natural gas liquids
("NGLs") processing facilities, NGL fractionation facilities,
pipelines, gathering lines and systems, storage facilities, terminaling
facilities, transportation facilities and other facilities relating to
the purchase, sale, exchange, gathering, processing or fractionating of
natural gas and NGLs which are more particularly described on SCHEDULE
1A hereto, including all leases, subleases, fee estates and leaseholds,
easements, permits, access licenses, servitudes, rights-of-way, surface
leases and other real property and real property interests related or
pertaining thereto (collectively, the "Facilities");
-1-
b. CONTRACTS. All rights in or derived from the contracts
listed on SCHEDULE 1B hereto, including without limitation all rights
to receive payment for products sold and/or services rendered and all
rights to receive goods and services purchased pursuant to such
contracts and to assert claims and take such other actions in respect
of breaches, defaults or other violations thereof and otherwise;
PROVIDED, HOWEVER, that the foregoing shall not include any contracts
associated with the Excluded Warren Assets or any employment or
severance agreements or an employee benefit plan, policy, program,
agreement or arrangement of Chevron or any of its Subsidiaries or
Affiliates;
c. PERSONAL PROPERTY AND FIXTURES. All of the Contributing
Parties' right, title and interest in all fixtures, personal property
and improvements which are located on, used or held for use in
connection with the Facilities, including without limitation, the
boilers, buildings, compression facilities, machinery, equipment,
furnishings, automobiles, trucks and other vehicles and rolling stock,
tools, telephone and telegraph lines, and other facilities and similar
property located on such Facilities which are owned or leased by Warren
Petroleum Company (other than those assets described on SCHEDULE 1EX);
d. INVENTORIES. All of Chevron's right, title and interest in
(i) the inventories of materials (including, without limitation,
natural gas and NGLs), raw materials, work in process and finished
products of Warren Petroleum Company ("Inventory"), but excluding any
such inventory relating to the Excluded Warren Assets as identified on
SCHEDULE 1EX, and (ii) spare parts, replacement and component parts,
and office and other supplies which are used or held for use by Chevron
or any of its Subsidiaries or Affiliates in connection with the
operation of the Facilities (but excluding any such inventory related
to the Excluded Warren Assets);
e. BOOKS AND RECORDS. All contract files, gas processing
files, division order files, abstracts, product design data, plans,
blueprints, specifications, manuals, designs, drawings, surveys,
engineering reports, equipment and parts lists, test reports, materials
standards, catalogues, performance and quality control standards,
procedures and records, price lists, mailing lists, photographs,
production data, sales and purchase records, sales order files,
records, data, media materials and plates, advertising, marketing,
promotional and sales materials, files and materials relating to
suppliers, vendors and other service providers, and all other books,
records, files, maps, accounting information and records and other
similar information or data in the possession of
-2-
Chevron relating to the operation of the Facilities and Chevron's
transferable rights in the computer and automatic machinery software
and programs and source disks that are used by Warren Petroleum Company
in connection with the assets described in this Section 1 (together
with all guides, forms, manuals, tapes and other materials employed in
connection therewith); PROVIDED, HOWEVER, that the foregoing shall not
include any proprietary information or manuals of Chevron Corporation
or other intellectual property retained by Chevron but licensed to
Newco pursuant to an Intellectual Property License Agreement of even
date herewith;
f. LICENSES AND PERMITS. To the extent permitted by law, all
of the Contributing Parties' right, title and interest in all permits,
approvals, licenses, product registrations, safety certifications and
other similar authorizations used in the operation of the Facilities,
including, without limitation, those listed on SCHEDULE 1F hereto;
g. TRADEMARKS AND TRADENAMES. All of Chevron's right, title
and interest in all common law rights and interests in the tradenames
"The Warren Petroleum Company," "Warrengas," "Warren Petroleum," or any
derivation of any such name and the design, tradenames and service
marks relating to Warren Petroleum Company other than those expressly
excluded pursuant to Section 15.1 of the Combination Agreement;
h. RIGHTS IN WARRANTIES. All rights in, to and under all
express or implied representations, warranties, indemnities, covenants
or other agreements of third parties arising from or attributable to
the assets constituting the Contributed Warren Business;
PROVIDED, HOWEVER, that the Contributed Warren Business does not include and the
Contributing Parties' shall retain all of their right, title and interest in and
to the assets, properties, rights, titles, interests and contracts relating to
Warren Petroleum Company that are not expressly described in this SECTION 1,
including, without limitation, the Venice Complex and the Venice Gas Gathering
Company, the lease covering Warren Petroleum Company's Tulsa, Oklahoma
headquarters and those other assets described on SCHEDULE 1EX (collectively, the
"Excluded Warren Assets").
2. CONTRIBUTION OF NGBU BUSINESS. Chevron hereby contributes, assigns,
transfers, conveys and delivers to Newco the following assets, properties,
contracts and other rights, titles and interests (all such assets and rights
other than the Excluded NGBU Assets defined below are hereinafter collectively
referred to as the "Contributed NGBU Business"):
-3-
a. CONTRACTS. All rights in or derived from the contracts
listed on SCHEDULE 2A hereto, including without limitation all rights
to receive payment for products sold and/or services rendered and all
rights to receive goods and services purchased pursuant to such
contracts and to assert claims and take such other actions in respect
of breaches, defaults or other violations thereof and otherwise;
b. FIXED ASSETS. The fixtures, personal property, computer
hardware and software used by the employees of the NGBU, as are more
specifically identified on SCHEDULE 2B hereto;
c. BOOK AND RECORDS. All contract files, gas marketing files,
division order files, abstracts, plans, specifications, manuals,
materials standards, catalogues, performance and quality control
standards, procedures and records, price lists, mailing lists,
photographs, sales and purchase records, sales order files, records,
data, media materials and plates, advertising, marketing, promotional
and sales materials, files and materials relating to suppliers, vendors
and other service providers, and all other books, records, files, maps,
accounting information and records, and other similar information or
data in the possession of Chevron relating to the Contributed NGBU
Business; PROVIDED, HOWEVER, that the foregoing shall not include any
proprietary information or manuals of Chevron Corporation or other
intellectual property retained by Chevron but licensed to Newco
pursuant to an Intellectual Property License Agreement of even date
herewith;
d. LICENSES AND PERMITS. To the extent permitted by law, all
permits, approvals, licenses and other similar authorizations used in
connection with the Contributed NGBU Business including, without
limitation, those listed on SCHEDULE 2D hereto;
e. RIGHTS IN WARRANTIES. All rights in, to and under all
express or implied representations, warranties, indemnities, covenants
or other agreements of third parties arising from or attributable to
the assets constituting the Contributed NGBU Business;
PROVIDED, HOWEVER, that the Contributed NGBU Business does not include and
Chevron shall retain all of Chevron's right, title and interest in and to the
assets, properties, rights, titles, interests, and contracts relating to the
NGBU that are not expressly described in this SECTION 2, including, without
limitation, the assets and contracts identified on SCHEDULE 2EX (collectively,
the "Excluded NGBU Assets").
3. REPRESENTATIONS. Without limiting any rights it may have under the
Combination Agreement, Chevron warrants title to
-4-
the assets comprising the Contributed Businesses (including those purported to
be conveyed by CPL and CCC) to the extent, BUT ONLY TO THE EXTENT, set forth in
the Combination Agreement, subject to the limitations and conditions regarding
the warranty of title and the remedies contained therein. EXCEPT AS SET FORTH IN
THE COMBINATION AGREEMENT, THE CONTRIBUTING PARTIES MAKE NO WARRANTIES OR
REPRESENTATIONS WHATSOEVER, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW,
WITH RESPECT TO TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, QUALITY,
CONDITION, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, SAFETY OF EQUIPMENT, TITLE
TO PERSONAL PROPERTY, COMPLIANCE WITH GOVERNMENTAL REGULATIONS OR OTHERWISE.
4. ASSUMPTION OF INDEBTEDNESS. Newco, for itself, its successors and
assigns, hereby assumes and from and after the Closing, agrees to duly and
timely pay, perform and discharge $155.373 million in certain related
indebtedness of Chevron to Chevron Capital U.S.A. Inc. (the "Assumed
Indebtedness") described in the Loan Agreement effective as of August 25, 1994
pursuant to the Assumption Agreement in substantially the form of EXHIBIT 4.
5. LIABILITIES. Without limiting its rights under the Combination
Agreement, Newco, for itself, its successors and assigns, hereby assumes from
the Contributing Parties from and after the Contribution Time and agrees to pay,
perform and discharge, and shall to the fullest extent permitted by law (but
subject to the further provisions of this paragraph 5), indemnify and hold the
Contributing Parties and their Affiliates harmless against, any and all
liabilities, obligations or claims associated with the ownership and operation
of the Contributed Businesses, whether or not such liabilities, obligations or
claims are known at the date hereof and whether or not such liabilities,
obligations or claims arise from the Contributing Parties ownership and
operation of the Contributed Businesses prior to the date hereof or from Newco's
ownership and operation of the Contributed Businesses subsequent to the date
hereof (all such liabilities, obligations or claims described below are
hereinafter referred to as the "Assumed Liabilities," and together with the
Contributed Warren Business and the Contributed NGBU Business, the "Contributed
Businesses"), including without limitation the following:
a. all liabilities, obligations or claims pursuant to the leases,
easements, permits, licenses, contracts and contract rights
included in the Contributed Warren Business and the
Contributed NGBU Business;
b. all liabilities, obligations or claims arising from
litigation or arising from the ownership or operation
of the Contributed Warren Business or the Contributed
NGBU Business or any assets thereof, including,
without limitation, the Facilities;
-5-
c. any and all liabilities, obligations or claims arising
from the presence or Release of Hazardous Materials
(as such terms are defined in the Combination
Agreement) in or on, or migration or release from, any
assets or properties, included in the Contributed
Warren Business or the Contributed NGBU Business; and
d. any and all other liabilities, obligations or claims,
contingent or otherwise, relating to the Contributed
Warren Business and the Contributed NGBU Business (but
not the Excluded Warren Assets and Excluded NGBU
Assets).
This contribution is made expressly subject to all such agreements, leases,
easements and other contracts relating to the Contributed Businesses or any of
their constituent assets, including the Facilities, whether or not the same are
herein specifically identified. Notwithstanding the foregoing, the assumption of
the Assumed Liabilities shall not waive any valid defense (a "Defense") that was
available to any Contributing Party, as applicable, with respect to the Assumed
Liabilities, cause any other party to be a third party beneficiary thereunder or
otherwise enlarge any rights or remedies of any third party under or with
respect to any of the Assumed Liabilities. Upon execution and delivery of this
Agreement by the parties hereto, any Defense to the Assumed Liabilities shall
inure to the benefit of Newco or its designees and, upon consummation of the
Combination, any such Defense shall inure to the benefit of the Surviving
Corporation or its Subsidiaries or Affiliates (as applicable), in each case to
the fullest extent permissible under applicable law.
Newco will not assume and Chevron shall retain, and shall to the
fullest extent permitted by law, indemnify and hold Newco and its Affiliates
harmless against, any and all liabilities, obligations or claims associated with
(i) the offsite disposal of Hazardous Materials (as such term is defined in the
Contribution Agreement) from the operation of the Contributed Businesses prior
to the Contribution Time, (ii) underpayment of royalties on the production of
natural gas prior to the Contribution Time, (iii) the litigation described on
SCHEDULE 5 hereto, (iv) Excluded Warren Assets and (v) Excluded NGBU Assets
(collectively, (i) through (v), the "Retained Liabilities").
6. CONTRIBUTED WEST TEXAS LPG PIPELINE BUSINESS. CPL hereby
contributes, assigns, transfers, conveys and delivers to Newco an undivided 49%
interest in and to those assets identified on SCHEDULE 6 hereto (such interest
collectively, the "Contributed West Texas LPG Pipeline Business"), including all
rights in, to and under all express or implied representations, warranties,
indemnities, covenants or other agreements of third parties arising from or
attributable to the assets constituting the Contributed West Texas LPG Pipeline
Business. CPL represents that such assets are free and clear of any lien,
-6-
mortgage, security interest or other encumbrance arising by, through or under
CPL, and that such assets, when combined with the 51% interest in those assets
identified on SCHEDULE 6 to be retained by CPL, are in all material respects
adequate for the purposes for which such assets are presently used. CPL, for
itself, its successors and assigns, hereby agrees to pay, perform and discharge,
and shall to the fullest extent permitted by law, indemnify and hold Newco, its
Affiliates and their respective successors and assigns harmless against, any and
all liabilities, obligations or claims (including, without limitation, those
arising from the presence or Release of Hazardous Materials) arising out of or
in any way associated with the Contributed West Texas LPG Pipeline Business, but
only to the extent such liabilities, obligations or claims arise out of CPL's
ownership or operation of the Contributed West Texas LPG Pipeline Business prior
to the Contribution Time, whether or not such liabilities, obligations or claims
are known as of the date hereof. Newco, for itself, its successors and assigns,
hereby agrees that from and after the Contribution Time, it shall be responsible
for, and shall to the fullest extent permitted by law, indemnify and hold CPL
and its Affiliates harmless against, any and all liabilities, obligations or
claims associated with the Contributed West Texas LPG Pipeline Business but only
to the extent such liabilities, obligations or claims arise out of the Surviving
Corporation's ownership of the Contributed West Texas LPG Pipeline Business
subsequent to the Contribution Time.
7. CONSENTS TO ASSIGNMENT; TRANSFER RESTRICTIONS. Should any asset
included in the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business be subject to a valid consent to assign or other restriction
on transfer as to which the contribution hereunder would be a breach of such
obligation or result in the forfeiture, termination or significant loss of use
of such asset, then such asset may be excluded herefrom and from the assignment
and shall be deemed not transferred unless and until any obligation to a third
party is fulfilled. The exclusion of less than all the assets included in the
Contributed Businesses and the Contributed West Texas LPG Pipeline Business
pursuant to this provision shall not affect the validity of the transfer of the
non-excluded assets.
8. ISSUANCE OF SHARES; INVESTMENT. In exchange for the contribution of
the Contributed Businesses and the Contributed West Texas LPG Pipeline Business,
Newco will issue (i) 38,623,210 shares of Newco Common Stock to Chevron, (ii)
7,815,363 shares of Newco Series A Participating Preferred Stock to Chevron and
(iii) a promissory note in favor of Chevron on behalf of itself, CCC and CPL in
the amount of $138.4 million. Chevron hereby represents to Newco that it is
acquiring the shares of Common Stock and Preferred Stock of Newco for its own
account and not for the account of any other person. Chevron is acquiring such
shares for investment to continue its involvement in the combined midstream
businesses of
-7-
Chevron and NGC and not with a view to distribution or resale thereof.
9. REAL PROPERTY DISCLOSURES. In connection with the transfer of real
property constituting part of the Contributed Businesses and the Contributed
West Texas LPG Pipeline Business located in the State of Texas, the Contributing
Parties hereby affirm the disclosures set forth in Section 16.14 of the
Combination Agreement as amended by EXHIBIT 9 to this Agreement. Newco
represents that it is aware that the disclosures contained in EXHIBIT 9 may be
incomplete and agrees that Chevron may amend such disclosures from time to time
prior to the conveyance of the real property to comply with disclosure generally
applicable to the transfer of real estate in the State of Texas ("General
Disclosures"). Newco further waives any rights it may have arising out of the
incompleteness of any General Disclosure given in the Combination Agreement or
EXHIBIT 9 or the failure to give any additional General Disclosure required to
be given by any state or local law, statute or ordinance including, but not
limited to, Section 230.005 of the Texas Local Government Code, Section 257.004
of the Texas Transportation Code, Section 61.025 of the Texas Natural Resources
Code, Section 33.135 of the Texas Natural Resources Code and Section 49.452 of
the Texas Water Code.
10. FURTHER ASSURANCES. The Contributing Parties shall execute Deeds
and a Bill of Sale in the forms attached hereto as EXHIBIT 10(A) and EXHIBIT
10(B), respectively, and made a part hereof. Chevron and Newco shall execute an
Assignment of Rights and Obligations Under Agreements, Assignment of Leases and
Intellectual Property License Agreement in the forms attached hereto as EXHIBIT
10(C), EXHIBIT 10(D) and EXHIBIT 10(E) and made a part hereof. The Contributing
Parties and Newco will cause to be executed and delivered from time to time at
the request of the other such other all such further instruments of conveyance,
assignments and further assurances as may be required to transfer and assign the
title of the Contributing Parties to the assets included in the Contributed
Businesses and the Contributed West Texas LPG Pipeline Business to Newco and the
Surviving Corporation and to effect the provisions of this Agreement.
11. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that no party hereto shall assign any of its rights, duties or
privileges under this Agreement without the prior written consent of the other,
but no such consent is required for any further transfer of the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, as if both parties hereto
were resident and doing
-8-
business in such state, except to the extent that the law of the states in which
any of the assets are located necessarily apply to the construction of this
Agreement as it applies to the portion of the assets located in such states.
13. HEADINGS; TERMS. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meanings of the
provisions hereof. Unless otherwise indicated herein, capitalized terms shall
have the meanings set forth in the Combination Agreement.
IN WITNESS WHEREOF, Chevron, CPL, CCC and Newco have duly executed this
Agreement as of the date set forth above, but effective for all purposes as of
12:01 a.m., Houston, Texas time on the Closing Date (the "Contribution Time").
CHEVRON U.S.A. INC.
By
Title
CHEVRON PIPE LINE COMPANY
By
Title
CHEVRON CHEMICAL COMPANY
By
Title
MIDSTREAM COMBINATION CORP.
By
Title
-9-
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1A Warren Contributed Assets
Schedule 1B Warren Contracts
Schedule 1EX Warren Excluded Assets
Schedule 1F Warren Licenses and Permits
Schedule 2A NGBU Contracts
Schedule 2B NGBU Contributed Assets
Schedule 2D NGBU Licenses and Permits
Schedule 2EX NGBU Excluded Assets
Schedule 5 Chevron Retained Litigation
Schedule 6 West Texas LPG Pipeline Assets
EXHIBITS
Exhibit 4 Note Assumption Agreement
Exhibit 8 Real Property Disclosures
Exhibit 10(a) Deeds (fee and pipeline)
Exhibit 10(b) Bill of Sale
Exhibit 10(c) Assignment of Rights and Obligations Under
Agreements
Exhibit 10(d) Assignment of Leases
Exhibit 10(e) Intellectual Property License Agreement
-10-
SCHEDULE 1A
CONTRIBUTED WARREN ASSETS
OPERATED GAS PLANTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
OWNERSHIP OF
ASSET STATE COUNTY OPERATIONS PLANT/TERMINAL
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2 Plants (Canadian/Tonkawa). The Canadian
Plant is a turbo expander processing plant.
The Tonkawa Plant is an idle refrigeration
plant.
Surplus equipment at the Tonkawa site is as
follows:
Amine System (scavenged)
Canadian/ Turbo-expander processing plant
Tonkawa TX Hemphill 100% Straight Refrigeration Process Skid
- ----------------------------------------------------------------------------------------------------
Refrigerated turbo expander
processing plant.
Includes water disposal well (Well #1, Unit
Letter
Eunice NM Lea 100% H, Section 3, 22S - 37E, Lea County, NM).
- ----------------------------------------------------------------------------------------------------
Refrigerated lean oil absorption plant, with
Fashing TX Atasocia 44.7% * fractionation and a modified Claus sulfur plant.
- ----------------------------------------------------------------------------------------------------
Idle turbo expander straddle plant with
molecular
Gruver TX Roberts 100% sieve dehydration and iron sponge.
- ----------------------------------------------------------------------------------------------------
Leedy OK Roger Mills 100% Turbo-expander processing plant.
- ----------------------------------------------------------------------------------------------------
Shut-down turbo expander
straddle plant with molecular
sieve dehydration and
compression.
Miami TX Hansford 100% Meter skid has been scavenged.
- ----------------------------------------------------------------------------------------------------
2 Plants (Monahans, Worsham). The
Monahans plant is a Cryogenic/expander plant
and treater. The Worsham plant is an idle
turbo-expander straddle plant. Includes water
Monahans/ disposal well (Section 4, Blk F, G&M.MB&A
Worsham TX Ward 100% Survey, Ward County, TX).
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ASSET GATHERING SYSTEM SATELLITES EXCLUDED ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Associated gathering system Turbo-expander processing plant at Tonkawa is missing
consisting of approximately the following equipment:
100 miles of pipe and 132 Regeneration Gas Heater
meter stations, located in Demethanizer Reboiler
Canadian/ Hemphill and Roberts Regeneration Gas Compressor
Tonkawa Counties, Texas. Tonkawa Compressor St. Instrumentation
- ---------------------------------------------------------------------------------------------------------------------------
Associated gathering system
consisting of approximately
226 miles of pipe and 461 Communication/Microwave tower, building and equipment
meter stations, located in on property.
Lea CPL 4" Pipeline (sampler, densitometer, meter skid,
Eunice County, New Mexico. None swab, piping, RTU building).
- ---------------------------------------------------------------------------------------------------------------------------
Fashing Excluded Excluded The Fashing Treating Plant and Gathering Facilities.
- ---------------------------------------------------------------------------------------------------------------------------
Plant is missing the following equipment:
Starting air compressor package
Office Bldg.
Gruver None None One Compressor piston (Recompression)
- ---------------------------------------------------------------------------------------------------------------------------
Associated gathering system
consisting of approximately
68 miles of pipe and 92
meter stations, located in
Roger Mills County,
Leedy Oklahoma. None
- ---------------------------------------------------------------------------------------------------------------------------
Plant is missing the following equipment:
(1) Iron Sponge vessel
Generator package and building
Refrigeration/recompressor package/bldg.
Regen Heater
Miami None None Office Bldg.
- ---------------------------------------------------------------------------------------------------------------------------
Gulf States
Compressor St.,
Moncrief Compressor
St.,
Cat Compressor St.,
Hutch-Sealy
Compressor St., Waha
Compressor St.,
Penn Field Compressor
St. No.1, Penn Field
Compressor St. No.2,
South Ward Compressor
St., South Hutch
Compressor St.,
Residue ReCompressor
St.,
Associated gathering system Veste Ranch
consisting of approximately Compressor St.
300 miles of pipe and 208 South Wink Meter St.
meter stations, located in #16 North Ward Estes Electrical Distribution System.
Ward, Winkler, Pecos and Flare Site CPL 4" Pipeline (sampler, densitometer, meter skid,
Monahans/ Reeves Counties, Texas. So. Penn Line Launcher swab, piping, RTU building) @ Monahans.
Worsham O'Brien Gathering System. Valero Treater Site CPL Pipeline (piping, swab) @ Worsham.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Interest in Joint Venture
<PAGE>
SCHEDULE 1A
CONTRIBUTED WARREN ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
OWNERSHIP OF
ASSET STATE COUNTY OPERATIONS PLANT/TERMINAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Refrigerated turbo expander
processing plant with
modified Claus sulfur plant
and fractionation
facilities. Includes water
disposal well (Graham State
NCT-F Well #7 water disposal
well 1650'FEL, 330' FSL,
Monument NM Lea 100% Section 36, 19S-36E, Lea County, NM).
- ---------------------------------------------------------------------------------------------------
Moores
Orchard TX Ft. Bend 100% Cryogenic/Expander Plant.
- ---------------------------------------------------------------------------------------------------
Puckett TX Pecos 100% Propylene Carbonate CO2 Treater Plant.
- ---------------------------------------------------------------------------------------------------
A Cryogenic/expander plant with an idle oil
absorption plant. The plant has a 2 bed
Sand Hills TX Crane 100% Claus sulfur plant.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ASSET GATHERING SYSTEM SATELLITES EXCLUDED ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Associated gathering system
consisting of approximately Skaggs Compressor St.
534 miles of pipe and 382 Joy Compressor St.
meter stations, located in Loading Rack Site
Lea County, New Mexico, and Underground Storage
Gaines and Andrews Counties, Site CPL 4" & 6" Pipelines (sampler, densitometer, meter
Monument Texas. Cooper Water Tank Site skid, swab, piping, RTU building).
- ----------------------------------------------------------------------------------------------------------------------------
Gas lift system
Moores Chevron Production Field Office Trailer located on the
Orchard Excluded Excluded plant site.
- ----------------------------------------------------------------------------------------------------------------------------
Associated gathering system
consisting of approximately
20 miles of pipe and meter
stations, located in Pecos
County, Texas. Includes 15
remote glycol dehydration Two Chevron Production owned booster compressor
units located within the stations and associated land.
Puckett field system. Excluded El Paso Mainline Compressor
- ----------------------------------------------------------------------------------------------------------------------------
Waddell Compressor
St.,
King Mountain
Compressor St.,
McKnight Compressor
St.,
Dora Roberts
Compressor St.,
Cattleguard 25
Compressor St., Block
42 Compressor St.,
Exxon Compressor St.,
Ponderosa Compressor
St., Fresh water lease and system (Sand Hills and Waddell).
L&H Compressor St., CPL 6" Pipeline (sampler, densitometer, meter skid,
L&H Booster Station, swab, piping, RTU building) @ Sand Hills (Warren).
Associated gathering system Cattleguard 31, CPL Pipeline (misc piping stubs) @ idle Sand Hills
consisting of approximately Janelle Edwards plant.
750 miles of pipe and 650 Compressor St. CPL 4" crude oil pipeline @ Waddell.
meter stations, located in Sphere Launcher and King Mountain communication tower, building and
Crane, Ward, Pecos, Ector, Receiver Site equipment.
Sand Hills Upton Counties, Texas. Tubbsville Crane County Water Injection System
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 1A
CONTRIBUTED WARREN ASSETS
- --------------------------------------------------------------------------------
OWNERSHIP OF
ASSET STATE COUNTY OPERATIONS PLANT/TERMINAL
- --------------------------------------------------------------------------------
3 Plants (Saunders, Vada,
Bluitt). The Saunders Plant
is a refrigerated J-T Plant.
The Bluitt Plant is amine
treating with a Claus sulfur
plant (with idle processing
skid, nitrogen rejection
unit and fractionator). The
Vada Plant is a refrigerated
J-T plant. Includes water
disposal well (Unit letter
Saunders/Vada/ L, Section 34,
Bluitt NM Lea 100% T14S, R33E).
- --------------------------------------------------------------------------------
Refrigerated Lean Oil
Absorption Plant with
fractionation facilities,
compression, and TEG
Sherman TX Grayson 100% dehydration.
- --------------------------------------------------------------------------------
Idle Turbo-expander process
S. Sherman skid with molecular sieve
Process Skid TX Hemphill 100% dehydration.
- --------------------------------------------------------------------------------
Processing plant with two
refrigerated lean
Yscloskey LA St. Bernard 27.19509% (1) * oil absorption trains.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ASSET GATHERING SYSTEM SATELLITES EXCLUDED ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Epperson Compressor St.,
Bluitt Compressor St.,
West Sawyer Compressor St.,
Lehman Compressor St.,
Clauene Compressor St.,
Cato Compressor St.,
West Milnesand
Compressor St.,
Chaveroo Compressor St.,
South Peterson
Compressor St.,
Bough Compressor St.,
Sawyer Compressor St.,
Gladiola (Tatum)
Compressor St.,
Associated gathering system Bronco Compressor
consisting of approximately St., Communication/Microwave tower, building and equipment
2,510 miles of pipe and 905 King Compressor St., on property.
meter stations, located in Dean Compressor St., CPL 4" Pipeline (sampler, densitometer, meter skid,
Lea, Roosevelt, and Chaves Townsend Compressor swab, piping, RTU building) @ Bluitt.
Counties, New Mexico, and St. CPL 4" Pipeline (sampler, densitometer, meter skid,
Yoakum, Terry, Hockley, Ranger Lake swab, piping, RTU building) @ Vada.
Saunders/ Cochran and Lamb Counties, Tobac CPL 4" & 6" Pipelines (sampler, densitometer, meter
Vada/Bluitt Texas. Williamson Valve St. skid, swab, piping, RTU building) @ Saunders.
- ----------------------------------------------------------------------------------------------------------------------------
Two water disposal wells.
Chevron Production buildings, real estate,
Associated gathering system improvements and equipment (all real estate and
consisting of approximately Lawrence Compressor improvements north and west of the dashed/dotted line
75 miles of pipe and 150 St. shown on the Sherman map except the plant flare).
meter stations, located in Metering Facilities (2) 30M Gal Tanks (already committed to third party)
Sherman Grayson County, Texas. Site Fresh water line to Chevron Production.
- ----------------------------------------------------------------------------------------------------------------------------
S. Sherman
Process Skid None None
- ----------------------------------------------------------------------------------------------------------------------------
Yscloskey None None
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Interest in Joint Venture
(1) Adjusted annually according to participation value for liquid hydrocarbons
made available for processing during the immediately preceding adjustment
period.
<PAGE>
SCHEDULE 1A
CONTRIBUTED WARREN ASSETS
OPERATED FRACTIONATION & PRODUCT FACILITIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
OWNERSHIP OF
ASSET STATE COUNTY OPERATIONS PLANT/TERMINAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mont Belvieu Domestic and Imports Fractionation Trains
Fractionator TX Chambers 100% adjacent to Warren's Mont Belvieu Terminal.
- ---------------------------------------------------------------------------------------------------
Mont Belvieu
Isomerization Butane isomerization plant adjacent to
Plant TX Chambers 100% Warren's Mont Belvieu Fractionator.
- ---------------------------------------------------------------------------------------------------
Mont Belvieu Product storage facility adjacent to Warren's
Terminal TX Chambers 100% Mont Belvieu Fractionator.
- ---------------------------------------------------------------------------------------------------
Warrengas LPG Import/Export Terminal connected to the
Terminal TX Harris 100% Mont Belvieu Terminal.
- ---------------------------------------------------------------------------------------------------
Calvert City
Terminal KY Marshall 100% Product Transport Terminal
- ---------------------------------------------------------------------------------------------------
Greenville
Terminal MS Washington 100% Propane Terminal (barge, railcar, transport)
- ---------------------------------------------------------------------------------------------------
Hattiesburg
Terminal MS Forrest 50% * Propane Terminal (railcar, transport)
- ---------------------------------------------------------------------------------------------------
Lampton-Love
Terminal MS Forrest 100% Idle Product Transport Terminal
- ---------------------------------------------------------------------------------------------------
Port
Everglades
Marine
Terminal FL Broward 100% Propane Terminal (barge, transport)
- ---------------------------------------------------------------------------------------------------
Tampa Marine
Terminal FL Hillsborough 100% Propane Terminal (barge, railcar, transport)
- ---------------------------------------------------------------------------------------------------
Mont Belvieu
Transport
Terminal TX Chambers 100% Administrative offices and repair shop.
- ---------------------------------------------------------------------------------------------------
Abileen
Transport
Terminal TX Taylor 100% Raw LPG Transport Terminal
- ---------------------------------------------------------------------------------------------------
Bridgeport
Transport
Terminal TX Jack 65% * Raw LPG Transport Terminal
- ---------------------------------------------------------------------------------------------------
Gladewater
Transport
Terminal TX Gregg 100% Raw LPG Transport Terminal
- ---------------------------------------------------------------------------------------------------
Louisville
Term. Land KY Jefferson 100% Ohio Riverfront Property for unbuilt terminal.
- ---------------------------------------------------------------------------------------------------
Belle Chasse
Barge Maint. LA Plaquemines 100% Modular office building
- ---------------------------------------------------------------------------------------------------
Houston
Gathering Chambers
System TX Harris 100% NA
- ---------------------------------------------------------------------------------------------------
Texas City
Pipeline TX Harris 100% NA
- ---------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
GATHERING
ASSET SYSTEM SATELLITES EXCLUDED ASSETS
- --------------------------------------------------------------------------------
Mont Belvieu
Fractionator NA NA
- --------------------------------------------------------------------------------
Mont Belvieu
Isomerization
Plant NA NA
- --------------------------------------------------------------------------------
See Schedule 1EX for comprehensive listing.
Mont Belvieu Microwave equipment on tower and in building
Terminal NA NA dedicated for Chevron use.
- --------------------------------------------------------------------------------
See Schedule 1EX for comprehensive listing.
Warrengas Microwave equipment on tower and in building
Terminal NA NA dedicated for Chevron use.
- --------------------------------------------------------------------------------
Calvert City
Terminal NA NA
- --------------------------------------------------------------------------------
Greenville
Terminal NA NA
- --------------------------------------------------------------------------------
Hattiesburg
Terminal NA NA
- --------------------------------------------------------------------------------
Lampton-Love
Terminal NA NA
- --------------------------------------------------------------------------------
Port
Everglades
Marine
Terminal NA NA
- --------------------------------------------------------------------------------
Tampa Marine
Terminal NA NA
- --------------------------------------------------------------------------------
Mont Belvieu
Transport
Terminal NA NA
- --------------------------------------------------------------------------------
Abileen
Transport
Terminal NA NA CPL 10" Pipeline (meter skids, piping).
- --------------------------------------------------------------------------------
Bridgeport
Transport CPL 3" Pipeline (meter skids, piping @ truck
Terminal NA NA racks).
- --------------------------------------------------------------------------------
Gladewater CPL 6" Pipeline (sampler, densitometer, 2
Transport meter skids, swab, piping, RTU building,
Terminal NA NA 48'x137' fence)
- --------------------------------------------------------------------------------
Louisville
Term. Land NA NA
- --------------------------------------------------------------------------------
Belle Chasse
Barge Maint. NA NA
- --------------------------------------------------------------------------------
Houston
Gathering Port Arthur Gathering System is excluded. See
System Included NA Schedule 1EX for other excludes.
- --------------------------------------------------------------------------------
Texas City
Pipeline NA NA
- --------------------------------------------------------------------------------
* Interest in Joint Venture
<PAGE>
SCHEDULE 1A
CONTRIBUTED WARREN ASSETS
NON-OPERATED GAS PLANTS/GATHERING
- ---------------------------------------------------------------
ASSET STATE COUNTY JV INTEREST
- ---------------------------------------------------------------
Blue Water LA Acadia 16.72238% (2)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Calumet LA St. Mary 20.8859% (2)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Diamond M TX Scurry 3.690600%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Grand Chenier LA Cameron 1.865850% (3)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Indian Basin NM Eddy 14.192650%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Iowa LA Jefferson Davis 9.92% (4)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Laverne OK Harper 0.857090% (4)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Maysville OK Garvin 21%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Patterson II LA St. Mary 1.0946%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Sea Robin LA Vermilion 19.072077% (2)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
North Terrebone LA Terrebone 1.828530%
- ---------------------------------------------------------------
Toca LA St. Bernard 8.862723%
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
GATHERING
ASSET PLANT/TERMINAL SYSTEM SATELLITES EXCLUDED ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Blue Water Cryogenic expander processing plant. Operated by Exxon. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Refrigerated oil absorption processing plant. Operated
Calumet by Shell. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Gas now processed at another plant. Plant removed.
Diamond M Operated by Exxon. Included None
- ---------------------------------------------------------------------------------------------------------------------------------
Cryogenic and refrigerated lean oil processing plants.
Grand Chenier Operated by Vastar. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Indian Basin Cryogenic processing plant. Operated by Marathon. Included None
- ---------------------------------------------------------------------------------------------------------------------------------
Iowa Cryogenic processing plant. Operated by TETCO. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Laverne Cryogenic processing plant. Operated by Conoco. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Lindsey
Compressor St.
Antioch
Maysville Cryogenic processing plant. Operated by Texaco. Included Compressor St.
- ---------------------------------------------------------------------------------------------------------------------------------
Patterson II Cryogenic processing plant. Operated by Norcen Explorer None None
- ---------------------------------------------------------------------------------------------------------------------------------
Sea Robin Cryogenic processing plant. Operated by Texaco. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Refrigerated oil absorption processing plant. Operated
North Terrebone by Shell. None None
- ---------------------------------------------------------------------------------------------------------------------------------
Cryogenic and refrigerated oil processing plants.
Toca Operated by Shell. None None
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjusted annually according to participation value for liquid hydrocarbons
made available for processing during the immediately preceding adjustment
period.
(2) Adjusted annually, with plant ownership based on gas units and liquids
capacity.
(3) Adjusted annually, with plant ownership based on volume of products
attributable to gas made available for processing during 12 month period.
(4) Ownership based on gas units.
<PAGE>
SCHEDULE 1A
CONTRIBUTED WARREN ASSETS
OTHER
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET DESCRIPTION EXCLUDED ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mont Belvieu Industry Warren's interest in Mont Belvieu Industry
Association Association
- ------------------------------------------------------------------------------------------------------------------------------------
Mont Belvieu Salt Dome Warren's Salt Dome Properties around Mt.
Properties Belvieu (detailed in land listing). Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Fort Worth TX Sales Fort Worth Sales office lease and all
Office (Lease) Warren owned office equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Jackson MS Sales Office Jackson Sales office lease and all Warren
(Lease) owned office equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Sacramento CA Sales Sacramento Sales office lease and all
Office (Lease) Warren owned office equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Marshalls Creek PA Sales Marshalls Creek Sales office lease and all
Office (Lease) Warren owned office equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Louisville KY Sales Louisville Sales office lease and all
Office (Lease) Warren owned office equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Tampa FL Sales Office Tampa Sales office lease and all Warren
(Lease) owned office equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Hangar and related office lease and all
Tulsa Hangar and Related airplane associated office equipment,
Office (Lease) spare parts and operating supplies. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
All Warren owned training equipment Excludes individual use computer equipment (see Schedule
located in the Midland Training Center. 1EX for detail). Also excludes all office equipment
Includes audio/video equipment, training (including desks, chairs, tables, bookcases, and file
Training Equipment - props/simulators, training books/tapes and cabinets -- per NGC's request). Excludes
Midland Training Center training related computer equipment. non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
All Warren owned mechanical maintenance Excludes computer equipment not specifically dedicated to
equipment located in the Midland mechanical maintenance analysis (see Schedule 1EX for detail).
Maintenance office. Includes all Also excludes all office equipment (including desks, chairs,
Maintenance Equipment - maintenance equipment tools and tables, bookcases, and file cabinets -- per NGC's request).
Midland Maintenance specifically related computer equipment. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
All Warren owned mechanical maintenance
equipment located in the Northern Area
Maintenance offices. Includes all maintenance
equipment tools, specifically
related computer equipment and office Excludes computer equipment not specifically dedicated to
Maintenance Equipment - equipment utilized by maintenance mechanical maintenance analysis (see Schedule 1EX for detail).
Northern Area personnel. Excludes non-transferable leased or rented office equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Airplane - 1980 Beechcraft
Super King Air 200 Warren owned aircraft.
- ------------------------------------------------------------------------------------------------------------------------------------
Monahans Electrical
Distribution Lateral Lateral from the mainline to the plant. North Ward Estes Electrical Distribution System
- ------------------------------------------------------------------------------------------------------------------------------------
Warren owned/leased cars, tractors,
Warren Owned/Leased Motor pick-up trucks, motor vans, transport Vehicles associated with excluded assets and leases that
Vehicles trucks and trailers. cannot be assigned.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned Conventional Warren owned portable units, mobile units, Conventional radio systems associated with excluded assets and
Radio Systems repeaters, consoles and frequencies. office space.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren owned RTU stations and master
Warren Owned SCADA Units stations. SCADA Units associated with excluded assets and office space.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned Telephone
Key Systems Key Systems associated with excluded assets and office space.
- ------------------------------------------------------------------------------------------------------------------------------------
Mt Belvieu PBX Telephone system with voice mail.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned LANs Warren owned ethernet and token LANs. LANs associated with excluded assets and office space.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned PCs, Including CITC PCs in exclusive Warren Computer equipment associated with employees continuing with
Printers and Peripherals service. Chevron.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned Warren owned exclusive use mini computers
Mini-Computers and and file servers. Excludes joint use equipment.
File Servers.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned Cellular Warren owned cellular phones.
Phones
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Owned Fiber Canadian, Galena Park, Saunders, Yscloskey. Fiber Systems associated with excluded assets and office
Systems space.
- ------------------------------------------------------------------------------------------------------------------------------------
Mt Belvieu Plant, Mt Belvieu Terminal and
Warren Owned CCTV Systems Sand Hills.
- ------------------------------------------------------------------------------------------------------------------------------------
Warren Exclusive Use Excludes non-transferable , CITC and other Chevron Corporation
Software software.
- ------------------------------------------------------------------------------------------------------------------------------------
Excludes office furniture utilized by transition personnel,
those personnel continuing with Chevron and outplacement
Warren Owned Furniture Warren owned office furniture in the Tulsa Services. Excludes built in office furniture and office
in the Tulsa Office office space. furniture owned by other Chevron operating companies.
- ------------------------------------------------------------------------------------------------------------------------------------
Mont Belvieu and
Warrengas Microwave Excludes microwave RF equipment serving Chevron.
Tower and Building
- ------------------------------------------------------------------------------------------------------------------------------------
NDS BTD 2 Server - Excludes Class B Internet address and Chevron data circuits.
Openview
- ------------------------------------------------------------------------------------------------------------------------------------
Jackson and Tampa Sales
Office Satellite Systems DTS gas pricing satellites.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 1B
WARREN CONTRACTS
[List to be attached at Closing and will include all Warren contracts
related to the Contributed Warren Business, including but not limited to those
identifited on Schedule 5.12 to the Combination Agreement (but excluding any
contracts related to the Excluded Warren Assets).]
SCHEDULE 1EX
EXCLUDED WARREN ASSETS
A. Chevron shall retain the following improvements that are associated with the
properties listed below. Chevron shall retain its real property interests in the
land associated with the improvements or shall reserve an easement to the extent
the improvements are on property being transferred to NEWCO.
EUNICE:
Communication/Microwave tower, building and equipment on
property (NEWCO will have access to current Warren usage of
the tower).
CPL 4" Pipeline (sampler, densitometer, meter skid, swab,
piping, RTU building)
FASHING:
Chevron shall retain all of its interest in the joint
venture formed under that certain Construction and Operating
Agreement, Gas Treating Plant and Gathering System, Fashing
Field, Atascosa & Karnes Counties, Texas dated May 9, 1958
(the "Treating Operating Agreement" ). Chevron shall retain
all its rights under the Treating Operating Agreement,
including but not limited to any rights it may have to real
estate, inventories, equipment, buildings, vehicles and
personal property associate therewith. Notwithstanding the
foregoing, per the Miscellaneous Services Agreement
(attached to the Combination Agreement and Plan of Merger),
Chevron shall make best efforts to assign its rights and
obligations as Plant Operator under the Treating Operating
Agreement to NEWCO.
MONAHANS/WORSHAM:
North Ward Estes Electrical Distribution System (except
lateral from mainline to the Monahans Plant).
CPL 4" Pipeline (sampler, densitometer, meter skid, swab,
piping, RTU building) at Monahans
CPL Pipeline (piping, swab) at Worsham
Midway Scrubber and Your & Durgin abandoned compressor
stations/satellite sites at Monahans
MONUMENT:
CPL 4" and 6" Pipelines (sampler, densitometer, meter skid,
swab, piping, RTU building)
Pearl Queen and Roline abandoned compressor
stations/satellite sites
MOORES ORCHARD:
Gathering System and satellite locations.
Gas Lift System
Chevron Production Field Office Trailer located on the plant
site (right of ingress and egress and the continuing right
of Chevron Production under the existing lease to utilize
the existing site for its field office trailer).
PUCKETT:
2 Chevron Production owned booster compressor stations and
associated land
El Paso Mainline Compressor
SAND HILLS:
Fresh water lease and system (Sand Hills and Waddell) (NEWCO
will continue to have access to water)
CPL 6" Pipeline (sampler, densitometer, meter skid, swab,
piping, RTU building) at Sand Hills
CPL Pipeline (misc. piping stubs) at idle Sand Hills plant
CPL 4" crude oil pipeline at idle Waddell plant
Pennwell Loading Rack abandoned compressor station/satellite
site
King Mountain communication tower, building and equipment.
Crane County Water Injection System
SAUNDERS/VADA/BLUITT
Communication/Microwave Tower, building and equipment on
property (NEWCO will have access to current Warren usage of
the tower).
CPL 4" Pipeline (sampler, densitometer, meter skid, swab,
piping, RTU building) at Bluitt
CPL 4" Pipeline (sampler, densitometer, meter skid, 6" swab,
piping, RTU building) at Vada
CPL 4" and 6" Pipelines (sampler, densitometer, meter skid,
swab, piping, RTU building) at Saunders
Bass, Trident Buckshot, Buckshot, Flying M and Sante Fe
abandoned compressor stations/satellite sites
ABILEEN TRANSPORT TERMINAL:
CPL 10" Pipeline (meter skids, piping)
BRIDGEPORT TRANSPORT TERMINAL:
CPL 3" Pipeline (meter skids, piping at truck racks)
GLADEWATER TRANSPORT TERMINAL:
CPL 6" Pipeline (sampler, densitometer, 2 meter skids, 6"
swab, piping, RTU building, 48' x 137' fence)
Gladewater Plant and Railsite
B. Chevron shall retain title to the land that is north and west of the
dashed/dotted line on that certain drawing labeled "Sherman Plant and Production
Facilities Drawing', dated 4/17/96 attached hereto as Exhibit 1EX-(1) and
incorporated herein by this reference (hereinafter, the "Sherman Map") and all
improvements, fixtures, equipment and personal property located on such land
(except the plant flare) including, but not limited to, the improvements
described below and all other improvements, fixtures, equipment and personal
property located on land that is being transferred to NEWCO that have
historically been used by Chevron Production in their operation of the Sherman
Field. Chevron shall reserve easements as appropriate to maintain the
improvements on the property being transferred and for access to the property
being retained by Chevron (including access to the Lone Star gas connection).
NEWCO shall be granted rights of ingress and egress to the property being
transferred and an easement for the plant flare as shown on the above referenced
drawing.
SHERMAN:
2 Water disposal wells
2 30M Gal Tanks
Fresh water line to Chevron Production
Adjacent Chevron Production buildings, improvements and
equipment [all real estate and improvements north and west
of the dashed/dotted line shown on the Sherman map except
the plant flare]
C. Chevron shall retain fee title to the land and all improvements and assets
thereon at the Mont Belvieu Terminal and the Warren Gas Terminal as outlined in
the drawings labeled "Asset-1" and "Asset-2" dated 2/2/96 (revision dated
4/8/96) which are attached hereto as Exhibits 1EX-(2) and 1EX-(3) and
incorporated herein by this reference (hereinafter referred to individually as
"Asset-1" and "Asset-2" and collectively as the "Asset Drawings"). In addition,
Chevron shall retain certain pipelines, fixtures and improvements described
below and shall reserve appropriate easements therefor. Chevron shall have a
blanket easement over the Mont Belvieu and Warrengas properties being
transferred to NEWCO for, among other things, access, fixtures, equipment,
pipelines and improvements to permit the ongoing operations of the retained
Chevron facilities.
MONT BELVIEU TERMINAL (numbers are referenced to Asset-1):
1. All assets and land as shown (bounded) on Asset-1 drawing
including, but not limited to, pipelines, 6 storage wells,
dehydration systems, compressors, and other process
equipment. NEWCO will be granted an easement to permit NEWCO
to continue to use Warren assets in the Chevron Chemical
bounded area including well #7 instruments and other
instruments found in FCR8 and MCC8 which are used to operate
non-Chevron Chemical assets.
Inventory: All Chevron Chemical inventory including but not
limited to material in wells 8, 10, 13, 14, 22, 23 and
associated equipment and piping systems. Warren may store
product for Chevron Chemical Company in other wells. Also,
Chevron Chemical Company owned E-P Mix, Propane, Natural
Gasoline, and Butane commingled in Warren's Mont Belvieu
facility.
2. E/P Blending System
3. Propylene Pump House P-7 with 2 pumps
4. I-13 Meter System
5. T/C loading (propylene)/unloading(P/P Mix) system including
rail spur, rack, process equipment required for the
operation.
6. Texas Eastman meter station and pipeline
7. Propylene 2 spot truck loading rack, equipment and
connecting pipeline system
8. 8" Quantum Ethylene Line
9. 6" Ethylene Line to Exxon
10. 8" Port Arthur Gathering Line
11. 10" E/P Line to Port Arthur
12. 10" Ethylene Line (eastern line to Port Arthur)
13. 6" Propylene Line (to Junction by bank at Hwy 146)
14. 8" Natural Gas Line (to Cedar Bayou)
15. 2" Brine Line (to Cedar Bayou)
16. 6" LPG Line (to Cedar Bayou)
17. 12" E-P Line (to Cedar Bayou)
18. 12" Naphtha Feedstocks Line (to Cedar Bayou)
19. 4" P-P Mix Line (to Cedar Bayou)
20. 12" Ethylene Line (to Cedar Bayou)
21. 6" Propane Line (to Cedar Bayou)
22. 8" Propylene Line (to Cedar Bayou)
23. 4" C5 Line (to Cedar Bayou)
24. 10" Ethylene Line (Houston Leg - to Cedar Bayou)
25. Alternate power feed from MCC9 to FCR8
26. Port Arthur Main Line Pumps (2) Planned.
27. Dedicated E/P meters Supplying CCC - Cedar Bayou, Port
Arthur
28. Dedicated CCC Power Feeder from the substation
Land at Mt Belvieu bounded by Highway 146 and Loop No. 207
(just across Hwy 146 to the east of Warren Mt Belvieu
Terminal), described as 4.183 acres in William Bloodgood
Survey, Abstract 5, Chambers County, and the office building
thereon.
CPL 12" E-P Feedstock Pipeline- A 12" OD x 0.250" wall
thickness pipeline that runs 64 miles in Chambers and
Jefferson Counties from Warren Mont Belvieu Terminal Storage
Facility to Fannett , and then to Chevron Chemical's 1544
Ethylene Unit at Port Arthur.
51% Interest in the CPL West Texas LPG Pipeline System -
running from New Mexico/Texas to Mont Belvieu, as outlined
on the "Asset Drawings".
Any stand-alone equipment or device that supports, controls
or interfaces solely with Chevron retained assets.
Microwave equipment on tower and in building on site
dedicated for Chevron use.
WARRENGAS TERMINAL (numbers are referenced to Asset-2):
1. Ethylene Import and Ethylene Truck Unloading Facilities at
Warrengas as outlined on Asset-2. Major equipment in these
facilities includes the stainless steel loading arm, the
ethylene import pumps #28-85 and #28-86, the ethylene import
exchanger #18-1, the ethylene meter, the ethylene import
flare relief knock out drum #301-2, the ethylene import sink
#302-3, the pentane circulating pumps P-46 and P-47, the
pentane circulating drum #301-1, Pentane Circulating
Pipelines, and the Smalling Heater.
2. Ethylene/Propylene Export Facilities at Warrengas as
outlined on drawing Asset-2. Major equipment in this
facility includes Compressors #11-101 through #11-108, Pumps
#28-91 through #28-110, the Ethylene Pump, the Spare
Ethylene Pump, Evaporative Condensers #2-101 through #2-103,
Chillers/Coolers/Exchangers #18-101 through #18-115, Vessels
#30-114, and Motors #27-101 through #27-136.
3. Piperack and pipelines from ethylene export area to Dock #1
as shown on Asset-2.
4. Ethylene and Propylene pipelines as shown on Asset-2.
Starters and electrical lines for ethylene import and truck
unloading systems including, but not limited to, pumps 46,
47, 85, and 86, and the heat sink.
Inventory: All products stored in tanks W-20, W-58, W-59,
and W-60, and all Chevron Chemical Company owned product in
pipelines.
All other assets and land at Warrengas as shown (bounded) on
the Asset-2, including but not limited to, product tanks
101, 102, 103, 107, 108, 109, 117, 118, 119, 121 and 122,
inventories, pumps, pipeways, office, waste water treatment
pond, truck shop and dirt road to Federal Road will be
retained in fee (The Chevron Products' flare, bounded in
green (solid line) will be retained by Chevron with an
easement (no fee)). The area on Asset-2 bounded in green
(dashed line) surrounds the assets and land owned by Chevron
Products.
The dock #2 and dock #3 barge unloading pipelines - avgas
and motor gasoline.
The Chevron Products flare and flare line.
The 12" Explorer Pipeline including the section to Hess and
the product tank manifold.
The 12" products line from Hess.
The waste water lift station including electrical power
lines and breaker.
The sewage sump tank and pump including electrical power
line and breaker.
The overhead electrical power line, breaker, transformer and
electrical meter.
Monitoring well #7.
The 6" outfall drain line and secondary weir.
The Chevron Products fuel (natural gas) line.
The Chevron Products leach line.
The 3" fresh water line.
Chevron Product Company equipment in the lab at Warrengas.
The dirt road running west from the proposed Chevron
Products Company boundary to Federal Road (60 feet wide).
Any stand-alone equipment or device that supports, controls
or interfaces solely with Chevron retained assets.
Microwave equipment on tower and in building on site
dedicated for Chevron use.
Easements will be granted for the facilities listed above,
the piperacks and all remaining Chevron owned/used
electrical lines, electrical equipment, instruments, and
other miscellaneous equipment.
Chevron shall have a blanket easement over the Mont Belvieu and
Warrengas properties being transferred to NEWCO for among other
things, the following:
Access to the helicopter pad for emergencies, emergency
response actions.
Firewall (tank dykes) Drainage System -- Chevron Products
Company will need access to and sole use of the system which
is located on real property at Warrengas Terminal that will
be transferred to NEWCO.
Access to all roads at the Warrengas Terminal.
D. Other Exclusions:
Venice Complex Assets (including but not limited to):
Venice Gas Processing Plant
Venice NGL Fractionator
Venice NGL Storage Caverns (8 wells & associated
surface leases)
Venice NGL Barging Terminal (2 docks)
Venice Stabilizer Plant (condensate handling
facilities, gas meter stations & piping, compression,
and all other facilities.)
Delta Gathering Station (compression, piping, and all
other facilities)
Venice Gathering Company (22", 26" and Bay fields gas
pipelines)
Venice Real Estate
CPL 8" Faustina LPG Pipeline
CPL Gas Pipeline connecting CXY's production.
Commercial Agreements (including Processing,
Gathering, Wheeling) All associated unfractionated
(raw) NGL inventory, equipment, buildings, vehicles
and personal property.
Vermilion Gas Plant and real estate (including all
associated inventory, equipment, vehicles and personal
property).
Como Gas Plant and real estate (including all associated
inventory, equipment, vehicles and personal property).
Fairway Gas Plant and real estate
Houston Central Gas Plant and real estate
Warren-owned land currently leased to CPL for CPL's Gulf
Coast Meter Facility, described as 10 acres in William D
Smith Survey, Abstract 24, Chamber County, located on south
side of Hwy 1942, about 2 miles east of Hwy 146, where CPL
W. Texas LPG Pipelines cross Hwy 1942 and intersect this
property.
Port Arthur Terminal including land and all above ground
equipment, inventory, tanks, etc. and all 3 pipelines (1-8",
and 2-6" between the Port Arthur Terminal and the Refinery
Complex).
8" Port Arthur Gathering System P/L (Mont Belvieu to Fannett
to Port Arthur) and inventory therein.
Pakenham Gathering System, real estate, inventories and all
associated equipment (SCADA, compression, dehydration,
compressor site alarms, electrical distribution system,
Right of Ways, associated vehicles and associated
test/support equipment).
Wickett Residue Gas System
Water disposal wells unless otherwise specified as included.
All production from the leases of water disposal wells.
Microwave systems (including tower, building and equipment).
Mont Belvieu and Warrengas microwave tower and building are
included.
800 Mhz simulcast radio system, mobile units and portables.
Wide area network (including circuits and Internet
addresses)
Chevron PBX hardware and voice mail systems (except as
specifically included in Schedule 1A).
All Chevron operating company jointly used telephone
stations and telephone trunks.
Chevron's "CTN" voice network service.
Chevron's global e-mail service directory
"LAN" hubs in Chevron offices (Tulsa, Houston and Midland).
All PC's, printers, software and peripherals associated with
all Warren and related CITC employees retained by Chevron.
All joint Chevron operating company file servers and mini
computers (e-mail, PREMAS).
All CITC or Chevron Corporation owned software.
All non-transferable software and licenses.
Tulsa satellite dish and associated equipment.
Barges
Railcars
Midland office building space
Tulsa office building space
Houston office building space
Non transferable leased or rented office equipment.
Employees' personal property.
All office equipment in CREMCO leased office space (except
for specifically included furniture).
Acreage planned for sale to Bayer. 32 acre tract of land
adjacent to the Bayer Facility. Pipeline on land to be
transferred to NEWCO with easement.
Inventories associated with excluded assets (except for
agreed upon inventory at the Venice Terminal).
Following Abandoned Plant/Terminal sites:
Bough Plant
Breckenridge
Crossville Plant
Crossville Terminal
Fannett Terminal
Gladewater Plant & Railsite
Greggtex Plant and Railsite
Holiday Plant
Mermentau Plant (to be abandoned)
Spear Plant
Previously sold property retained liability.
Accounts Receivable and Payable recorded on the accounting
ledgers as of the Closing Date.
All Cash.
Such mineral rights as Chevron deems to retain in the
closing documents except for any salt dome storage rights
associated with the conveyed properties.
See lists of excluded Warren contracts for specifically
excluded contracts
Any and all other assets owned by Chevron Pipeline Company,
Chevron Chemical Company, Chevron Products Company, Chevron
Production Company, Chevron Information Technology Company,
or Chevron Real Estate Management Company (CREMCO) not
specified as being transferred.
Chevron shall reserve the right to continue the existing use
of cables or cable pairs in cables that cross NEWCO property
to connect required services between Chevron facilities
located in the vicinity of the NEWCO property. Chevron also
shall reserve the ongoing right to attach communications
cables to telephone poles within the NEWCO properties (in
the form of the mutually agreed to easements).
Chevron shall reserve in favor of itself or shall grant to
one or more of its affiliates or subsidiaries, prior to the
closing, such real property rights as are appropriate to
permit the retained assets to remain on the properties being
transferred.
All other excluded assets identified in Schedules 1A and 2B.
TERMS OF EASEMENTS. The parties shall negotiate in good faith to reach agreement
as to the form of easement to be used for easements that will be created as a
result of this transaction. The parties agree that the form of easement shall
contain the terms set forth in Exhibit 1EX-(4) attached hereto and incorporated
herein by this reference.
Exhibit 1EX-(1) - Sherman Plant and Production Facilities Drawing
[GRAPHIC OMITTED]
EXHIBIT 1EX-(4)
EASEMENTS
1. TERM: Perpetual and nonexclusive - but only to the extent the grantor's
underlying lease/easement document permits grantor to do so.
2. FEE: None.
3. ADDITIONAL LINE RIGHTS: The pipeline easements will contain additional line
rights.
4. INDEMNITY: The easements will contain an indemnity by the easement holder
in favor of the landowner for liability created as a result of the use of
the easement.
5. MAINTENANCE: The easements will contain a maintenance clause obligating the
easement holder to maintain the easement area.
6. EASEMENT AREA: The easement area for pipelines shall be 15 feet of either
side of the pipeline except for pipeline easements for Mont Belvieu and
Galena Park which shall be one foot on either side of the pipeline. The
easement area for non-pipeline easements shall be as appropriate and
negotiated by the parties. the easement holder shall also have reasonable
work space beyond the easement area.
7. USE: The pipeline easement shall permit the transportation of the product
that is presently being transported in the pipeline as well as any other
oil, gas or associated hydrocarbon products; any other products will
required the prior written consent of the owner of the fee property.
8. RELOCATION RIGHTS: The easement shall not contain a relocation clause.
9. TAXES: The easement holder shall be responsible for paying any real
property taxes assessed against the easement estate.
10. ASSIGNMENT: The easements shall contain an assignment clause which shall
permit the assignment of the easement with notice to the fee owner.
11. REMOVAL & RESTORATION: Easement holder will remove pipeline upon cessation
of operations if required by grantor's underlying lease/easement document,
or to the extent reasonably required by grantor.
WARREN PETROLEUM COMPANY
EXCLUDED CONTRACTS
1. Venice Plant Gathering & Processing Agreements (attached)
2. Venice NGL Storage Contracts
BP Oil Company K#9528 4-25-95
BP Oil, Inc. K#9531 4-25-95
Mobil Oil Corp. K#1003 1-27-93
3. Commercial commitments for previously sold assets where there is no ongoing
Warren business involvement have been EXCLUDED.
4. At the FASHING FACILITY, some agreements cover gathering and treating
services as well as processing services. Merger intent calls for gathering
and treating portions of these agreements to be EXCLUDED from merger and
retained by Chevron, and for processing portions to be INCLUDED as part of
Warren's business. Administrative processes to carry out this intent, such
as separate contracts, should be pursued during merger implementation.
5. Third party processing agreements between Chevron Production Company and
Plant Owners at Lowry, Stingray, Burns Point, Cow Island, and Cameron are
excluded from Merger. Chevron Production retain those agreements as well as
any similar agreements.
6. Chevron intra- and inter- company agreements have been excluded from this
listing and are to be replaced by various Merger Agreements.
SCHEDULE 1F
WARREN LICENSES AND PERMITS
1. Software licenses listed on Annex A.
2. FCC licenses listed on Annex B.
3. Environmental, tax and operating permits listed on Annex C.
ANNEX A
Included Software
Software Included in the NEWCO Deal
* NGBU SOFTWARE LICENSES *
<TABLE>
<CAPTION>
License
Transfer Manufacturer Software Version License Comments
Status Name Title Number Used
- -------- ------------ -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
IBM OS/2 Warp Connect 3 100 This license is owned by NGBU
Sybase Structure Query Report Writer 3.1 120 This license is owned by NGBU
NO Easel Easel Run Time 2 120 This license is owned by NGBU
Microsoft MS DOS 6.22 75 This license is owned by NGBU
Microsoft Windows 3.11 120 This license is owned by NGBU
FTP Software PC/TCP for DOS/Windows 3.1 40 This license is owned by NGBU
IBM DOS LAN Services Requester 4 40 This license is owned by NGBU
Microsoft Word, Excel, PowerPoint 4.2 100 This license is owned by NGBU
Microsoft Access 2 60 This license is owned by NGBU
Microsoft Schedule + 1 80 This license is owned by NGBU
Microsoft Mail Remote 3.2 80 This license is owned by NGBU
Netscape Com Corp Netscape Navigator 2 120 NGBU obtaining a license for Netscape
IBM Warp Server - Advanced 3 6 This license is owned by NGBU
GasLink * In-house developed 2 1 Price Waterhouse owns marketing rights to
GasLink through Sept. 96
</TABLE>
*NOTE: With respect to GASLINK, NewCo must negotiate an agreement with Price
Waterhouse to continue using the application. NEWCO must agree not to market the
GasLink Software until existing contract expires (9/96).
WARREN SOFTWARE LICENSES *
<TABLE>
<CAPTION>
License
Transfer Manufacturer Software Version License Comments
Status Name Title Number Used
- -------- ------------ -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
IBM OS/2 Warp Connect 3 12 Used by Gas Control and Tech Support.
DBMS 7.x 32 Warren owns a 32 concurrent user copy
Seagate EMS Palindrome Storage Manager 4.x 14 Pricing based on media, server and
storage capacity. Used to backup
Netware.
Palindrome Backup Director 4.x 1 Pricing based on server type. Used to
Backup NT environment.
NerveCenter Event Manager 2.4 1 Annual license fee is 18% of package
price.
Ashwin Batch Scheduler x 1 License fee provides for scheduling up
to 10 machines.
MicroGrafix ABC Flowchart 4 13
Traveling Software Faxworks Pro 2 120 FaxWorks is used as a OS/2 Fax Server
service.
Netware server 4.1 20
Netware Support Encyclopedia x 1 CDRom based support tool.
On Command Software SofTrack 24 Maintenance fee is 12% of total software
value.
Hewlett Packard HP UX 9.x, 10.x 4 Includes maintenance for PA RISC
hardware,OpenView software & Unix
tools.
Hp Openview PA/Risc 4.x 1 Software maintenance is included with
the Unix OS maintenance.
HP NetServer Assistant 1.x 14 Comes free with Servers.
NO Peregrine Software Serverview/Stationview 2.6 22 Software maintenance is 20% of software
purchase price.
NO Microsoft MS DOS 6.22 910
CITC Maint.Contract Windows 95 upgrade 500
Windows 3.11 120
NT Server 3.51 8
NT Workstation 3.51 1
MS Word, Excel, Powerpoint 600
Project 4 22
Access 2 60
Schedule + 1 750
Mail Remote 3.2 80
Mail PostOffice 3.2,3.5 19
Visual C++ for Windows 3.x 2
Visual Basic for Windows 3.x 2
Visual Basic Professional 4.x 1
Nantucket, Inc. Clipper Pro S87' 2
FTP Software PC/TCP for DOS/Windows 3.1 4
Netscape Com Corp Netscape Navigator 2 31
IBM Warp Server - Advanced 3 1
AT&T InstaCom Pro 1.6g 2 Multi-User Lan license
Delrina WinFax Pro Client 3.x,4.x 72
WinFax Pro for Networks client 4.1 40
WinFax Pro for Networks Server 4.1 2 Software maintenance is fixed amount.
Hilgraeve HyperAccess/5 DOS 2.4 48
HyperAccess/5 Windows 2.x,3.x 46
HyperAccess/5 OS/2 1.x 1
DataCode, Inc. WorldWatch 1.83a 15 Leased from DataCode. $595 for Feed
Fee, and 15 clients @ $50/month.
BindView 2.x 14
Traveling Software Laplink Pro 3.x 24
AutoDesk, Inc. AutoCad Windows 12.x 11
DTN DTS x 1
ProComm Procomm+ for Windows x 11 Used by Tech Suport only.
TechSmith SnagIt for Windows 3.4 50 Warren purchased 2x25 user licenses.
IBM/Lotus Lotus 1-2-3 2.x,3.x,4.x 40 Warren has sunsetted Lotus. However,
we still own 116 licenses.
Network General Sniffer 4.45 1 CITC owns this device - Token-Ring only
.. includes a hardware component.
BARR, Inc. BARR Output Spooling 1.6g 1 Proprietary hardware/software package
.. includes a hardware component.
xxx ACT Contact Manager x 24 Used primarily by D&I Sales.
MicroDesign SCSI Express 2.2 8 Fixed rate software maintenance.
International
Reporter 2.x 1
</TABLE>
Warren Systems: Selected Mainframe Programs that will be operated and supported
for up to 24 months.
Mainframe applications section of agreement:
NGC will take ownership.
AFIS MOAT/MAGIC
GAIS Online (Gas Plants)
GAIS Batch
GAS (old gas plant system)
WFS (Warren Financial System, legacy)
WFI (Warren Financial System, legacy)
A/R Inquiry
FREIGHT
BILLING
Mass Weights
PIMS
Accrual/Reversal
Exchange
Booking Master
Purchase Settlement
Tax Accounting
Inventory Valuation (LIFO)
Laid in Cost
Debit Memo
Accounts Receivable
Joint Interest Billing
Joint Venture Accounting
Location Transaction Reporting
1301 Reporting
Right of Way
MSRS
Brown Book Reporting
Marketing Adhoc Reporting
Warren Systems: Selected Mainframe Program Support Tools
GROUP MVS Software: GROUP VM Systems:
RACF ISPF V3 for VM
TSO/E ISPF/PDF V3 for VM
Abend-Aid/MVS Nomad Suite of Products
CA-1 for MVS Office Vission/VM
CA-7 for MVS VM:Schedule
CA7TOOL VM:Operator
CA90S VM:Tape
INFOPAC
RACF Administrator
RMDS
SYNCSORT
TSO/MON SPFI and Online
VTAM Printer Support (VPS)
WSF2
3270-PC Host File Transfer
Supersession
TCP/IP for MVS
TCP/IP for VM
ADF
DB2
Nomad
Focus
Warren Systems: Selected PC/Mini Application programs that will be supported up
to 12 months.
PC application section of agreement:
The Parties may negotiate an extension of this service
NGC will take ownership of these..
AFIS Interfaces
(SAP R/3) Desktop software
AFIS Reporting, in-house developed
ORIN, in-house developed
LOCKBOX BANK , in-house developed
Liquids Marketing Contracts, in-house developed
WAVES, in-house
Manley data capture
Custmenu
Integrator
OPIS
MARS
Record Services Date Control
Engineering Contracts
Terminal Management systems
SIDES
Petroex/Mapco
Pipeline Tickets
CSPR (Client Server Processing)
VIOLA
Barge Reporting System
Distribution
Chevron Corporate Systems: Below are applications that Chevron would support
and/or operate via Service Agreement for up to 24 months.
The Parties may negotiate an extension. NGC shall have no ownership of these
applications
RMS, Chevron Products Railcar Management System
CPS, Chevron Products System
SAP R/3, Chevron Corporate Financial System/ @ Warren
(NEWCO license required)
IPS, Chevron invoice processing system
EDI translator, Chevron corporate translator
TESS, Chevron time entry support system
CASS, Corporate data feed to Warren
* No= license is not transferable without contacting the vendor for written
approval. This will usually involve some kind of fee.
Chevron, Warren and NGBU IT Systems:
NOTE: Subject to the restrictions contained elsewhere, all additional software
and hardware necessary to operate Warren Petroleum and NGBU contributed
businesses are included in the merger assets.
ANNEX B
Active License List
<TABLE>
<CAPTION>
DC FILENUM CALL SIGN FREQUENCY FC ACO STA UNIT TRAN POWER ERP ELEV ANTPOL SQT SQR LATITUDE LONGITUDE
<S> <C> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
G 793.115 KA9430 33.26 1 N MO 17 17 120
G 791.431 KAP567 153.44 1 N FB 1 1 300 428 199 284818 981044
G 791.432 KAP568 153.44 1 N FB 1 1 300 226 50 284315 981745
G 790.211 KBR406 33.380-A 1 N FB 1 1 120 385 60 381120 880203
G 793.225 KC2535 153.35 1 N MO 85 85 100
G 790.318 KKQ666 153.305-A 1 N FB 1 1 110 1005 171 322038 975304
G 791.468 KKS262 153.35 1 N FB 1 1 110 0 3629 171 323954 1035318
G 790.221 KNCE588 49.240-A 1 N FB 1 1 120 120 2500 125 365310 1001924
G 791.479 KNDU771 153.35 1 N FB 1 1 110 0 2420 25 354830 1001033
G 794.535 KNHK376 453.375 1 N FXO 1 1 40 200 3060 46 354709 1003736
G 794.539 KNJC878 465.100-A 1 N FXO 1 1 20 185 370 20 323326 945354
G 794.539 KNJC878 465.100-B 2 N FXO 1 1 20 185 335 20 322249 945313
G 791.489 KQX435 153.35 1 N FB 1 1 110 0 4200 150 332500 1033330
G 791.495 KSV408 153.35 1 N FB 1 1 110 3500 105 332219 1023152
G 789.328 KU7879 156.45 1 N MUC 1 1 10
G 789.328 KU7879 156.6 2 N SS 1 0 10
G 789.328 KU7879 156.8 3 N SS 1 0 10
G 792.758 WAE255 153.35 1 N FXOT 10 10 10
G 789.163 WHH203 156.275 1 N FCL 1 1 50 0 71 295013 935735
G 789.163 WHH203 156.5 2 N FCL 1 0 50 0 71 295013 935735
G 789.163 WHH203 156.8 3 N FCL 1 0 50 0 71 295013 935735
G 792.759 WPC99 153.35 1 N FXOT 50 50 30
G 789.182 WQX609 156.45 1 N FCL 1 1 50 5 121 260520 800807
G 789.182 WQX609 156.8 2 N FCL 1 0 50 5 121 260520 800807
G 789.182 WQX609 161.6 3 N FCL 1 0 50 5 121 260520 800807
G 789.183 WQX709 156.45 1 N FCL 1 1 50 57 61 275314 823204
G 789.183 WQX709 156.8 2 N FCL 1 0 50 57 61 275314 823204
G 789.183 WQX709 161.6 3 N FCL 1 0 50 57 61 275314 823204
G 789.184 WRS901 156.35 1 N FCL 1 1 50 230 50 294434 951221
G 789.184 WRS901 156.7 2 N FCL 1 0 50 230 50 294434 951221
G 789.184 WRS901 156.8 3 N FCL 1 0 50 230 50 294434 951221
G 782.242 WXK924 460.85 1 N FB2 1 1 2 0 64 30 295035 945343
G 782.242 WXK924 460.9125 2 N MO 1 1 2 0 295035 945343
G 782.242 WXK924 460.9875 3 N MO 1 0 2 0 295035 945343
G 782.242 WXK924 465.85 4 N MO 15 15 2 0 295035 945343
G 782.242 WXK924 465.9125 5 N MO 15 15 2 0 295035 945343
G 782.242 WXK924 465.9875 6 N MO 15 15 2 0 295035 945343
G 782.243 WXK925 460.675 1 N MO 25 25 2 294434 951221
G 782.243 WXK925 460.725 2 N MO 25 0 2 294434 951221
N 795.00 WNTU356 928.03125 MAS 12 322535 1030849
N 795.00 WNTY226 928.04375 MAS 12 323636 1031840
N 795.927 WNTA396 928.23125 MAS 12 313020 1023848
N 795.00 WNTV764 928.5825 MAS 12 330336 1033632
</TABLE>
<TABLE>
<CAPTION>
DC FILENUM CALL SIGN SITECODE AREA OF OPERATION STATION ADDRESS CITY COUNTY
<S> <C> <C> <C> <C> <C> <C> <C>
G 793.115 KA9430 SOUTHEAST TEXAS STATE OF TX
G 791.431 KAP567 FASHING PLANT, 19 MI. S.W.OF KARNES ATASCOSA
G 791.432 KAP568 FASHING LOADING RACK,26.5MI SW KARNES CITY ATASCOSA
G 790.211 KBR406 50 MIRA OF COOR HWY 1 2.5 MI N CROSSVILLE IL CROSSVILLE WHITE
G 793.225 KC2535 STATE OF TX
G 790.318 KKQ666 20 MIRA COOR TOLAR PLANT 172, 3.5 MI SE TOLAR HOOD
G 791.468 KKS262 LITTLEFIELD PL #163, 11.25 MI LOCO HILLS EDDY
G 790.221 KNCE588 WARREN PET MOCANE PLANT MOCANE BEAVER
G 791.479 KNDU771 WARREN'S TONKAWA PLANT 1 MI N GEM HEMPHILL
G 794.535 KNHK376 QUARTERHORSE RD.,6 MI.S. OF MIAMI ROBERTS
G 794.539 KNJC878 WARREN PET.PLANT,GEO.RICKEY RD WARREN CITY GREGG
G 794.539 KNJC878 .4 MI S GLADEWATER ST KILGORE GREGG
G 791.489 KQX435 VADA GASOLINE PL, 28 MI NW OF LOVINGTON LEA
G 791.495 KSV408 WPC TERRY PLANT #188, 5 MI SSW SUNDOWN HOCKLEY
G 789.328 KU7879 WARREN MARINE TERMINAL GREENVILLE
G 789.328 KU7879 WARREN MARINE TERMINAL GREENVILLE
G 789.328 KU7879 WARREN MARINE TERMINAL GREENVILLE
G 792.758 WAE255 SOUTHEASTERN NM
G 789.163 WHH203 PTAT WARREN'S PORT ARTHUR TERMINAL PORT ARTHUR JEFFERSON
G 789.163 WHH203 PTAT WARREN'S PORT ARTHUR TERMINAL PORT ARTHUR JEFFERSON
G 789.163 WHH203 PTAT WARREN'S PORT ARTHUR TERMINAL PORT ARTHUR JEFFERSON
G 792.759 WPC99 STATE OF TX
G 789.182 WQX609 WARREN`S PORT EVERGLADES TERM. PORT EVERGLADES BROWARD
G 789.182 WQX609 WARREN`S PORT EVERGLADES TERM. PORT EVERGLADES BROWARD
G 789.182 WQX609 WARREN`S PORT EVERGLADES TERM. PORT EVERGLADES BROWARD
G 789.183 WQX709 WARREN'S TAMPA TERMINAL TAMPA HILLSBOROUGH
G 789.183 WQX709 WARREN'S TAMPA TERMINAL TAMPA HILLSBOROUGH
G 789.183 WQX709 WARREN'S TAMPA TERMINAL TAMPA HILLSBOROUGH
G 789.184 WRS901 WARREN GAS TERM.ON HOU.SH.CHAN GALENA PARK HARRIS
G 789.184 WRS901 WARREN GAS TERM.ON HOU.SH.CHAN GALENA PARK HARRIS
G 789.184 WRS901 WARREN GAS TERM.ON HOU.SH.CHAN GALENA PARK HARRIS
G 782.242 WXK924 BELV MT BELVIEU UNDERGROUND TERM. MONT BELVIEU CHAMBERS
G 782.242 WXK924 BELV MT BELVIEU UNDERGROUND TERM. MONT BELVIEU CHAMBERS
G 782.242 WXK924 BELV MT BELVIEU UNDERGROUND TERM. MONT BELVIEU CHAMBERS
G 782.242 WXK924 BELV MT BELVIEU UNDERGROUND TERM. MONT BELVIEU CHAMBERS
G 782.242 WXK924 BELV MT BELVIEU UNDERGROUND TERM. MONT BELVIEU CHAMBERS
G 782.242 WXK924 BELV MT BELVIEU UNDERGROUND TERM. MONT BELVIEU CHAMBERS
G 782.243 WXK925 GLPK WARREN GAS TERMINAL INSIDE GALENA PARK HARRIS
G 782.243 WXK925 GLPK WARREN GAS TERMINAL INSIDE GALENA PARK HARRIS
N 795.00 WNTU356 EUNICE
N 795.00 WNTY226 MONUMENT
N 795.927 WNTA396 SANDHILLS
N 795.00 WNTV764 SAUNDERS
</TABLE>
DC FILENUM CALL SIGN STATE REGION SUPV SVC LICNAM OLDLICNAM
G 793.115 KA9430 TX EAST WLC IP CII GOCCI
G 791.431 KAP567 TX EAST WLC IP CII GOCCI
G 791.432 KAP568 TX EAST WLC IP CII GOCCI
G 790.211 KBR406 IL EAST MTH IP CII GOCCI
G 793.225 KC2535 TX EAST WLC IP CII GOCCI
G 790.318 KKQ666 TX EAST WLC IP CII GOCCI
G 791.468 KKS262 NM EAST MTH IP CII GOCCI
G 790.221 KNCE588 OK EAST WLC IP CII GOCCI
G 791.479 KNDU771 TX EAST WLC IP CII GOCCI
G 794.535 KNHK376 TX EAST WLC IP CII GOCCI
G 794.539 KNJC878 TX EAST WLC IP CII GOCCI
G 794.539 KNJC878 TX EAST WLC IP CII GOCCI
G 791.489 KQX435 NM EAST MTH IP CII GOCCI
G 791.495 KSV408 TX EAST WLC IP CII GOCCI
G 789.328 KU7879 MS EAST --- MT CII GOCCI
G 789.328 KU7879 MS EAST --- MT CII GOCCI
G 789.328 KU7879 MS EAST --- MT CII GOCCI
G 792.758 WAE255 NM EAST WLC IP CII GOCCI
G 789.163 WHH203 TX EAST WLC MC CII GOCCI
G 789.163 WHH203 TX EAST WLC MC CII GOCCI
G 789.163 WHH203 TX EAST WLC MC CII GOCCI
G 792.759 WPC99 TX EAST WLC IP CII GOCCI
G 789.182 WQX609 FL EAST MTH MC CII GOCCI
G 789.182 WQX609 FL EAST MTH MC CII GOCCI
G 789.182 WQX609 FL EAST MTH MC CII GOCCI
G 789.183 WQX709 FL EAST MTH MC CII GOCCI
G 789.183 WQX709 FL EAST MTH MC CII GOCCI
G 789.183 WQX709 FL EAST MTH MC CII GOCCI
G 789.184 WRS901 TX EAST WLC MT CII GOCCI
G 789.184 WRS901 TX EAST WLC MT CII GOCCI
G 789.184 WRS901 TX EAST WLC MT CII GOCCI
G 782.242 WXK924 TX EAST WLC IB CII GOCCI
G 782.242 WXK924 TX EAST WLC IB CII GOCCI
G 782.242 WXK924 TX EAST WLC IB CII GOCCI
G 782.242 WXK924 TX EAST WLC IB CII GOCCI
G 782.242 WXK924 TX EAST WLC IB CII GOCCI
G 782.242 WXK924 TX EAST WLC IB CII GOCCI
G 782.243 WXK925 TX EAST WLC IB CII GOCCI
G 782.243 WXK925 TX EAST WLC IB CII GOCCI
<TABLE>
<CAPTION>
DC FILENUM CALL SIGN EFFECTIVE EXPIRATION CANCEL OTHERCAL STRU USER COMMENT DUMMY INDEX
DATE DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
G 793.115 KA9430 1/24/94 3/7/99 WARREN X
G 791.431 KAP567 4/30/92 6/11/97 179 WARREN X
G 791.432 KAP568 4/30/92 6/11/97 WARREN X
G 790.211 KBR406 4/19/91 4/19/96 50 WARREN X
G 793.225 KC2535 5/20/92 7/27/97 WARREN X
G 790.318 KKQ666 6/25/92 8/21/97 150 WARREN X
G 791.468 KKS262 6/25/92 8/21/97 150 WARREN X
G 790.221 KNCE588 5/17/94 5/17/99 120 WARREN X
G 791.479 KNDU771 8/26/92 10/30/97 20 WARREN STA.ADD: OF HWY 33 X
G 794.535 KNHK376 2/1/94 2/1/99 40 WARREN X
G 794.539 KNJC878 4/5/94 4/5/99 WARREN X
G 794.539 KNJC878 4/5/94 4/5/99 WARREN X
G 791.489 KQX435 6/25/92 9/21/97 140 WARREN X
G 791.495 KSV408 6/3/91 7/3/96 100 WARREN X
G 789.328 KU7879 3/22/94 3/22/99 WARREN X
G 789.328 KU7879 3/22/94 3/22/99 WARREN X
G 789.328 KU7879 3/22/94 3/22/99 WARREN X
G 792.758 WAE255 7/11/91 8/4/96 WARREN X
G 789.163 WHH203 3/22/94 3/22/99 50 WARREN X
G 789.163 WHH203 3/22/94 3/22/99 50 WARREN X
G 789.163 WHH203 3/22/94 3/22/99 50 WARREN X
G 792.759 WPC99 5/17/94 5/17/99 WARREN X
G 789.182 WQX609 3/22/94 3/22/99 100 WARREN X
G 789.182 WQX609 3/22/94 3/22/99 100 WARREN X
G 789.182 WQX609 3/22/94 3/22/99 100 WARREN X
G 789.183 WQX709 3/22/94 3/22/99 40 WARREN X
G 789.183 WQX709 3/22/94 3/22/99 40 WARREN X
G 789.183 WQX709 3/22/94 3/22/99 40 WARREN X
G 789.184 WRS901 3/22/94 3/22/99 230 WARREN X
G 789.184 WRS901 3/22/94 3/22/99 230 WARREN X
G 789.184 WRS901 3/22/94 3/22/99 230 WARREN X
G 782.242 WXK924 4/22/93 6/14/98 230 WARREN X
G 782.242 WXK924 4/22/93 6/14/98 WARREN X
G 782.242 WXK924 4/22/93 6/14/98 WARREN X
G 782.242 WXK924 4/22/93 6/14/98 WARREN X
G 782.242 WXK924 4/22/93 6/14/98 WARREN X
G 782.242 WXK924 4/22/93 6/14/98 WARREN X
G 782.243 WXK925 9/24/91 10/16/96 WARREN X
G 782.243 WXK925 9/24/91 10/16/96 WARREN X
</TABLE>
<TABLE>
<CAPTION>
DC FILENUM CALL SIGN FCC FILE HEIGHT EMMISSION FREQUENCY FCC AZIMUTH BEAM
TO TOLERANCE FORM WIDTH
CENTER
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
G 793.115 KA9430 8604374051 A20K0F3E 574
G 791.431 KAP567 8605375045 A20K0F3E 574
G 791.432 KAP568 8605375046 A20K0F3E 574
G 790.211 KBR406 8605375036 A20K0F3E 574
G 793.225 KC2535 8604374301 A20K0F3E 574
G 790.318 KKQ666 NA A20K0F3E 574
G 791.468 KKS262 A20K0F3E 574
G 790.221 KNCE588 8607378405 A20K0F3E 574
G 791.479 KNDU771 8607378398 A20K0F3E 574
G 794.535 KNHK376 8607378389 A2OKOF3E 574
G 794.539 KNJC878 8607378556 A20K0F3E 574
G 794.539 KNJC878 8607378556 A20K0F3E 574
G 791.489 KQX435 A20K0F3E 574
G 791.495 KSV408 8606376627 A20K0F3E 574
G 789.328 KU7879 864894-MC-ML-51 A16KOF3E
G 789.328 KU7879 864894-MC-ML-51 A16KOF3E
G 789.328 KU7879 864894-MC-ML-51 A16KOF3E
G 792.758 WAE255 8607377645 A20K0F2D 574
G 789.163 WHH203 865590 A16K0F3E
G 789.163 WHH203 865590 A16K0F3E
G 789.163 WHH203 865590 A16K0F3E
G 792.759 WPC99 8607378008 A20K0F3E 574
G 789.182 WQX609 856623 A16K0F3E
G 789.182 WQX609 865623 A16K0F3E
G 789.182 WQX609 865623 A16K0F3E
G 789.183 WQX709 865581 A16K0F3E
G 789.183 WQX709 865581 A16K0F3E
G 789.183 WQX709 865581 A16K0F3E
G 789.184 WRS901 865450 A16KOF3E
G 789.184 WRS901 865450 A16KOF3E
G 789.184 WRS901 865450 A16KOF3E
G 782.242 WXK924 8609049297 A20K0F3E 574
G 782.242 WXK924 8609049297 A20K0F3E 574
G 782.242 WXK924 8609049297 A20K0F3E 574
G 782.242 WXK924 8609049297 A20K0F3E 574
G 782.242 WXK924 8609049297 A20K0F3E 574
G 782.242 WXK924 8609049297 A20K0F3E 574
G 782.243 WXK925 8609049298 A20K0F3E 574
G 782.243 WXK925 8609049298 A20K0F3E 574
</TABLE>
ANNEX C
ENVIRONMENTAL PERMITS SENT TO RECORDS CONTROL
PLANTS
(STATE PERMITS)
BLUITT PLANT
TACB - Change of Ownership Permit #8233A: Lehman Compr. Sta. (5/24/93)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) NMR10A117 (8/13/93)
TNRCC - Std. Ex. 26244 - Lehman Compressor Sta. (9/15/94)
TRRC - Cancellation Permit 00165 for Effluent Disposal Lehman Pl.(Issued:
10/04/73)(10/27/94)
NMOCA - Archaeological sensitivity Review (3/20/95)
CANADIAN PLANT
Construction Permit Exemption (7/18/77)
Permit Exemption X-453 (10/19/78)
Construction Permit C-7776 (12/19/79)
Operating Permit R-7776 (8/17/81)
Permit Exemption X-2845 (12/28/81)
TRRC-No Pit Permit Required. (10/17/85)
TRRC-Pit Permit No. P006739B (03/26/86); Permit Canceled (6/12/86)
Section 311 - SARA Title III (10/7/88)
TRRC-Pit Permit No. P006739A (03/26/86)
TRRC-Pit Permit No. P006739B (03/26/86); Permit Canceled (6/12/86)
Section 311 - SARA Title III (10/7/88)
TACB-Permit Exemption(Std.Ex.6-engine; 66-Glycol Reconcentrator) (7/19/90)
TACB-Permit Exemption (Std. Ex. 66 & 80) (5/20/92)
TACB-Permit Exemption (Std. Ex. 6) (7/21/92)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00D737 (12/31/92) (P/L)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00D738 (12/31/92) (P/L)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00C292 (12/31/92) (Plant)
TACB-Permit Exemption-2 Waukesha L7042 Engines (6/25/93)
TRRC-Hydrostatic Discharge Approval 8/9/93 (30 days)
TRRC-Minor Permit 0980 (11/18/93) (30 days)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR10H339 (11/18/93) (P/L)
TNRCC-Std. Exemption 24592: #143 engine (4/12/94)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR10G035 (5/9/94) (P/L)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR10G036 (5/9/94) (P/L)
TRRC-Minor Permit 1065 (7/27/94) (30 days)
TRRC-Minor Permit 1066 (7/27/94) 30 days)
THC-Approval Flowers 2-1 Pipeline (7/27/94)
THC-Approval Northern Natural/El Paso Pipelines (7/27/94)
THC-Approval Isaacs 7-210 Pipeline (8/12/94)
THC-Approval Isaacs 6-210 Pipeline (8/12/94)
THC-Approval Flowers 3-1 Pipeline (8/12/94)
TRRC-Minor Permit 1077 (8/29/94) (30 days)
THC-Cultural Sensitivity Review (Med.-High Site Potential) (09/20/94)
USEPA-Notice Application Complete, Hydrostatic Disch. Water, Appl. Nos.TX0112836
Isaacs 6-210; TX0112844 - Isaacs 7-210; TX0112879 - Flowers 3-1 P/L
(10/06/94)
THC-Archaeological Clearance, Cree Flowers P/L (11/23/94)
TRRC-HT-1116 - Minor Permit to Discharge Hydrostatic Test Waters (30 days)
(11/30/94)
TRRC-HT-1131 - Minor Permit to Discharge Hydrostatic Test Waters (30 days)
(01/09/95)
USEPA-Stormwater General Permit Notification-TXR10M897-Cree Flowers P/L
(01/17/95)
THC-Archaeological Clearance Alpar Flowers 75-2D P/L, Cross Timbers Flowers 2-79
P/L, Maxus Flowers
Brothers 8-74 P/L, 01/20/95)
THC-Archaeological Clearance Campbell #2-58 P/L (02/15/95)
USEPA-NPDES Appl. No. TX0113204 (02/24/95)
USEPA-Stormwater Gen. Permit Notification TXR00G271-ElPaso/No. Natural P/L
(04/07/95)
THC-Archaeological Clearance Red Deer P/L, Sharon 1-26 (9400912), Taylor Lateral
P/L (9400915), (04/27/95)
USEPA-Stormwater Gen. Permit Notification TXR10P104: Red Deer P/L (06/06/95)
THC-Archaeological Clearance for Plant Expansion Project (09/24/95)
CLARK COMPRESSOR STATION
TACB - Std. Ex. (10/23/91)
EUNICE PLANT
Construction Permit (Conditional) (5/23/75)
Permit Exemption (11/12/76)
Permit #67 - Modification Exemption (11/16/81)
Permit #67-M-1 Modification Exemption (12/17/82)
Approval 4/5/84 for 288 hp. firewater engine
Reaffirmation of Permit #67-M-1 Modification Exemption for Units 19A & 19B
(3/13/85)
Notice from NMEID of RCRA reclassification of non-handler of hazardous
waste (9/6/85)
NMOCD Discharge Plan Approval (5/09/86)
Section 311 - SARA Title III (9/22/88)
NMEID - Permit #67-M-1 (1/26/89)
NMEID - Permit Exemption: 1500 Gallon Gasoline Fuel Tank (2/9/90)
NMEID - NOV - AQCR 621.H-Flare Stack Height (7/19/90)
NMOCD Discharge Plan Approval (5/9/91) (Expires May 16, 1996)
NMED - Air Quality Permit #67-M-2 (12/16/92)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) NMR00A189 (12/31/92)
NMOCA - Archaeological Sensitivity Review (Med.-High Site Potential) (03/20/95)
NMED - Notice of Air Permit Application Completion:Permit #0067-M-3 (05/22/95)
USEPA - Stormwater Gen. Permit Notification NMR10A408, P/L Const. (06/06/95)
NMED - Air Quality Permit #67-M-3 (09/15/95)
FASHING PLANT
Permit Exemption (SRU) (8/5/77)
National Pollutant Discharge Elimination System (NPDES) Permit TX0086720
(5/19/82)
Approval for Application for Plant Effluent Disposal Permit; Form R-8;
(TRRC) (10/2/84)
Permit Exemption X-16580 (5/31/85)
Pit Permit No. P006411 - TRRC (7/31/85)
Pit Permit No. P006412 - TRRC (7/31/85)
Rural Road Sign Renewal - Registration #007-2975-01-001 (12/30/86)
Draft EPA NPDES Permit (7/2/87)
Renewed EPA NPDES Permit (8/18/87)
Section 311 - SARA Title III (9/21/88)
Permit Exemption X-16580 - Voided by TACB (2/1/89)
Rural Road Sign Renewal - Registration #007-2975-01-001 (3/21/89)
TACB-Approval for Outdoor Burning (3/22/93)
THC/DAP-Approval for Hydrostatic Discharge (7/20/93)
TACB - Account Number Consolidation (8/10/93)
TACB - St. Exemption X-22717:2-995HP. engines (6/16/93)
TACB - Account No. Consolidation (8/10/93)
TACB - St. Exemption III for Solar Turbine Replacement (8/16/93)
TNRCC - St. Exemption 25964 (T-1 & T-2) (8/17/94)
TRRC - Permit to dispose of tank bottom sludge, (Effective: 09/02/9 Expiration
Date: 11/02/94)
THC - Archaeological Sensitivity Review (Low Site Potential) (09/20/94)
GIBSON COMPRESSOR STATION
TACB Std. Ex. (10/23/91)
LEEDEY PLANT
Installation Permit 79-093-C (4/14/80) Construction Permit 80-099-C (12/1/80)
Operating Permit 79-093-0 (12/22/80) Installation Permit 81-006-C (4/13/81)
Construction Permit 81-021-C (6/3/81) Operating Permit 81-006-0 (8/3/81)
Operating Permit 81-099-0 (8/3/81) Operating Permit 81-021-0 (11/30/81)
Construction Permit 81-129-C (12/31/81) Operating Permit 82-060-0 (10/18/82)
Operating Permit 86-049-0 (11/7/86) Section 311 - SARA Title III (9/23/88)
Operating Permit 89-033-0 (Compilation of all Permits) (8/1/89)
Operating Permit 91-047-C (10/3/91)
OCC - UST determination (12/10/91)
OSDH - Operating Permit No. 91-047-0 (3/10/93)
ODEQ - Construction Permit No. 93-080-C (9/30/93)
ODEQ - Permit No. 93-080-0 (07/31/95)
MONAHANS PLANT
Plant Effluent Disposal Permit (10/24/73)
Construction Permit C-1114 (4/2/74)
Operating Permit R-1114 (7/18/74)
Permit Exemption X-16509 (So. Hutch Compressor Station) (4/17/85)
Permit Exemption X-16526 (Hutching Sealy #1 Compressor Station) (4/17/85)
Permit Exemption X-16561 (So. Hutch Compressor Station) (5/21/85)
Permit Exemption Revision X-16561 (So. Hutch Comp. Station) (7/3/85)
Permit Exemption X-16605 (10/2/85) (#1 Compressor Station)
TRRC - Pit Permit No. P006753A (11/18/85); Amended 5/27/86
TRRC - Pit Permit No. P006753B (11/20/85); Amended 5/27/86
TRRC - H-9 Approval for Rule 36 (12/31/86)
TACB: SO is 310 #/hr for R-1114 (6/10/88)
Section 311 - SARA Title III (9/19/88)
Chevron Pipe Line Safety Review Response (9/22/88)
Permit Exemption X-19247 (So. Ward Compressor Station) (12/20/88)
TACB - SO is 1358 tpy (310 PPH) (2/7/89)
TACB - Notice of Compliance - NOV Resolved (7/5/89)
TACB - Notice of Violation - SO2 from acid gas flare (5/23/89)
TACB - Continuance to Operate Permit No. R-1114 (10/31/89
TRRC - Approval - District Office Form H-9: Certificate of Compliance Statewide
Rule 36 (6/8/90)
TRRC - H-9 Approval for Rule 36 (6/8/90):17120 Amended
Permit Exemption X-20545 (Waha Compressor Station) (12/17/90)
Permit Exemption X-20642 (Plant #2 Compressor Station) (2/8/91)
Permit Exemption Revision X-16605 (Plant #1 Compressor Station) (3/22/91)
Permit No. C-20710 Triethylene Glycol Dehydration Unit ID No. WC-0076-F
(8/16/91)
TACB - Single Permit System requirement (12/31/91)
TACB - Gulf States Compr. Sta. Std. Ex. #X-21789 (9/9/92)
TNRCC - NOV Southwink Treater (9/28/93)
TNRCC - Gulf States Compr. Sta. Std. Ex. #21789 (5/4/94)
THC - Archaeological Sensitivity Review (Low Site Potential) (09/20/94)
THC - Notice to Proceed w/P/L Expansion - SW Royalties, NXS No.1 P/L (10/21/94)
USEPA - Stormwater Discharge Permit No. TXR00F913, SW Royalties NXS P/L
(11/30/94)
TNRCC - Std. Ex. #27203 for Waukesha L7040GU Comp. Engine (12/19/94)
THC - Archeological Clearance for Sand Hills to Monahans P/L Project (01/11/95)
USEPA - Stormwater Disch. Permit Notice, No.TXR10M935, Sand Hills to Monahans
P/L (01/17/95)
USEPA - Stormwater Disch. Permit Notice No.TXR10N685, Tiger #1 P/L (02/15/95)
TNRCC -St. Ex. No. 28346 for No. 2 Compressor Station, (03/09/95)
TNRCC - St. Ex. No. 28192 - Recomp. Sta., White Superior 8G825 Engine,
(03/13/95)
THC - Archaeological Clearance for Chevron Estes Gas Gathering P/L, (05/23/95)
TAC - Antiquities Permit #1577 - Siana-Tiger #1 Lease Connection - (07/31/95)
TNRCC - St. Ex. No. 27203 - So. Hutch Comp. Sta.- Waukesha Engine
Replacementvc (10/26/95)
TNRCC - St. Ex. Regis. No. 28192 - Monahans Recompressor Sta.-(2/15/96)
MONT BELVIEU PLANT
National Pollutant Discharge Elimination System (NPDES) Draft Permit TX0002887
(2/14/74)
Construction Permit Exemption C-2050 (4/8/74)
Construction Permit C-5452 (7/21/77) Operating Permit R-5452 (10/20/78)
FAA Approval - Fractionation Towers (7/11/86) Permit No. C-16968 - TACB
(6/17/86)
Construction Permit PSD-TX-696 (7/3/86)
Construction Permit - Amended C-16968 - TACB (1/15/87)
Construction Permit - PSD-TX-696 - M-1 (2/11/87)
TRRC: H-9 for Rule 36 (7/9/87)
TACB: Standard Exemption No. 106 (10/29/87)
TRRC - MP 03-0886A - Disposal Permit (7/20/88)
TRRC - Pit Permit P009174 (7/29/88)
TRRC - Pit Permit P009175 (7/29/88)
TRRC - Pit Permit P009176 (7/29/88)
TRRC - Pit Permit P009177 (7/29/88)
Section 311 - SARA Title III (9/22/88)
USEPA - NPDES - Application deemed complete (9/23/88)
TACB - Std. Ex. #106 - Ethane Fractionator (2/23/89)
TACB - Std. Ex. #106 - T-4 Surge Pump Project (4/24/89)
TACB - Std. Ex. #106 - No. 4 Flare Tank Product Recovery (5/19/89)
TACB - Compliance Achieved - NOV Resolved (5/24/89)
TRRC - Pit Permit Amendment P009174 (Supersedes 7/29/88) (10/20/88)
TRRC - Pit Permit Amendment P009175 (Supersedes 7/29/88) (10/20/88)
TRRC - Pit Permit Amendment P009176 (Supersedes 7/29/88) (10/20/88)
TRRC - Pit Permit Amendment P009177 (Supersedes 7/29/88) (10/20/88)
EPA Comments on PSD-TX-696M-2 (5/24/89)
EPA Comments on PSD-TX-696M-2 (10/19/89)
EPA - Permit Number PSD-TX-696M-2 (1/18/90)
TRRC - Facility Effluent Discharge Permit GLP-001 (10/3/90)
TACB - Notice of Rule 101.20(1) Violation Resolution (10/30/90)
TRRC - Minor Permit MP-A90-0051 - Disposal Permit (11/7/90)
TRRC - Amendment to Permit GLP-001 (12/21/90)
TACB - Permit R-16968 - Gas Turbine Cogeneration Facility (2/12/91)
TACB - Permit Applic. 22042 & PSD-TX-817 deemed complete (11/16/92)
TACB - Permit No. 16968-Applic. deemed complete (12/1/92)
TACB - Permit No. 22088-1,3 Butadiene Handling Facility (deemed complete)
(12/9/92)
TACB - Permit No. 16968 & PSD-TX-696M1(add'l. info) (12/10/93)
TACB - Permit Revisions Pmt. No. 5452-Butane units - denial of revision
(12/16/92)
USEPA - Stormwater Gen. Pmt. Notif. TXR00C294 (12/31/92)
TACB-Permit 5452 (4/29/93)
TRRC-Minor Permit HT-0904 Hydro. Disch. Water (5/28/93) (30 days)
USEPA-TX0111414 Discharge Permit Applic. Complete (6/14/93)
TACB - Permit Exemption No. X-2050 for Butane ISOM Furn. (8/18/93)
TACB - Permit Renewal No. 5452 for LPG Frac. and ISOM Unit (8/30/93)
TNRCC - Permit Amendment No. 16968/PSD - TX 696M-1 - Gas Turbine Cogeneration
(12/13/93)
TNRCC - Permit No. 22042/PSD-TX-817: T-6, T-11 & T-12 (5/12/94)
TRRC - Permit GLP-001-Renewal Permit GLP-001 (3/1/96)
MONUMENT PLANT
Permit Denial (Modification) (4/15/76)
Variance Order (8/30/76)
Permit to Construct Sulfur Recovery Plant (8/30/76)
Permit to Convert (10/1/76)
Approval 4/4/84 for 288 h.p. Firewater Engine
Lined Pit Inspected - Okay (3/1/84)
Public Notice - Discharge Plans for NMOCD (5/17/85)
Notice from NMEID of RCRA reclassification to non-handler of hazardous waste
(9/6/85)
NMOCD Discharge Plan Approval (10/18/85)
Air quality Permit 110-M-1 (6/23/86) and Motion to Vacate Variance (7/09/86)
Proposed Variance Order (11/17/86)
Order to Vacate Variance (Received 3/2/87)
A.Q.Pmt. 681 - NMEID - Public Notice (6/9/87)
Consolidation of Skaggs-McKee-Joy Compressor Sta.-NMEID-A.Q.Pmt.-681 (7/10/87)
Section 311 - SARA Title III (9/20/88)
Discharge Plan GW-25 Approved by NMOCC (8/14/90);Expires 7/31/95.
NMED - building construction (3/20/92)
NMED-110-M-2: 1000 HP Solar Saturn (Model:T-100; Serial No. 21399) (6/22/93)
NMTRD - Approval for Semiannual Payment (2/4/94)
NMOCD - Administrative Order SWD-561 (6/16/94)
USEPA - Stormwater Gen.Permit Notif. No. NMR10A327, Joy Comp. Sta. P/L
(01/17/95)
NMOCA - Facility Archaeological Sensitivity Review (Medium Site Potential)
(03/20/95)
NMED - Air Permit 110-M-3 (1/31/96)
MOORES ORCHARD PLANT
Plant Effluent Disposal Permit (10/24/73)
Permit Exemption X-3134 (4/7/83)
Permit-Recommended Issuance-TACB Pmt. No. C-18451 (2/8/88)
Permit C-18451-TACB (3/9/88)
Permit C-18451-TACB (9/21/88)
Section 311 - SARA Title III (9/21/88)
TACB - Std. Exp. #6 - 1000 HP Replacement Engine (2/10/89)
TACB - Permit Amendment R-18451 (9/24/90)
THC - Archaeological Sensitivity Review (Medium-High Site Potential) (09/20/94)
TRRC - Notice of Proposed Cancellation (30 days) Effluent Disposal Permit (R-8)
(12/20/94)
PUCKETT PLANT
TRRC - Pit Permit No. P001079 (1/11/85)
TACB - Permit Exemption X-19619 (2 Solar Saturn Turbines) (8/15/89)
TACB - Permit Exemption No. X-19619 (11/7/89)
TACB - Permit Exemption - Nine TEG Units (2/28/90)
TACB - Permit File C-19839 Void (5/4/90)
TNRCC - St. Exemption 23249: Gas Turbine and Cat. Conv. (9/10/93)
TNRCC - St. Exemption 24001: Solar Turbine Replacement (12/21/93)
THC - Archaeological Sensitivity Review (Low Site Potential) (09/20/94)
SAND HILLS PLANT
Plant Effluent Disposal Permit (10/24/73)
Permit Exemption X-3068 (12/9/81)
Permit Exemption X-3217 (2/18/82)
Draft Permit C-9029 (7/2/82)
Construction Permit C-9029 (7/26/82)
Amended Permit C-9029 (5/16/84)
Superfund/RCRA Inspection Report by EPA (3/7/84)
RCRA Inspection and NOV by TDWR (12/14/84)
Response to NOV (1/28/85)
Permit C-9029-Extension of Permit by TACB until 6/30/86 (1/30/85)
Accident/Incident Investigation Number 85-AI-055-TRRC (4/29/85)
Accident/Incident Investigation Number 85-AI-055-TRRC final report (5/15/85)
Extension and authorization page to extend PSD-TX-464M-1 to June 30, 1986
(5/2/85)
Corrected authorization page to extend PSD-TX-464M-1 to June 30, 1986 (8/6/85)
Inspection Operations and Maintenance Plan - TRRC review (9/16/85)
TRRC - Pit Permit No. P005452 (2/18/86)
TRRC - Pit Permit No. P005454 (2/18/86)
TRRC - Pit Permit No. P005455 (02/18/86)
Inspection, Operation and Maintenance Plan Final Approval - TRRC (5/21/86)
TRRC - Pit Permit P006531 (Ponderosa Station) (7/15/86)
TRRC - Pit Permit P006532 (Cattle Guard #25 Station) (7/15/86)
TRRC - Pit Permit P006533 (McKnight Station) (7/15/86)
TRRC - Pit Permit P006535 (McElroy Station) (7/15/86)
TRRC - Pit Permit P006536 (L&H Station) (7/15/86)
TRRC - Pit Permit P006537 (L&H Station) (7/15/86)
TRRC - Pit Permit P006538 (L&H Station) (7/15/86)
TRRC - Pit Permit P006534 (King Mountain Station) (7/21/86)
Extension of Construction Permit C-9029 (7/14/86)
TRRC - Pit Permit P005453 (7/17/86)
Section 311 - SARA Title III (including Waddell Booster) (9/20/88)
Chevron Pipe Line Safety Review Letter (9/30/88)
TRRC - Pit Permit Review (10 Pits) (5/9/91)
TACB - Operating Permit R-9029 (5/23/91)
TRRC - Pit Permit Cancellation (#'s P006532 & P006534) (7/12/91)
TRRC - Pit Permit Cancellation (Tubbsville Station) (7/12/91)
TRRC - Pit Permit Cancellation (#'s P006531, P006535, P006537 & P006538)
(7/18/91)
TRRC - Notice of Cancellation of Discharge Permit No.00158 (S. Hills & Waddell)
(R-8)(1/31/92)
TRRC - Annual Minor Permit (5/15/92)
EPA - NPDES - NOI approved (Stormwater) Wolfcamp P/L (3/30/93)
TNRCC - St. Exemption 25099: Ponderosa Compr. Sta. (6/30/94)
TNRCC - St. Exemption 25486: 1478HP Waukesha at King Mt. Comp. Sta. (7/12/94)
TNRCC - Nov: Air Inspection (9/13/94)
THC - Archaeological Sensitivity Review (Medium-High Site Potential) (09/20/94)
USEPA - Stormwater Gen. Permit Notification No.TXR10M664, King Mt.Comp. Sta. P/L
(11/30/94)
TNRCC - St. Ex. No. 27077 -West Tap Compressor Station, (12/12/94)
TNRCC - St. Ex. No. 26847 - Pakenham GCI, 810 HP Caterpillar 351 (01/23/95)
TNRCC - St. Ex. No. 28347, 3 Waukesha Engines, East Tap Compressor Station
(03/10/95)
TNRCC - Amendment Withdrawal, Permit No. 9029 (03/20/95)
TNRCC - St. Ex. No. 28347: relocation of glycol dehydrator, East Tap Compressor
Station (05/26/95)
USEPA - Stormwater Gen. Permit Notif. No. TXR10Q150, Meridian P/L 1995 Upgrade
(08/09/95)
TNRCC - St. Ex. No. 30085, West Tap Compressor Station Modification (08/22/95)
THC - Archaeological Clearance for PSL Gathering System (08/25/95)
THC - Archaeological Permit No.1627 - Gomez Line Replacement
(Issue Date: 11/04/95)
THC - Archaeological Approval Antiquities Permit 1627 (1/25/96)
THC - Archaeological Clearance for Gaylord/Wolfcamp Pipeline (1/30/96)
TNRCC - St. Ex. Regis. No. 31604-West Tap Compessor Sta. (2//12//96)
SAUNDERS PLANT
Construction Permit Exemption (1/16/78)
Permit Exemption (modification) (6/4/80)
Letter to NMEID (verbal approval received) (10/15/81)
Approval for 1000 HP rental compressor-temporary (6/19/84)
Approval of First and Second Quarter Reports-SO2 limit of 15 tons/day (10/16/84)
Public Notice - Discharge Plans for NMOCD (5/17/85)
Determination of grandfathered emission limit (8/8/85)
Permit #315-M-1 for standby engine (8/19/85)
Notice from NMEID of RCRA reclassification to non-handler of hazardous waste
(9/6/85)
NMOCD Discharge Plan Approval (10/15/85)
Grandfathered Emission Rate for 315-M-1 confirmed by NMEID (11/15/85)
NMOCD Cancellation of Permit 315-M-1 (7/24/86 and 8/25/86)
Saunders/Vada Texas Operations - H-9 for Rule 36 Approval (7/23/87)
Section 311 - SARA Title III (9/21/88)
NMOCD Discharge Plan Renewal Approval (10/29/90) (Expires 7/31/95)
NMED - 190 HP Emergency Diesel Fire Engine - Exemption (3/20/92)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) NMR10A084 (5/21/93)
NMTRD - Approval for Semiannual Payment (2/4/94)
NMOCA - Archaeological Sensitivity Survey (3/20/95)
SHERMAN PLANT
Permit Exemption X-2676 (6/5/81)
Permit Exemption X-2676 (7/11/83)
Permit Exemption (Regional Office) (11/8/85)
TRRC - Pit Permit P007615 (6/27/86)
TRRC - Pit Permit P007616 (6/27/86)
TRRC - Pit Permit P007617 (6/27/86)
TRRC - Pit Permit P007618 (6/27/86)
TRRC - Amended Pit Permit P007615 (4/29/87)
TRRC - Cancellation of Pit Permit P007616 (6/16/87)
TRRC - Cancellation of Pit Permit P007617 (6/16/87)
TRRC - Cancellation of Pit Permit P007618 (7/21/88)
Chevron P/L Response to Review (8/12/88)
Section 311 - SARA Title III (9/19/88)
TRRC - Minor Permit HT-0795 (10/2/92) N
TACB - St. Ex. #80 (flare) (12/3/92) S
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00C289 (12/31/92) N
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00C290 (12/31/92) S
THC - Archaeological Clearance for Chevron/Cullar P/L (11/10/94)
THC - Archaeological Clearance for J. H. Lawrence P/L Upgrade (12/15/94)
THC - Archaeological Clearance for Eagle Oil & Gas Tie-In Upgrade (12/15/94)
THC - Archaeological Clearance Shell Refuge/Hagerman P/L (12/15/94)
THC - Archaeological Clearance Simpson Lease L.P. Connect (01/11/95)
THC - Archaeological Clearance Hunt-McCullough #2 L.P. Tie-In (01/11/95)
THC - Archaeological Clearance M&B North L.P. P/L (01/11/95)
THC - ArchaeologicalClearance Hunt Stephens L.P. Tie-In (01/11/95)
THC - Cultural/Arch.Sensitivity Review (Low Site Potential) (09/20/94)
USEPA - Stormwater Gen. Permit Notification, No. TXR10N440, Beulah Hazlip P/L
Tie-In (01/17/95)
USEPA - Stormwater Gen. Permit Notification, No. TXR10N441,J. H. Lawrence
Upgrade (01/17/95)
USEPA - Stormwater Gen. Permit Notification, No. TXR10N442, Shell-Hagerman P/L
(01/17/95)
USEPA - Stormwater Gen. Permit Notification, No. TXR10N443, M/b N Low Pressure
P/L (01/17/95)
TRRC - Notice of Proposed Cancellation (30 Days) Plant Effluent Disposal Permit
(R-8) (01/30/95)
USCOE -Permit I.D. No. 05776: P/L installation in Hagerman Natl. Wildlife
Refuge, (02/02/95)
USEPA - Stormwater Gen. Permit Notification, No. TXR10P103, Chevron Estes Gas
P/L (06/06/95)
TONKAWA PLANT
Construction Permit Exemption (memo JEM to LHH) (4/13/77)
Permit Exemption X-2897 (12/28/81)
Permit Exemption X-3204 (12/30/81)
Permit Exemption X-3399 (7/19/83)
Section 311 - SARA Title III (10/7/88)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00C293 (12/31/92)
THC - Archaeological Sensitivity Review (Medium-High Site Potential) (09/20/94)
VADA PLANT
Construction Permit #203 (9/6/78)
Permit Denial #203 (6/3/81)
Permit Exemption #203 (Modification) (8/10/81)
Permit #203 (Modification) (9/3/81)
Permit #203 Amendment #1 (12/28/81)
Permit Exemption #203 (Modification) (1/28/82)
Permit Exemption #203 (Modification) (3/16/82)
Approval 4/4/84 for 137 h.p. Firewater Engine
No Permit Required for Heaters H-18 and H-19 (9/13/84)
No Permit Required for Engines 7A-R1 and 7A-R2 (3/15/85)
Inspection Report for NM Permits #203, 203-M-1 and PSD-NM-156-M-1 (4/17/85)
Public Notice - Discharge Plans for NMOCD (5/17/85)
Notice by NMEID of RCRA reclassification to non-handler of hazardous waste
(9/6/85)
NMOCD Discharge Plan Approval (10/18/85)
Section 311 - SARA Title III (9/21/88)
NMOCD Discharge Plan Renewal Approval (10/29/90) (Expires 7/31/95).
NMED - Exemption as a Public Water Supply (8/5/93)
NMOCA - Archaeological Sensitivity Review (3/20/95)
WADDELL PLANT (BOOSTER STATION)
Special Order Permitting Gulf Oil Corp. to Store LPG (10/5/55)
Waste Water Disposal Permit Exemption (2/1/65)
Permit Exemption X-4338 (4/21/83)
TRRC - Pit Permit P005456 (4/25/86)
TRRC - Pit Permit P006749A (4/25/86)
TRRC - Pit Permit P006749B (4/25/86)
TRRC - Pit Permit P006749C (4/25/86)
TRRC - Pit Permit P007794 (4/25/86)
TRRC - Notice of Cancellation of Discharge Permit (R-8), Waddell Plant No. 156,
(01/31/92)
TNRCC - Air Quality Permit No. 26949, (05/08/95)
WORSHAM PLANT
Permit Exemption C-3029 (3/3/75)
Permit Exemption C-8120 (1/23/80)
Permit Exemption X-4551 (6/27/83)
THC - Cultural Sensitivity Review (Medium-High Site Potential) (09/20/94)
TAC - Antiquities/Archaeology Permit No. 1574, Approval Date: (07/18/95)
(Expiration Date: 01/18/96)
THC - Archaeological Clearance for Antiquities Permit #1574 (07/27/95)
YSCLOSKEY PLANT
LDEQ - Variance Waste Gas VOC Emissions (12/18/92)
LDEQ - Permit 2500-00014-00 (4/29/93)
LDEQ - Permit 2500-00014-00: Administrative Change to Remove Condition 3.b.
(11/10/93)
NODCOE - No Permit Required for Bridge Replacement (1/14/94)
LDNR - No Coastal use Permit Required (1/20/94)
PREVENTION OF SIGNIFICANT DETERIORATION (PSD) PERMITS
(FEDERAL)
SAND HILLS PLANT
PSD Permit #PSD-TX-464 (TACB) (8/5/82). Modified Permit No. PSD-TX-464 M-1
(5/18/84)
PSD Permit #PSD-TX-464M-1 (6/20/84)
PSD Permit PSD-TX-464M-1-Extension granted by US EPA (2/26/85)
Public Notice for Extension of Permit #PSD-TX-464M-1 (3/12/85)
Extension of PSD-TX-464M-1 (7/25/86 and 7/28/86)
Extension of PSD-TX-464M-1 (Follows letter of 7/25/86) (9/19/86)
VADA PLANT
Draft PSD Permit #PSD-NM-156 (EPA) (3/23/79)
PSD Permit #PSD-NM-156 (EPA) (5/8/79)
PSD Permit #PSD-NM-156 M-1 (Modification) (EPA) (12/23/81)
TERMINAL PERMITS TO RECORDS
ABILENE LPG TRANSPORT
Section 311 - SARA Title III (9/23/88)
TWC - Notice of Storage Tank Registration 27306/0052006 (9/19/90)
TWC - Notice of Storage Tank Registration 27306/0052006 (10/5/90)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00F771 (9/16/94)
TNRCC - Notice of Receipt for Application 03734 (9/23/94)
TNRCC - Notice of Completeness for Application 03734 (10/3/94)
THC - Archaeological Sensitivity Review (Medium-High Site Potential) (09/20/94)
TNRCC - Draft of Proposed Waste Disposal Permit, No. 03734 (01/06/95)(Truck
Washing)
TNRCC - Wastewater Treatment Permit Approval - No. 03734 (03/17/95)(Truck
Washing)
TNRCC - Soils and Effluent Testing Requirements - Waste Disposal Permit No.
03734 (09/21/95)
TNRCC - Notice of Storage Tank Registration, Owner I.D. No. 27306, Facility
No.0052006 (11/08/95)
BRIDGEPORT LPG TRANSPORT
Permit Exemption - TACB: S-18034 (5/13/87) - Injection Facility
Standard Exemption - TACB: 80 (6/9/87) - Emergency Maintenance Flare
Section 311 - SARA Title III (9/21/88)
TWC - Notice of Storage Tank Registration (Aboveground, Diesel) (5/17/90)
TNRCC - Notice of Storage Tank Registration (Aboveground, Diesel) (1/7/94)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00F773 (9/16/94)
THC - Archaeological Sensitivity Review (Medium-High Site Potential) (09/20/94)
TNRCC - Notice of Receipt for Application 03732 (9/23/94)
TNRCC - Notice of Completeness for Application 03732 (10/3/94)
TNRCC - Draft of Proposed Waste Disposal Permit, No. 03732 (01/05/95)(Truck
Washing)
TRRC - Proposed Cancellation (30 Days) Plant Effluent Disposal Permit (R-8)
Ref. 00193, GM&A Gas Prod. Plant, No. 09-0062 (01/30/95)(Placed here
because in Wise County)
TNRCC - Wastewater Disposal Permit Approval, No. 03732, (Issued: 03/17/95)(Truck
Washing)
TNRCC -Testing Requirements for Soils and Effluent - Waste Disposal Permit No.
03732 (09/21/95)
CALVERT CITY TERMINAL
Department of Housing, Building & Construction LPG Permit No. K-30 (1986)
GLADEWATER LPG TRANSPORT
Section 311 - SARA Title III (9/19/88)
TWC - Notice of Storage Tank Registration (Aboveground, Diesel)(5/17/90)
TRRC - HT-0841 Minor Permit (2/1/93)
TRRC - HT-0868 Minor Permit (3/26/93)
THC/DAP - Approval for Hydrostatic Water Discharge (7/20/93)
TRRC - HT-0920: Minor Permit (6/29/93) (30 days)
TRRC - HT-0921: Minor Permit (6/29/93) (30 days)
THC/DAP - Approval for Project (7/22/93)
TNRCC - Notice of Storage Tank Registration (Abovegd., Diesel) (1/7/94)
THC - Approval to Discharge Truck Water (7/5/94)
TRRC - Minor Permit 1060 (7/14/94) (30 days)
USEPA - NPDES No. TX0112712 Administratively Complete Application (8/29/94)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00F774 (9/16/94)
THC - Archaeological Sensitivity Review (Medium-High Site Potential) (09/20/94)
TNRCC - Notice of Receipt for application 03733 (9/23/94)
TNRCC - Notice of Completeness for Application 03733 (10/3/94)
TNRCC - Draft of Proposed Waste Disposal System Permit, No. 03733 (01/05/95)
(Truck Washing)
TNRCC - Notice of Permit Approval - Waste Disposal Permit No. 03733 (03/17/95)
(Truck Washing)
TNRCC -Testing Requirements for Soils and Effluent - Waste Disposal Permit No.
03733 (09/21/95)
GREENVILLE TERMINAL
Permit to operate emergency propane flare. Permit No. 2800-00017 (10/23/84)
(Expires 11/01/87)
Approval for Extension of Dredge and Fill Permit LMKOD-FE 1522-14 (Miss. R.)-78
to October 17, 1997. (1/16/87)
Permit to Operate No. 2800-00017 (11/10/87)
Section 311 - SARA Title III (9/22/88)
MDEQ - Hydrostatic Water Discharge Approval (7/20/90)
MDEQ - NPDES Permit No. MS0046116 (10/9/90) (Expires 10/8/95)
MDEQ - Notice of Permit to Operate No. 2800-00017 (11/2/90)
MDEQ - Permit to operate air emissions equipment - Permit No. 2800-00017
(5/28/91) (Expires 6/1/94)
Coverage of Permit to Operate No. 2800-00017 for source 000 (7/29/91)
MDEQ - Stormwater General NPDES MSR000852 (3/24/93) (Expires 7/13/97)
MDEQ - Draft Water Permit MS0046116 (5/11/93)
MDEQ - Operating Permit Continuance Approval (Permit No. 2800-00017) Effective
Date: 03/06/95, (Permit Expiration Date: 06/01/94, prior to receipt of
Renewal Application)
HATTIESBURG TERMINAL
Saltwater Injection Well-Docket No. 15-71; Order No. 14-71 (1/20/71)
Brine Storage Pit Permit 75-1-ES (1/23/75)8
Brine Storage Pit Permit 75-1-S (1/23/75)
Order #133-80 - Storage Well #5 (Permit to Drill) (4/16/80)
Permit #664 - Storage Well #5 (4/16/80) (Amended 8/15/80)
Brine Storage Pit Permit 82-1-ES (2/22/82)
Brine Storage Pit Renewal Permit 84-15-ES (2/6/84)
Definition of Non-Class II Injection Wells for Propane Storage Wells-US EPA
(2/8/85)
Brine Storage Pit Permit - MOGB - 94-37-T (1/24/94)
MDNR-Exemption from Existing Air Regulations (2/13/87)
MDNR-Permit to Discharge Hydrostatic Test Water (2/13/87)
Surface Water Permit MS-SW00623 (5/26/87)
Surface Water Permit MS-SW00624 (5/26/87)
MOGB - Order #378-87-Wells #1 & #2, and Wells #3 & #4
(Authority to Operate Each Well Set as Single Unit) (7/16/87)
MOGB - Variance to Rule 64 (10/30/87)
USEPA - UIC - MSI0661 - UIC Permit Application deemed completed (9/14/88)
Section 311 - SARA Title III (9/20/88)
MDNR - Water Use Permit MS-GW-01021 (5/8/90-Expires 5/8/2000)
MDNR - Water Use Permit
MS-GW-01022 (5/8/90-Expires 5/8/2000)
MDNR - Water Use Permit MS-GW-01023
(5/8/90-Expires 5/8/2000)
MDEQ - Air Pmt. 0800-00003 (12/6/91)
MOGB - Renewal - Application for Earthen Pit (Shell No. 1 Pit) - Dated 12/10/91
MOGB - Pmt. to Drill Number 13-92-571; Order 18-92 (1/15/92)
MOGB - Well No. 2 - Permit to Drill #12-92-571; 17-92 (1/15/92)
MOGB - Well No. 6 - Permit to Drill #14-92-571 (1/19/92)
MDEQ - Water Use Pmt (MS-GW-14417 (9/22/92)
MOGB - Brine Pit Approval (1/8/93)
MDEQ - Construction Pmt. 0800-00003 (3/9/93)
MDEQ - Construction Pmt. 0800-00031 (3/9/93)
MOGB - Renewal - Applicaton for Earthen Pit (Shell No. 1 Pit) - Dated 2/6/94
MONT BELVIEU TERMINAL
SWD Permit for SWD-1 (TWDB) (5/3/68)
SWD Permit for SWD-1 (TRRC) (5/17/68)
Approval to Inject SWD-1 (TRRC) (9/1/70)
Permit WDW-85 for SWD-1 (TWQB) (10/27/70)
Temporary Permit WDW-85 for SWD-1 (TWQB) (11/6/72)
SWD Permit to Inject SWD-1 (TRRC) (6/21/73)
Permit to Drill SWD-2 (TRRC) (2/19/74)
Approval to Inject SWD-2 (TWQB) (2/27/74)
Permit to Inject SWD-2 (TRRC) (4/23/74)
Approval to Drill and Inject SWD-3 (City of Mt. Belvieu) (4/4/74)
Permit to Drill SWD-3 (TRRC) (4/5/74)
Application Denial, SWD-3 (TWQB) (4/8/74)
Permit to Inject SWD-3 (TRRC) (4/26/74)
Permit to Drill SWD-3A (TRRC) (6/6/74)
Application Denial, SWD-3A (TWQB) (6/11/74)
Temporary Permit to Inject SWD-3A (TRRC) (6/19/74)
Permit to Inject SWD-3A (TRRC) (9/7/76)
Permit to Drill SWD-4 (TRRC) (5/10/76)
Application Denial, SWD-4 (TWQB) (6/25/76)
Permit to Inject SWD-4 (TRRC) (7/1/76)
Application Denial, SWD-5 (TWQB) (1/11/77)
Permit to Drill SWD-5 (TRRC) (1/21/77)
Permit to Inject SWD-5 (TRRC) (1/27/77)
TRRC - Pit Permit No. P006942 (7/31/86)
TRRC - Pit Permit No. P006943 (7/31/86)
Pit Permit No. P006943 - Amended (8/5/86)
TACB - Std.Exp. 106 Texas Eastman Propane Project (7/21/88)
TACB - Std.Exp. 106 Texas Eastman Propylene Project (7/21/88)
TACB - C-18929 Public Notice (7/28/88)
Section 311 - SARA Title III (9/21/88)
USEPA - TXG340278 received 9/28/88) (12/13/89 Found out this is Determined to be
the Permit)
TRRC - Permit to Re-Enter - D-1 (10/18/88)
TACB - C-18929 - P/P Unloading Rack (10/28/88)
TACB - Std.Exp. 106 Gaso.Pip. & Meter Run (11/8/88)
Permit 07503 - SWD #1 (12/13/88)
TACB C-18929 - Permit Revision (12/14/88)
TACB-Std.Exp. 106 - Texas Eastman Propane (1/27/89)
TRRC-H-9 Approval-Rule 36 (2/6/89)
TACB - Std. Exp. #106 - Texas Eastman Propylene - Relief Valves (2/23/89)
TACB - Std. Exp. #106 (Feedstock Matrix Modification) (9/21/89)
TRRC - Permit No. 07503 Amended for SWD #1 (3/7/90)
TACB - Std. Ex. #6-two Pipelines (5/17/90)
TRRC - Permit to Drill, Deepen, Plugback or Re-enter (Well 29) #376024(8/17/90)
TRRC - Facility Effluent Discharge Permit No. UHS-002 (10/3/90)
TRRC - Minor Permit No. MP-A90-0041 (11/7/90)
TACB - Permit No. R-18929 - Propane/Propylene Unloading Rack (2/12/91)
TRRC - Permit UHS-002 (1/28/92)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) TXR00E567 (12/31/92) (Terminal)
TNRCC - Air Permit 22088: Bulk Handling and Storage Facility (6/6/94)
TRRC - Pit Permit No. P010693 (7/14/94)
THC - Archaeological Sensitivity Review (Low Site Potential) (09/20/94)
PORT EVERGLADES TERMINAL
Letter of Adequacy for Facility Operations Manual by US Coast Guard (9/18/84)
Construction License AC-07623-Broward County Environmental Quality Control Board
(10/2/84)
Operating License AO-11768-Broward County Environmental Quality Control Board
(4/15/85)
Section 311 - SARA Title III (9/22/88)
BCEQCB - Air:AO-14175R (6/21/90) (Expires 3/15/91)
BCEQCB - Operating License AO-30005R-Broward County Environmental Quality
Control Board (2/3/91) (Expires 3/15/92)
USEPA - Stormwater Gen. Pmt. Notif. FLR00A629 (12/31/92)
BCONRP - Air Permit License AO-39903R (6/1/92) (Expires 3/1/93)
BCONRP - Air Permit License AO-58547R (3/10/93) (Expires 3/1/94)
BCONRP - Air Permit License, No. AO-80164R, Operation of Smokeless Flare, Issue
Date: 05/16/95, Expiration Date: 03/01/96
TAMPA TERMINAL
EPC - Hillsborough County - No Permit Required for Heater (7/26/88)
Section 311 - SARA Title III (9/23/88)
USEPA - Stormwater Gen. Pmt. Notif. (NOI) FLR00A630 (12/31/92)
WARRENGAS TERMINAL
Permit Exemption 131 (9/12/72)
Permit Exemption C-2052 (2/28/74)
Construction Permit C-5414 (8/1/77)
Operating Permit R-5414 (7/21/83)
Endorsement to Permit No. 02048 (3/8/84)
Revocation of Texas Water Commission Permit No. 02048, outfall 002 (7/24/84)
Revocation of US EPA, NPDES No. TX0031321, Outfall 002 (8/31/84)
Transferred Permit No. 02048 from Gulf to Chevron (2/24/86)
USCG Interim Certificate of Adequacy Letter for Oily Waste Reception Facilities
(4/08/86)
EPA Transfer Permit TX0031321 to Warren Petroleum Company, a Division of Chevron
U.S.A. Inc. (5/22/86)
Application for Water Discharge Permit No. 02048 deemed complete by the TWC
(1/15/87)
TWC - Discharge Permit No. 02048 (8/25/87)
EPA - Notification of General Permit TXG340278 (8/27/87)
TACB - Permit Amendment R-5414 (6/2/88)
TWC - Discharge Permit No.02048 (8/25/88)
Section 311 - SARA Title III (9/21/88)
EPA - NPDES Application No. TX0063339 (9/22/88)
Section 311 - SARA Title III (11/17/88) - Revised
TWC - Annual Compliance Inspection - TRRC Jurisdiction (12/6/88)
TACB - Std.Exp. 111 - Pipeline Pump #42 (1/2/89)
TACB - Permit Amendment R-5414 (4/10/89)
TACB Accounting Receipt #903028 (4/24/89)
TACB - Standard Exemption No. 106(Propane/Propylene terminal) (12/4/89)
TACB - Permit No. C-19585-Firewater Engines 1,2,3,4) (2/20/90).
TACB - Permit Amendment R-5414 (6/28/90)
TACB - Permit Correction R-5414 (7/27/90)
TRRC - Hydrocarbon Storage Facility Effluent Discharge Permit No. HS-001
(11/13/90)
TRRC - Hydrocarbon Storage Facility Effluent Discharge Permit No. HS-001A
(1/3/91)
TRRC - Hydrocarbon Storage Facility Effluent Discharge Permit No. HS-001A -
Permit Changes (1/3/91)
TACB - Standard Exemption No. 86 (Gasoline Storage Tank #123) (12/18/90)
TWC - Cancellation of Permit No. 02048 (1/16/91)
TWC - Notice of Storage Tank Registration 27303/0057883 (4/18/91)
TRRC - Minor Permit No. MP-A90-0050 (Removal of Used Oil/Solvent Mix to Disposal
Systems, Inc.) (11/7/90)
TWC - Acknowledgment of Receipt of Tank Registration Form and Exemption Notice
(6/13/91)
TACB - Permit Amendment R-5414 - Change of pressure tanks service (3/16/92)
TRRC - Discharge Permit HS-001A (1/3/91)
TACB - Permit No. C-19585; Fire Engines 1,2,3,4 (1/7/92)
TRRC - Discharge Permit HS-001A (4/9/92)
TRRC - Amended Discharge Permit HS-001B (7/27/92)
TACB - Permit Amendment 5414 (11/2/92)
TACB - Std. Ex. 83 Tank Chemicals (1/11/93)
USCG-OPA-90 (3/18/93)
USCG - Initial Review OPA-90 Plan (3/18/93)
USEPA - Notification of Plan Receipt: OPA-90 (9/9/93)
PHA - Construction - Dock 3 (7/28/94)
THC - Archaeological Sensitivity Review (Low Site Potential) (09/20/94)
DOT - U.S. Coast Guard - Rpt. Request - No. 16465 - Notice of Oil Pollution
Incident, 09/13/94, Port New Orleans - Case Nos. MC 94019183/NRC260387
(10/15/94)
TRRC - Amendment to Permit HS-001B (min. pH limit) (11/10/94)
TNRCC - Permit Renewal No. 5414 (03/09/95)
TNRCC - Std. Permit 31709-Installation of VRU (2/5/96)
PLANTS/TERMINALS
INACTIVE FILES
(STATE PERMITS)
GRUVER PLANT
Permit Exemption X-4349 (9/23/83)
MIAMI PLANT
Permit Exemption X-14409 (10/24/83)
Permit Exemption X-14827 (10/25/83)
TAX PERMITS
<TABLE>
<CAPTION>
FILE TERM/
NO. OTHER PARTY LOCATION EXPIRATION
- ---- ----------- -------- ----------
<S> <C> <C> <C>
5438 LIQUEFIED PETROLEUM GAS BOARD STATE OF ALABAMA 09/30/1996
(CLASS "B" LPG PERMIT)
5400 DEPT. OF REVENUE, USE TAX SECTION STATE OF ALABAMA PERMANENT
(SALES TAX REGISTRATION)
5401 LIQUEFIED PETROLEUM GAS BOARD STATE OF ARKANSAS 12/31/1996
(LPG LICENSE - CLASS 5)
5473 CALIFORNIA STATE BOARD OF EQUALIZATION STATE OF CALIFORNIA 12/31/1996
FUEL TAXES DIVISION-MIC: 30
(IFTA LICENSE)
5452 DEPT. OF REVENUE, APPLICATION ACCEPTANCE SECTION STATE OF FLORIDA 01/01/1997
(ALTERNATIVE FUEL USE PERMIT)
5409 TAMPA PORT AUTHORITY STATE OF FLORIDA 09/30/1996
(TAMPA PORT BULK AUTH.)
5407 DEPT. OF INSURANCE AND TREASURER, DIVISION OF LP GAS STATE OF FLORIDA 08/31/1997
(LPG LICENSE - PORT EVERGLADES)
5408 DEPT. OF INSURANCE AND TREASURER, DIVISION OF LP GAS STATE OF FLORIDA 08/31/1997
(LPG LICENSE - TAMPA)
5403 CITY OF TAMPA, FIRE PREVENTION DIVISION STATE OF FLORIDA 09/30/1996
(LPG PERMIT - CITY OF TAMPA)
5406 BROWARD COUNTY REVENUE COLLECTOR STATE OF FLORIDA 09/30/1996
(OCCUPATIONAL LICENSE - BROWARD COUNTY)
5405 MELVIN B. SMITH, TAX COLLECTOR STATE OF FLORIDA 09/30/1996
(OCCUPATIONAL LICENSE - HILLSBOROUGH COUNTY)
5402 STATE OF FLORIDA, DEPT. OF REVENUE STATE OF FLORIDA PERMANENT
(SALES TAX REGISTRATION)
5441 DEPT. OF INSURANCE AND TREASURER, DIVISION OF LP GAS STATE OF FLORIDA PERMANENT
(USER-DEALER'S LICENSE, SPECIAL FUELS)
5404 CITY OF TAMPA, OCCUPATIONAL LICENSE TAX DIVISION STATE OF FLORIDA 09/30/1996
(WHOLESALE MERCH. LICENSE-CITY OF TAMPA)
5410 DEPT. OF REVENUE, SALES AND USE TAX DIVISION STATE OF GEORGIA PERMANENT
(SALES TAX REGISTRATION)
5459 DEPT. OF REVENUE, RETAILER'S OCCUPATION TAX STATE OF ILLINOIS 11/30/1999
SALES/USE TAX PERMIT
5411 DEPT. OF REVENUE, SPECIAL TAX DIVISION STATE OF INDIANA PERMANENT
(ALTERNATIVE FUEL PERMIT)
5414 OFFICE OF THE STATE FIRE MARSHAL, STATE OF KENTUCKY 12/31/1996
HAZARDOUS MATERIALS SECTION
(LPG LICENSE)
5413 CITY OF ST. MATTHEWS STATE OF KENTUCKY 03/31/1997
(OCCUPATIONAL LICENSE-CITY OF MATTHEWS)
5412 COMMONWEALTH OF KENTUCKY, DEPT. OF REVENUE STATE OF KENTUCKY PERMANENT
(SALES/USE TAX PERMIT)
5440 DEPT. OF REVENUE AND TAXATION STATE OF LOUISIANA PERMANENT
(CUSA OFFSHORE SALES TAX REGISTRATION)
5416 LOUISIANA DEPT. OF PUBLIC SAFETY AND CORRECTIONS STATE OF LOUISIANA 02/28/1997
LIQUEFIED PETROLEUM GAS COMMISSION
(LP GAS PERMIT - CLASS 7)
5446 LOUISIANA DEPT. OF NATURAL RESOURCES STATE OF LOUISIANA 01/01/1997
OFFICE OF CONSERVATION
(ORGANIZATION REPORTS)
5471 PLAQUEMINES PARISH GOVERNMENT, SALES TAX DIVISION STATE OF LOUISIANA ---
(PLAQUEMINES PARISH SALES TAX REGISTRATION -
VGS PIPE LINE CO.)
5472 LOUISIANA DEPT. OF REVENUE AND TAXATION STATE OF LOUISIANA ---
CENTRAL REGISTRATION SECTION
(SALES TAX REGISTRATION - VGS PIPE LINE CO.)
5415 DEPT. OF REVENUE AND TAXATION STATE OF LOUISIANA PERMANENT
(SALES/USE TAX REGISTRATION)
5455 JACK A. STEPHENS, SHERIFF AND TAX COLLECTOR STATE OF LOUISIANA 01/01/1997
(ST. BERNARD PARISH OCCUPATIONAL LICENSE)
5456 SALES TAX DEPARTMENT STATE OF LOUISIANA PERMANENT
(ST. BERNARD PARISH SCHOOL BOARD & POLICE JURY
SALES TAX)
5419 ACADIA PARISH SCHOOL BOARD, SALES AND USE TAX DEPT. STATE OF LOUISIANA PERMANENT
(TAX REGISTRATION - ACADIA PARISH)
5439 DEPT. OF REVENUE AND TAXATION STATE OF LOUISIANA PERMANENT
(USERS LICENSE OF SPECIAL FUELS)
5422 MISSISSIPPI STATE TAX COMMISSION STATE OF MISSISSIPPI 05/31/1997
(LPG MOTOR FUEL PERMIT/REGISTRATION) & 12/31/1996
5448 UNDERGROUND INJECTION CONTROL STATE OF MISSISSIPPI 01/01/1997
(ORGANIZATION REPORT)
5425 CITY OF FLOWOOD STATE OF MISSISSIPPI 09/30/1996
(PRIVILEGE TAX-CITY OF FLOWOOD)
5423 CITY OF GREENVILLE (CITY TAX COLLECTOR) STATE OF MISSISSIPPI 03/01/1997
(PRIVILEGE TAX - CITY OF GREENVILLE)
5424 FORREST COUNTY TAX COLLECTOR STATE OF MISSISSIPPI 10/01/1996
(PRIVILEGE TAX - FORREST COUNTY)
5417 STATE TAX COMMISSION STATE OF MISSISSIPPI PERMANENT
(SALES TAX PERMIT)
5420 STATE TAX COMMISSION STATE OF MISSISSIPPI PERMANENT
(USE TAX REGISTRATION)
5454 NEW MEXICO MOTOR TRANSPORTATION DIVISION STATE OF NEW MEXICO 01/01/1997
HEAVY VEHICLE REGISTRATION SECTION
(FLAT FEE LPG PERMIT)
5458 NEW MEXICO TAXATION AND REVENUE DEPARTMENT STATE OF NEW MEXICO 01/01/1997
HEAVY VEHICLE REGISTRATION SECTION
(FUEL PERMIT AND TAX CARD)
5426 TAXATION AND REVENUE DEPARTMENT STATE OF NEW MEXICO PERMANENT
(GROSS RECEIPTS REGISTRATION)
5427 NEW MEXICO REGULATION AND LICENSING DEPARTMENT STATE OF NEW MEXICO 01/31/1997
CONSTRUCTION INDUSTRIES DIVISION
(LPG CLASS 8 PERMIT)
5466 NEW MEXICO TAXATION AND REVENUE DEPARTMENT STATE OF NEW MEXICO 01/01/1998
SPECIAL TAX PROGRAMS AND SERVICES
(SPECIAL BULK STORAGE USER PERMIT)
5428 NEW YORK STATE TAX DEPT., SALES TAX REGISTRATION UNIT STATE OF NEW YORK PERMANENT
(SALES/USE TAX PERMIT)
5432 OFFICE OF THE LIQUEFIED PETROLEUM GAS ADMINISTRATION STATE OF OKLAHOMA 08/31/1996
(LPG PERMIT - CLASS 2/PERMIT INSPECTION FEE)
5433 OKLAHOMA TAX COMMISSION, MOTOR VEHICLE DIVISION STATE OF OKLAHOMA 06/30/1997
DISTRIBUTOR SECTION (DIESEL NON-HIGHWAY PERMIT)
5435 OKLAHOMA TAX COMMISSION, MOTOR FUEL DIVISION STATE OF OKLAHOMA PERMANENT
(DISTRIB. LICENSE - GASOLINE, DIESEL, BLENDING)
5431 TAX COMMISSION, SALES AND USE TAX DIVISION STATE OF OKLAHOMA PERMANENT
(MFRS. EXEMPTION CERTIFICATE)
5434 OKLAHOMA TAX COMMISSION, MOTOR VEHICLE DIVISION STATE OF OKLAHOMA 04/1997
(MOTOR FUEL DISTR. INDEMNITY)
5436 OKLAHOMA TAX COMMISSION STATE OF OKLAHOMA 02/15/1999
(SALES TAX PERMIT)
5465 OKLAHOMA TAX COMMISSION, DISTRIBUTOR SECTION STATE OF OKLAHOMA PERMANENT
(SPECIAL FUEL DEALER LICENSE)
5468 MINISTRY OF TRANSPORTATION, CARRIER LICENSING OFFICE ONTARIO, CANADA PERMANENT
(OPERATING LICENSE)
5437 DEPT. OF COMMERCE AND INSURANCE STATE OF TENNESSEE 12/31/1996
DIVISION OF FIRE PREVENTION
(DEALER'S LICENSE - CLASS 4)
5453 COMPTROLLER OF PUBLIC ACCOUNTS STATE OF TEXAS VARIOUS
(PREPAID LIQUEFIED GAS PERMIT)
5457 RAILROAD COMMISSION OF TEXAS, LP-GAS DIVISION STATE OF TEXAS 05/31/1997
(RAILROAD COMMISSION QUALIFYING EXAM RENEWAL)
</TABLE>
TEXAS RAILROAD COMMISSION PERMITS
FILE TRRC
NO. PLANT PERMIT NO. LOCATION
- ---- ----- ------- --------
2169 Monument Plant No. 118 01375 Monument, New Mexico
1912 Tonkawa Plant No. 132 02614 Hemphill County, Texas
2051 Canadian Plant No. 143 01713 Canadian, Hemphill Co. Texas
0392 Saunders Plant No. 146 01312 Lovington, New Mexico
3505 Monahans Plant No. 162 00132 Wichett, Ward County, Texas
0074 Sand Hills Plant No. 193 00126 Crane, Crane County, Texas
2059 No. Sherman Plant No. 234 03349 Sherman, Grayson Co., Texas
1966 Puckett Plant No. 237 04149 Pecos County, Texas
TEXAS RAILROAD COMMISSION T-4 PERMITS
PIPELINES OPERATED BY CHEVRON PIPE LINE COMPANY
PIPELINE PERMIT NO.
- -------- ----------
Shell Chem. (Warren B) 204
Arco Jct. (Warren C) 204
GATX (C Lateral) 204
Utility 204
South Route (Warren D & Baytown C) 204
Cedar Bayou Dock 204
North Route (Warren E) 204
Phibro 204
6" Phibro 204
Fannett to Pt. Acres (Frio) 4005
Tenneco 204
Arco #1 204
Dow Products 204
6" Mag. 204
6" Oxychem (Placid) 204
6" Arco Black Lake 204
6"/8" Deer Park to Texas City 1032
8"/6" Warren-Koch add to 204
4" Texas Petro-Chem 204
4" Unocal 204
8" Natural Gas Pipeline Warrengas Terminal 2838
8" Cedar Bayou to Warren LPG 1446
CPL 20' LPG Import 1895
8" CPL-Owned Products 1446
SCHEDULE 2A
NGBU CONTRACTS
[ List to be attached at Closing and will include all NGBU contracts
related to the Contributed NGBU Business, including but not limited to those
identifited opn Schedule 5.12 to the Combination Agreement (but excluding any
contracts related to the Excluded NGBU Assets).]
SCHEDULE 2B
NGBU CONTRIBUTED ASSETS
ALL NGBU ASSETS INCLUDING BUT NOT LIMITED TO THE FOLLOWING
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSET DESCRIPTION EXCLUDED ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NGBU Owned Motor Vehicles All NGBU owned cars.
- ------------------------------------------------------------------------------------------------------------------------------
Birmingham AL Sales Office Birmingham Sales office lease and all Excludes non-transferable leased or rented office
(Lease) NGBU owned office equipment. equipment.
- ------------------------------------------------------------------------------------------------------------------------------
NGBU Owned PCs, Printers Including CITC PCs in exclusive NGBU Excludes computer equipment associated with employees
and Peripherals service. continuing with Chevron.
- ------------------------------------------------------------------------------------------------------------------------------
NGBU File Servers NGBU owned exclusive use file servers. Excludes joint use equipment.
- ------------------------------------------------------------------------------------------------------------------------------
Excludes office furniture to be utilized by the Chevron
Midstream Group (office, conference, filing, library).
NGBU Owned Furniture in NGBU owned office furniture in the Excludes built in/common area office furniture and
the Houston Office Chevron Tower office space. office furniture owned by other Chevron operating companies.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 2D
LICENSES AND PERMITS
Software licenses (see attached).
Software Included in the NEWCO Deal
* NGBU SOFTWARE LICENSES *
<TABLE>
<CAPTION>
License
Transfer Manufacturer Software Version License Comments
Status Name Title Number Used
<S> <C> <C> <C> <C> <C>
IBM OS/2 Warp Connect 3 100 This license is owned by NGBU
Sybase Structure Query Report Writer 3.1 120 This license is owned by NGBU
NO Easel Easel Run Time 2 120 This license is owned by NGBU
Microsoft MS DOS 6.22 75 This license is owned by NGBU
Microsoft Windows 3.11 120 This license is owned by NGBU
FTP Software PC/TCP for DOS/Windows 3.1 40 This license is owned by NGBU
IBM DOS LAN Services Requester 4 40 This license is owned by NGBU
Microsoft Word, Excel, PowerPoint 4.2 100 This license is owned by NGBU
Microsoft Access 2 60 This license is owned by NGBU
Microsoft Schedule + 1 80 This license is owned by NGBU
Microsoft Mail Remote 3.2 80 This license is owned by NGBU
Netscape Com Corp Netscape Navigator 2 120 NGBU obtaining a license for Netscape
IBM Warp Server - Advanced 3 6 This license is owned by NGBU
GasLink * In-house developed 2 1 Price Waterhouse owns marketing rights to
GasLink through Sept. 96
</TABLE>
*NOTE: With respect to GASLINK, NewCo must negotiate an agreement with Price
Waterhouse to continue using the application. NEWCO must agree not to market the
GasLink Software until existing contract expires (9/96).
* WARREN SOFTWARE LICENSES *
<TABLE>
<CAPTION>
License
Transfer Manufacturer Software Version License Comments
Status Name Title Number Used
<S> <C> <C> <C> <C> <C>
IBM OS/2 Warp Connect 3 12 Used by Gas Control and Tech Support.
DBMS 7.x 32 Warren owns a 32 concurrent user copy
Seagate EMS Palindrome Storage Manager 4.x 14 Pricing based on media, server and storage
capacity. Used to backup Netware.
Palindrome Backup Director 4.x 1 Pricing based on server type. Used to Backup NT
environment.
NerveCenter Event Manager 2.4 1 Annual license fee is 18% of package price.
Ashwin Batch Scheduler x 1 License fee provides for scheduling up to 10
machines.
MicroGrafix ABC Flowchart 4 13
Traveling Software Faxworks Pro 2 120 FaxWorks is used as a OS/2 Fax Server service.
Netware server 4.1 20
Netware Support Encyclopedia x 1 CDRom based support tool.
On Command Software SofTrack 24 Maintenance fee is 12% of total software value.
Hewlett Packard HP UX 9.x, 10.x 4 Includes maintenance for PA RISC hardware,
OpenView software & Unix tools.
Hp Openview PA/Risc 4.x 1 Software maintenance is included with the Unix
OS maintenance.
HP NetServer Assistant 1.x 14 Comes free with Servers.
NO Peregrine Software Serverview/Stationview 2.6 22 Software maintenance is 20% of software purchase
price.
NO Microsoft MS DOS 6.22 910
CITC Maint.Contract Windows 95 upgrade 500
Windows 3.11 120
NT Server 3.51 8
NT Workstation 3.51 1
MS Word, Excel, Powerpoint 600
Project 4 22
Access 2 60
Schedule + 1 750
Mail Remote 3.2 80
Mail PostOffice 3.2,3.5 19
Visual C++ for Windows 3.x 2
Visual Basic for Windows 3.x 2
Visual Basic Professional 4.x 1
Nantucket, Inc. Clipper Pro S87' 2
FTP Software PC/TCP for DOS/Windows 3.1 4
Netscape Com Corp Netscape Navigator 2 31
IBM Warp Server - Advanced 3 1
AT&T InstaCom Pro 1.6g 2 Multi-User Lan license
Delrina WinFax Pro Client 3.x,4.x 72
WinFax Pro for Networks client 4.1 40
WinFax Pro for Networks Server 4.1 2 Software maintenance is fixed amount.
Hilgraeve HyperAccess/5 DOS 2.4 48
HyperAccess/5 Windows 2.x,3.x 46
HyperAccess/5 OS/2 1.x 1
DataCode, Inc. WorldWatch 1.83a 15 Leased from DataCode. $595 for Feed Fee, and 15
clients @ $50/month.
BindView 2.x 14
Traveling Software Laplink Pro 3.x 24
AutoDesk, Inc. AutoCad Windows 12.x 11
DTN DTS x 1
ProComm Procomm+ for Windows x 11 Used by Tech Suport only.
TechSmith SnagIt for Windows 3.4 50 Warren purchased 2x25 user licenses.
IBM/Lotus Lotus 1-2-3 2.x,3.x,4.x 40 Warren has sunsetted Lotus. However, we still
own 116 licenses.
Network General Sniffer 4.45 1 CITC owns this device - Token-Ring only ..
includes a hardware component.
BARR, Inc. BARR Output Spooling 1.6g 1 Proprietary hardware/software package ..
includes a hardware component.
xxx ACT Contact Manager x 24 Used primarily by D&I Sales.
MicroDesign SCSI Express 2.2 8 Fixed rate software maintenance.
International
Reporter 2.x 1
</TABLE>
Warren Systems: Selected Mainframe Programs that will be operated and supported
for up to 24 months.
Mainframe applications section of agreement:
NGC will take ownership.
AFIS MOAT/MAGIC
GAIS Online (Gas Plants)
GAIS Batch
GAS (old gas plant system)
WFS (Warren Financial System, legacy)
WFI (Warren Financial System, legacy)
A/R Inquiry
FREIGHT
BILLING
Mass Weights
PIMS
Accrual/Reversal
Exchange
Booking Master
Purchase Settlement
Tax Accounting
Inventory Valuation (LIFO)
Laid in Cost
Debit Memo
Accounts Receivable
Joint Interest Billing
Joint Venture Accounting
Location Transaction Reporting
1301 Reporting
Right of Way
MSRS
Brown Book Reporting
Marketing Adhoc Reporting
Warren Systems: Selected Mainframe Program Support Tools
GROUP MVS Software: GROUP VM Systems:
RACF ISPF V3 for VM
TSO/E ISPF/PDF V3 for VM
Abend-Aid/MVS Nomad Suite of Products
CA-1 for MVS Office Vission/VM
CA-7 for MVS VM:Schedule
CA7TOOL VM:Operator
CA90S VM:Tape
INFOPAC
RACF Administrator
RMDS
SYNCSORT
TSO/MON SPFI and Online
VTAM Printer Support (VPS)
WSF2
3270-PC Host File Transfer
Supersession
TCP/IP for MVS
TCP/IP for VM
ADF
DB2
Nomad
Focus
Warren Systems: Selected PC/Mini Application programs that will be supported up
to 12 months.
PC application section of agreement:
NGC will take ownership of these..
AFIS Interfaces
(SAP R/3) Desktop software
AFIS Reporting, in-house developed
ORIN, in-house developed
LOCKBOX BANK , in-house developed
Liquids Marketing Contracts, in-house developed
WAVES, in-house
Manley data capture
Custmenu
Integrator
OPIS
MARS
Record Services Date Control
Engineering Contracts
Terminal Management systems
SIDES
Petroex/Mapco
Pipeline Tickets
CSPR (Client Server Processing)
VIOLA
Barge Reporting System
Distribution
Chevron Corporate Systems: Below are applications that Chevron would support
and/or operate via Service Agreement for up to 24 months.
RMS, Chevron Products Railcar Management System
CPS, Chevron Products System
SAP R/3, Chevron Corporate Financial System/ @ Warren
(NEWCO license required)
IPS, Chevron invoice processing system
EDI translator, Chevron corporate translator
TESS, Chevron time entry support system
CASS, Corporate data feed to Warren
* Note: license is not transferable without contacting the vendor for written
approval. This will usually involve some kind of fee.
Chevron, Warren and NGBU IT Systems:
NOTE: Subject to the restrictions contained elsewhere, all additional software
and hardware necessary to operate Warren Petroleum and NGBU contributed
businesses are included in the merger assets.
SCHEDULE 2EX
EXCLUDED NGBU ASSETS
The assets excluded from the merger are as follows:
Chevron Production Company assets (including but not limited to): Pipeline
imbalances as of the effective date of the merger. Grant-in-aid
pipeline capacity (except Fishhook).
All Chevron communication equipment/licenses and Chevron Information
Technology Company owned assets (including but not limited to):
Cellular phones.
Wide area network (including circuits, routers and Internet
addresses).
Chevron PBX hardware and voice mail systems (except as specifically
included).
All Chevron operating company jointly used telephone stations and
telephone trunks.
Chevron's "CTN" voice network service.
Chevron's global e-mail service directory.
"LAN" hubs in Chevron offices.
All PC's, printers, software and peripherals associated with all NGBU
and related CITC employees retained by Chevron.
All CITC or Chevron Corporation owned software.
All joint Chevron operating company use file servers (e-mail, PREMAS).
All non-transferable software and licenses.
NGBU satellite dish and associated equipment.
CREMCO owned assets:
Houston office building space
San Ramon office building space
All office equipment in CREMCO leased office space (except for specifically
included furniture).
All leased or rented office equipment.
Employees' personal property.
Accounts Receivable and Payable.
All Cash
Futures, swaps or other financial positions tied to physical gas purchase,
sale, transport or storage contracts that are excluded.
Future use of Master Agreements for Financial Transactions.
Any financial positions such as swaps that have been put in place by NGBU
on behalf of Chevron Corporation's price management strategy.
See lists of excluded NGBU contracts for specifically excluded contracts.
SCHEDULE 5
RETAINED LITIGATION
WARREN
A. Litigation:
1. Aaron, Roland, et ux. v. A&I Company, et al. (Warren)
2. Bentley, Hubert, et al. v. Shell, et al. (Warren)
3. Busygin, Catherine, et al. v. Warren, et al.
4. Collins, Todd, et al., v. Binks, et al. (Warren)
5. Duplessis Anthony James, et al. v. Warren, Inc., et al.
6. Hampton-Higgins, Brenda v. Chevron U.S.A. Inc. (Warren)
7. Hernandez, Jesse v. A-C Products, et al. (Warren)
8. Kulish, Ernest, et al. v. Chevron U.S.A. Inc. (Warren)
9. Marion Hurinenko Living Revocable Trust, et al. v. Chevron U.S.A.
Inc. (Warren)
10. Maritime Asbestos Cases v. Warren
11. Osorio-Leal, John v. Amerada Hess, et al. (Warren)
12. Pace, Paul J., et al. v. A&I Co., et al. (Warren)
13. Shaw, Earl Eugene et ux. v. A&I Co., et al. (Warren)
B. Disputes/Potential Litigation:
Four pending U.S. Equal Employment Opportunity Commission
Discrimination Charges:
1. Charge No. 270951412 (New Orleans District);
age/applicant
2. Charge No. 27095747 (New Orleans District);
race/employee
3. Charge No. 390960294 (Albuquerque District);
age/employee
4. Charge No. 311960531 (Oklahoma City District);
race/employee
SCHEDULE 6 TO CONTRIBUTION AGREEMENT
WEST TEXAS LPG PIPELINE ASSETS
WEST TEXAS PIPELINE ASSETS:
I) Pipeline: There is approximately 1,950 miles of various sizes of pipe ranging
from 2" to 14", 0.156 Gr B to 0.365 x46 w.t., and 1957 - 1992 vintage. The
lateral lines are up to 8" and the trunk portion is all 10" and 14".
II) Booster Stations: There are 18 pump stations, 24 pump and electric motor
units and associated electrical switchgear and control equipment. Total
horsepower is 28,200. Pumps are all horizontal centrifugal type.
III) Coahoma Facility: There are 2 - 1,000 horsepower pump units with
centrifugal pumps and electric motors. It is an 80 acre site with three storage
wells(nominal 300,000 Bbls), two brine pits (nominal 350,000 Bbls capacity), and
all associated piping and electrical equipment.
** Of the 19 booster stations (including Coahoma), 13 are on
separately identifiable property.
IV) Meter Stations: There are approximately 62 receipt, custody transfer meter
stations of which approximately 54 are at plant sites. There are another 18
check meter locations with a total of 34 meter runs. Each facility generally
includes turbine meter runs, instrumentation, and equipment buildings.
V) Miscellaneous:
* Sending and receiving swab trap facilities (22 on the trunk line
alone).
* Portable meter provers
* Spare parts inventory
THE FOLLOWING ASSETS ARE NOT INCLUDED IN THE CONVEYED WEST TEXAS PIPELINE ASSETS
AND SHALL BE RETAINED BY CPL OR ITS AFFILIATE:
I) Communications Equipment:
All microwave towers, radio equipment, transmitters, and associated
supporting hardware.
II) SCADA:
All Remote Telemetering Units (RTUs), Programmable Logic Controllers
(PLCs), computers, and any associated supporting hardware which is used
for the control and monitoring of pipeline stations and facilities.
This includes any and all hardware, computers, equipment, and/or
facilities located in CPL's Customer Service Center.
III) Cathodic Protection:
All rectifiers along the pipeline right-of-way which are servicing
multiple pipeline systems (except 49% of those identifiable rectifier
systems which are solely for the use and protection of only the West
Texas LPG Pipeline System and serve no other asset of CPL).
IV) Vehicles:
All Chevron Pipe Line Co. vehicles including heavy equipment and
associated trucks and trailers.
V) Property:
Any location where a West Texas LPG Pipeline System asset is located on
property which also includes pipeline systems, stations, office
buildings, warehouses, or other facilities used in connection with
other CPL pipelines other than the West Texas Pipeline. Chevron shall
also retain all Right-of-Ways.
EXHIBIT 4
ASSUMPTION AGREEMENT
Between
MIDSTREAM COMBINATION CORP.
and
CHEVRON U.S.A. INC.
----------------
Dated as of
_______ __, 1996
----------------
- --------------------------------------------------------------------------------
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT, is entered into as of ________ __, 1996 as
set forth herein, by and between MIDSTREAM COMBINATION CORP., a corporation
incorporated under the laws of Delaware ("Midstream"), and CHEVRON U.S.A. INC.,
a corporation incorporated under the laws of Pennsylvania ("Chevron U.S.A.").
WHEREAS, on August 24, 1994, Chevron Capital U.S.A. Inc. ("Chevron
Capital") issued and sold $350,000,000 in aggregate principal amount of its
7.45% Guaranteed Notes Due 2004 (the "Notes"); and
WHEREAS, Chevron Capital loaned the net proceeds it received from the
sale of the Notes to Chevron U.S.A., and in connection with such loan, Chevron
U.S.A. has executed and delivered to Chevron Capital a promissory note in the
aggregate principal amount of $347,715,375, dated August 25, 1994 and bearing
interest at the rate of 7.95% (the "CUSA Note") pursuant to the terms of that
certain Loan Agreement dated August 25, 1994 between Chevron U.S.A. and Chevron
Capital; and
WHEREAS, pursuant to that certain Combination Agreement and Plan of
Merger dated May __, 1996 (the "Combination Agreement") among NGC Corporation,
Midstream and Chevron U.S.A., Midstream has received a contribution of certain
businesses from Chevron U.S.A. and has agreed in connection therewith to assume
$________ in aggregate principal amount of Chevron U.S.A.'s obligations under
the CUSA Note, which amount relates to the contributed businesses and Chevron
U.S.A. has agreed to accept such assumption in exchange for those contributed
businesses upon the terms hereof and of the Combination Agreement;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, Midstream and Chevron U.S.A. hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in this Section 1.01
shall, for all purposes of this Agreement have the meanings herein specified,
the following definitions to be equally applicable to both the singular and
plural forms of any of the terms herein defined:
AGREEMENT
The term "Agreement" shall mean this Assumption Agreement between
Midstream and Chevron U.S.A., as such agreement is originally executed or as it
may from time to time be supplemented, modified or amended as provided herein.
-1-
ASSUMED PRINCIPAL
The term "Assumed Principal" shall have the meaning ascribed to such
term in Section 3.01 of this Agreement.
BANKING DAY
The term "Banking Day" shall mean in respect of all payments, notices
or actions to be made, given or taken under this Agreement, any day other than a
Saturday, a Sunday or any other day on which commercial banks in New York or
California are authorized or required to be closed.
CHEVRON CAPITAL
The term "Chevron Capital" shall mean Chevron Capital U.S.A. Inc., a
Delaware corporation or its successors or assigns.
CHEVRON U.S.A.
The term "Chevron U.S.A." shall mean Chevron U.S.A. Inc., a
Pennsylvania corporation, until a successor entity shall have become such
pursuant to the terms of this Agreement, and thereafter "Chevron U.S.A." shall
mean such successor entity.
COMBINATION AGREEMENT
The term "Combination Agreement" means that certain Combination
Agreement and Plan of Merger dated May __, 1996 among Chevron U.S.A., NGC
Corporation and Midstream, as such agreement is originally executed or as it may
be subsequently supplemented, modified or amended in accordance with the
provisions thereof
CUSA NOTE
The term "CUSA Note" shall mean that certain promissory note dated
August 25, 1994 in the aggregate principal amount of $347,715,375 issued by
Chevron U.S.A. to Chevron Capital U.S.A.
Inc.
EVENT OF DEFAULT
The term "Event of Default" shall mean any event specified as such in
Section 5.01 hereof. An Event of Default shall "exist" if an Event of Default
shall have occurred and be continuing.
INTEREST PAYMENT DATES
The term "Interest Payment Dates" shall mean August 14 and February 14
of each calendar year, commencing August 14, 1996.
MIDSTREAM
The term "Midstream" shall mean Midstream Combination Corp., a Delaware
corporation, until a successor entity shall have become such pursuant to the
applicable provisions of this Agreement, and thereafter "Midstream" shall mean
such successor entity.
-2-
POST-DEFAULT RATE
The term "Post-Default Rate" shall mean in respect of the obligations
of Midstream in respect of the CUSA Note or interest thereon not paid when due
(whether at stated maturity, by acceleration or otherwise), a rate per annum for
each day during the period (the "Default Period") commencing on the due date of
the CUSA Note or the interest thereon until the CUSA Note or interest shall be
paid in full equal to 9.95% per annum.
ARTICLE II
REPRESENTATIONS
SECTION 2.01. REPRESENTATIONS OF MIDSTREAM. Midstream makes the
following representations to Chevron U.S.A.:
(a) Midstream has been duly incorporated and is validly
existing as a corporation under the laws of Delaware, has full legal
right, power and authority to enter into this Agreement and to carry
out and consummate all transactions contemplated by this Agreement, and
by proper corporate action has duly authorized the execution, delivery
and performance of this Agreement.
(b) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or constitute on the part of Midstream a breach of or default
under its Certificate of Incorporation, its ByLaws, or any indenture or
other material agreement or instrument to which Midstream is a party or
by which it or its properties are bound, or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over Midstream-
or any of its activities or properties.
(c) This Agreement has been duly authorized, executed and
delivered by Midstream and this Agreement is the valid and binding
obligation of Midstream.
SECTION 2.02. REPRESENTATIONS OF CHEVRON U.S.A. Chevron U.S.A. makes
the following representations to Midstream:
(a) Chevron U.S.A. has been duly incorporated and is validly
existing as a corporation under the laws of Pennsylvania, has full
legal right, power and authority to enter into this Agreement and to
carry out and consummate all transactions contemplated by this
Agreement, and by proper corporate action has duly authorized the
execution, delivery and performance of this Agreement.
(b) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or constitute on the part of Chevron U.S.A. a breach of or default
under its Certificate of Incorporation, its By-Laws, or any indenture
or other material agreement or instrument to which Chevron U.S.A. is a
party or by which it or its properties are bound, or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over Chevron U.S.A. or any of its activities or
properties.
(c) This Agreement has been duly authorized, executed and
delivered by Chevron U.S.A. and this Agreement is the valid and binding
obligation of Chevron U.S.A.
-3-
ARTICLE III
ASSUMPTION; PAYMENTS
SECTION 3.01. ASSUMPTION. Midstream hereby agrees to assume $_______ of
Chevron U.S.A.'s obligations with respect to the payment of principal due under
the CUSA Note (the "Assumed Principal") on the terms and subject to the
conditions set forth in this Agreement.
Chevron U.S.A. and Midstream hereby acknowledge and agree that the
Assumed Principal does not constitute all of the outstanding principal payable
under the CUSA Note and that with respect to the remaining principal outstanding
under the CUSA Note (the "Unassumed Principal") after subtracting from the
original principal amount thereof the Assumed Principal, Chevron U.S.A. remains
the only obligor. Midstream shall not be liable for or obligated with respect to
the payment of the Unassumed Principal nor with respect to any interest payable
with respect thereto. Chevron U.S.A. shall remain liable for all interest on the
CUSA Note which is accrued and unpaid as of the date of this Agreement.
Midstream shall only be responsible for interest accruing on the Assumed
Principal after the date hereof. The parties further acknowledge that in no
event shall a default by Chevron U.S.A. under the CUSA Note constitute an Event
of Default hereunder or in any way affect Midstream's rights or obligations with
respect to payment of the Assumed Principal or the interest thereon.
SECTION 3.02. REPAYMENT OF ASSUMED PRINCIPAL OF CUSA NOTE. Upon demand
of Chevron Capital made on or after [INSERT DATE 2 YEARS AFTER CLOSING DATE]
Midstream hereby promises to pay the full amount of the Assumed Principal to
Chevron Capital and if no demand is made, Midstream hereby promises to pay the
full Assumed Principal to Chevron Capital on August 14, 2004.
SECTION 3.03. INTEREST ON THE ASSUMED PRINCIPAL OF THE CUSA NOTE.
Midstream hereby promises to pay to Chevron Capital interest on the unpaid
Assumed Principal amount (or, if Midstream prepays a portion of the Assumed
Principal pursuant to Section 3.04 hereof, the remaining unpaid portion thereof)
for the period commencing on the date of this Agreement and continuing until the
entire outstanding Assumed Principal has been paid by Midstream hereunder at the
rate of 7.95% per annum, PROVIDED THAT interest shall be payable at the
Post-Default Rate on the Assumed Principal or (to the extent permitted by law)
any interest thereon which shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof and continuing until the same is paid in full. Interest payable
hereunder by Midstream on the Assumed Principal shall be paid in arrears on the
Interest Payment Dates and shall be computed on the basis of a 360-day year of
twelve 30-day months.
SECTION 3.04. PAYMENTS. All payments of principal and interest payable
by Midstream with respect to the Assumed Principal shall be made in lawful money
of the United States of America, in immediately available funds, to Chevron
Capital. at , Account No. _______________________________, or such other place
as Chevron Capital shall designate in writing to Midstream at its address
_____________ specified in Section 6.03 hereof not less than 5 Banking Days
prior to the date on which any such payment shall become due.
SECTION 3.05. PREPAYMENTS. Midstream shall have the right, at any time
on or after [WILL INSERT SPECIFIC DATE 2 YEARS AFTER CLOSING] or from time to
time thereafter, to prepay the Assumed Principal in whole or in part, PROVIDED
THAT: (a) Midstream shall give Chevron Capital not less than 10 days' prior
notice of each prepayment in accordance with the provisions of Section 6.03
hereof, specifying the principal amount to be prepaid and the date of prepayment
(which date shall be a Banking Day) and (b) interest accrued on the principal
amount prepaid shall be paid on the prepayment date.
-4-
SECTION 3.06. ENFORCEMENT BY CHEVRON CAPITAL. The parties hereby agree
that Chevron Capital shall have the right to specifically enforce this
Agreement. Midstream shall reimburse Chevron Capital immediately on demand for
all costs and expenses, including without limitation reasonable attorneys' fees
and costs, incurred in connection with the enforcement of this Agreement. This
Agreement may not be modified or terminated without the prior written consent of
Chevron Capital. No failure or delay by Chevron Capital to exercise any right or
remedy hereunder shall be deemed a waiver of such right or remedy.
ARTICLE IV
COVENANTS
SECTION 4.01. NOTICE OF EVENT OF DEFAULT. As soon as practicable after
any Event of Default occurs and unless such Event of Default has been waived or
cured, Midstream shall notify Chevron U.S.A. and Chevron Capital in writing as
to the details thereof and the action which Midstream is taking or proposes to
take with respect thereto.
SECTION 4.02. ASSIGNMENT. Midstream may not assign its rights and
obligations hereunder without the prior written consent of Chevron U.S.A.,
except (i) by merger, combination or reorganization, including, without
limitation, the transactions contemplated by the Combination Agreement. Any
attempted assignment by Midstream in contravention of this covenant shall be
void. Chevron U.S.A. may assign its rights and obligations hereunder to Chevron
Capital. without the consent of Midstream.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. The term "Event of Default" whenever
used herein shall mean any one of the following events:
(a) Default by Midstream in the payment of any amount of principal of
or any installment of interest on the Assumed Principal when such principal or
interest becomes due and payable; or
(b) Any representation made by Midstream in Section 2.01 of this
Agreement shall prove to have been materially false when made; or
(c) Failure on the part of Midstream duly to observe or perform in any
material respect any other of the covenants or agreements on its part contained
in this Agreement and continuance of such default for a period of 30 days after
there has been given, in accordance with the provisions of Section 6.03 of this
Agreement, to Midstream written notice by Chevron U.S.A. which notice shall
specify such failure and state that it is a "Notice of Default" hereunder; or
(d) The entry by a court having jurisdiction in the premises of a
decree or order for relief in respect of Midstream in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Midstream or for substantially all of its
property, or ordering the winding up or liquidation of its affairs, if such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
-5-
(e) The commencement by Midstream of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or Midstream's consent to the entry of an order for relief in any
involuntary case under any such law, or its consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of Midstream or for substantially all of its
property or the making by Midstream of any general assignment for the benefit of
creditors, or its failure generally to pay its debts as they become due.
SECTION 5.02. REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Chevron U.S.A., by notice in writing to Midstream, may
declare the outstanding principal amount owed by Midstream with respect to the
CUSA Note together with any interest accrued thereon to be due and payable
immediately, and upon such declaration such principal amount and interest shall
be immediately due and payable.
SECTION 5.03. SUITS FOR ENFORCEMENT. In case an Event of Default shall
occur and be continuing, Chevron U.S.A. may proceed to protect and enforce its
rights by suit in equity, action at law and/or other appropriate proceeding,
whether for the specific performance of any covenant contained in this Agreement
or may proceed to enforce the payment of amounts owed by Midstream hereunder
with respect to the CUSA Note or to enforce any other or its legal or equitable
rights.
SECTION 5.04. REMEDIES NOT WAIVED. No delay or failure on the part of
Chevron U.S.A. to exercise any right shall operate as a waiver of such right or
otherwise prejudice Chevron U.S.A.'s rights, powers and remedies.
ARTICLE VII
MISCELLANEOUS
SECTION 6.01. BANKING DAYS. Except as otherwise provided in this
Agreement, if any date on which a payment is to be made, notice is to be given
or other action taken hereunder is not a Banking Day, then such payment, notice
or other action shall be made, given or taken on the next succeeding Banking
Day.
SECTION 6.02. LIMITATION OF RIGHTS TO PARTIES. Nothing in this
Agreement expressed or implied is intended or shall be construed to give to any
person other than Midstream and Chevron U.S.A. and Chevron Capital any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
covenant, condition or provision herein; and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of
Midstream and Chevron U.S.A. and Chevron Capital.
SECTION 6.03. NOTICES. All notices and other communications to
Midstream, Chevron U.S.A. or Chevron Capital may be electronically communicated
or hand delivered or sent by courier, addressed to any party hereto as provided
in this Section 6.03.
ALL COMMUNICATIONS INTENDED FOR MIDSTREAM SHALL BE SENT TO:
Midstream Combination Corp.
c/o NGC Corporation
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Attention: General Counsel
Fax Number: (713) 507-6808
-6-
ALL COMMUNICATIONS INTENDED FOR CHEVRON U.S.A. SHALL BE SENT TO:
Chevron U.S.A. Inc.
575 Market Street
San Francisco, CA 94105
Attention: Treasurer
Fax Number: (415) 894-2246
ALL COMMUNICATIONS INTENDED FOR CHEVRON CAPITAL SHALL BE SENT TO:
Chevron Capital U.S.A. Inc.
575 Market Street
San Francisco, CA 94105
Attention: Treasurer
Fax Number: (415) 894-2246
or at any other address of which any of the foregoing shall have notified the
other in any manner prescribed in this Section 6.03.
For all purposes of this Agreement, a notice or communication
will be deemed effective:
(a) if delivered by hand or sent by courier, on the day it is
delivered unless (i) that day is not a day upon which commercial banks
are open for the transaction of business in the city specified (a
"Local Banking Day") in the address for notice provided by the
recipient or (ii) if delivered after the close of business on a Local
Banking Day, then on the next succeeding Local Banking Day, or
(b) if sent by facsimile transmission, on the date
transmitted, provided that oral or written confirmation of receipt is
obtained by the sender, unless the date of transmission and
confirmation is not a Local Banking Day, in which case, on the next
succeeding Local Banking Day.
SECTION 6.04. NO WAIVERS. No failure or delay by either party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
SECTION 6.05. AMENDMENTS. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each of the parties.
SECTION 6.06. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of Midstream and Chevron U.S.A. and their
respective permitted successors and assigns.
SECTION 6.07. PARTIAL INVALIDITY. The invalidity or unenforceability of
any one or more phrases, sentences, clauses or sections in this Agreement shall
not affect the validity or enforceability of the remaining portions of this
Agreement or any part thereof.
SECTION 6.08. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of California (excluding
the choice of law principles thereof).
-7-
SECTION 6.09. COSTS AND EXPENSES OF ENFORCEMENT. Midstream agrees to
pay all costs, expenses and fees, including all reasonable attorneys' fees,
which are incurred by Chevron U.S.A. in enforcing or attempting to enforce this
Agreement following the occurrence and during the continuance of an Event of
Default, whether the same shall be enforced by suit or otherwise.
SECTION 6.10. EXECUTION IN SEVERAL COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall for all purposes be
deemed to be an original; but such counterparts shall together constitute but
one and the same instrument.
SECTION 6.11. ARTICLE AND SECTION HEADINGS. The headings or titles of
the several Articles and Sections hereof and any table of contents appended to
copies hereof shall be solely for convenience of reference and shall not affect
the meaning, construction or effect of this Agreement.
IN WITNESS WHEREOF, MIDSTREAM COMBINATION CORP. AND CHEVRON U.S.A. INC.
have caused this Assumption Agreement to be duly entered into as of the date
first above written.
MIDSTREAM COMBINATION CORP.
By
CHEVRON U.S.A. INC.
By
-8-
EXHIBIT 9
REAL PROPERTY DISCLOSURES
[To be provided at Closing and to include all disclosures
included in Exhibit 16.14.]
EXHIBIT 10(A)
[INSERT NAME OF GATHERING SYSTEM]
PIPELINE DEED AND ASSIGNMENT
THE STATE OF ss.
ss. Know All Persons By These Presents:
COUNTY OF ss.
That CHEVRON U.S.A. INC., a Pennsylvania corporation, formerly known as Gulf Oil
Corporation, successor in interest to Warren Petroleum Corporation, now known as
Warren Petroleum Company (formerly a Division of Gulf Oil Corporation and
presently a Division of Chevron U.S.A. Inc.) (hereinafter called "Assignor"),
with offices at 1301 McKinney, 22nd Floor, Houston, Texas 77010, for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration to Assignor in hand paid by MIDSTREAM COMBINATION CORP.,
a Delaware corporation (hereinafter called "Assignee"), with offices at 13430
Northwest Freeway, Suite 1200, Houston, Texas 77040, the receipt and sufficiency
of which are acknowledged by Assignee's acceptance hereof, has GRANTED,
BARGAINED, SOLD, CONVEYED, ASSIGNED, AND TRANSFERRED and by these presents does
GRANT, BARGAIN, SELL, CONVEY, ASSIGN, AND TRANSFER unto Assignee and Assignee's
successors and assigns all that certain property constituting the servitudes,
rights-of-way, permits, and easements, as amended to date, set forth and more
particularly described in Exhibit "A" attached hereto and made a part hereof for
all purposes (hereinafter called the "Subject Interests").
This conveyance is made subject to any titles and rights that may be asserted by
the public, governmental or other entities with regard (a) to tidelands, or
lands comprising the shores or beds of navigable or perennial rivers and
streams, lakes, bays, gulfs or oceans, (b) to lands beyond the line of the
harbor or bulkhead lines as established or changed by any governmental entity,
(c) to filled-in lands, or artificial islands, (d) to statutory water rights,
including riparian rights, or (e) to the area extending from the line of mean
low tide to the line of vegetation, or the rights of access to that area or
easement along and across that area.
This conveyance is further made subject to (a) any and all exceptions,
encumbrances, and other matters affecting the Subject Interests of whatsoever
nature that are listed and described in Schedule 5.18 to that certain
Combination Agreement and Plan of Merger dated May 22, 1996, by and among NGC
Corporation, Assignor, and Assignee (the "Agreement"), (b) any and all zoning
laws, regulations, and ordinances of municipal or other governmental
authorities, if any, relating to the Subject Interests, but only to the extent
that they are still in effect, and (c) any and all of the covenants, terms, and
conditions set forth in the Subject Interests.
Assignee hereby accepts the foregoing assignment of the Subject Interests and
assumes and agrees to pay and perform the duties, obligations, covenants, and
conditions of Assignor thereunder which arise after the effective date hereof.
Except as specified in the Agreement, the Subject Interests are conveyed by
Assignor to Assignee, and Assignee does agree that the Subject Interests are
conveyed to Assignee, AS IS, WHERE IS and WITH ALL FAULTS, and that "ASSIGNOR"
MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING
THOSE IMPLIED BY THE TERMS "GRANT," "BARGAIN," "SELL," "CONVEY," "ASSIGN," OR
"TRANSFER" OR THOSE IMPLIED BY ANY OTHER TERM HEREIN), OR ARISING BY OPERATION
OF LAW WITH RESPECT TO THE TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, OR
MARKETABILITY OF THE "SUBJECT INTERESTS" INCLUDING, WITHOUT LIMITATION, (A) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS
WARRANTY OF HABITABILITY, (C) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (D) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO ANY
MODELS OR SPECIFICATIONS, (E) ANY RIGHTS OF "ASSIGNEE" UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, [(F) ANY WARRANTIES IN SECTION
5.023 OF THE TEXAS PROPERTY CODE,] AND [(F)] [(G)] ANY CLAIM BY "ASSIGNEE" FOR
DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH RESPECT TO SUCH
"SUBJECT INTERESTS," IT BEING THE EXPRESS INTENTION OF "ASSIGNOR" AND "ASSIGNEE"
THAT THE "SUBJECT INTERESTS" BE CONVEYED TO, AND ACCEPTED BY, "ASSIGNEE" IN THE
"SUBJECT INTERESTS' " PRESENT CONDITION AND STATE OF REPAIR UNLESS OTHERWISE
SPECIFIED IN THE "AGREEMENT."
Taxes for the current calendar year have been prorated as of the date hereof,
and Assignee does hereby assume and agree to pay any and all ad valorem taxes
and special assessments pertaining to the Subject Interests for the calendar
year 1996 and subsequent years, there having been a proper proration of ad
valorem taxes for the current calendar year between Assignor and Assignee, and
Assignee does further assume and agree to pay any and all ad valorem taxes
relating to a subsequent change in the usage or ownership of the Subject
Interests, whether by reason of this assignment or hereafter.
EXECUTED on __________, 1996, by Assignor, and on __________, 1996, by Assignee,
but to be effective __________, 1996.
ASSIGNOR:
CHEVRON U.S.A. INC.
By: ____________________
Name:
Title:
<PAGE>
ASSIGNEE:
MIDSTREAM COMBINATION CORP.
By: ____________________
Name:
Title:
THE STATE OF _________ ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of CHEVRON U.S.A. INC., a
Pennsylvania corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
THE STATE OF _________ ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of MIDSTREAM COMBINATION CORP., a
Delaware corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
PLEASE RETURN RECORDED DOCUMENT TO:
MIDSTREAM COMBINATION CORP.
ATTN: MR. KENNETH E. RANDOLPH
NGC CORPORATION
13430 NORTHWEST FREEWAY, SUITE 1200
HOUSTON, TEXAS 77040
EXHIBIT "A" TO PIPELINE DEED
OR ASSIGNMENT OF RIGHT OF WAY INTERESTS OR EASEMENTS
(LEGAL DESCRIPTION OF THE SUBJECT INTERESTS)
<PAGE>
[INSERT NAME OF PROPERTY]
DEED
THE STATE OF TEXAS ss.
ss. Know All Persons By These Presents:
COUNTY OF ss.
That CHEVRON U.S.A. INC., a Pennsylvania corporation, formerly known as Gulf Oil
Corporation, successor in interest to Warren Petroleum Corporation, now known as
Warren Petroleum Company (formerly a Division of Gulf Oil Corporation and
presently a Division of Chevron U.S.A. Inc.) (hereinafter called "Grantor"),
with offices at 1301 McKinney, 22nd Floor, Houston, Texas 77010, for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration to Grantor in hand paid by MIDSTREAM COMBINATION CORP., a
Delaware corporation (hereinafter called "Grantee"), with offices at 13430
Northwest Freeway, Suite 1200, Houston, Texas 77040, the receipt and sufficiency
of which are acknowledged by Grantee's acceptance hereof, has GRANTED,
BARGAINED, SOLD, AND CONVEYED, and by these presents does GRANT, BARGAIN, SELL,
AND CONVEY unto Grantee that certain parcel or tract of land, together with any
and all improvements situated thereon (except those improvements, if any, listed
and described on Exhibit "B" attached hereto and made a part hereof for all
purposes), situated in the above-named County and State and described on Exhibit
"A" attached hereto and made a part hereof for all purposes (hereinafter called
the "Property").
This conveyance is made subject to any titles and rights that may be asserted by
the public, governmental or other entities with regard (a) to tidelands, or
lands comprising the shores or beds of navigable or perennial rivers and
streams, lakes, bays, gulfs or oceans, (b) to lands beyond the line of the
harbor or bulkhead lines as established or changed by any governmental entity,
(c) to filled-in lands, or artificial islands, (d) to statutory water rights,
including riparian rights, or (e) to the area extending from the line of mean
low tide to the line of vegetation, or the rights of access to that area or
easement along and across that area.
This conveyance is further made subject to, (a) any and all zoning laws,
regulations, and ordinances of municipal or other governmental authorities, if
any, relating to the Property, but only to the extent that they are still in
effect, (b) any and all easements or other rights reserved (by Grantor unto
Grantor and Grantor's successors and assigns) in, and listed and described on,
Exhibit "B" hereto, and (c) any and all minerals or mineral interests, rights,
or estates reserved by Grantor in Exhibit "B" hereto or reserved or granted
heretofore by prior grantors.
TO HAVE AND TO HOLD the Property, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject only to the matters stated
herein, unto Grantee and Grantee's successors and assigns, forever; and Grantor
warrants title to the Property to the extent, but only to the extent, of the
express warranties set forth in that certain Combination Agreement and Plan of
Merger dated May 22, 1996, by and between NGC Corporation, a Delaware
corporation ("NGC"), Grantor and Grantee (the "Agreement"), which warranties, if
any, are only made to NGC as specified in the Agreement and shall survive the
delivery of this Deed but only for the period of time and as specified in the
Agreement. Except as specified in the Agreement, the Property is conveyed by
Grantor to Grantee, and Grantee does hereby agree that the Property is conveyed
to Grantee, AS IS, WHERE IS and WITH ALL FAULTS, and "GRANTOR" MAKES NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING THOSE
IMPLIED BY THE TERMS "GRANT," "BARGAIN," "SELL," "CONVEY," OR "DEED," OR THOSE
IMPLIED BY ANY OTHER TERM HEREIN), OR ARISING BY OPERATION OF LAW WITH RESPECT
TO THE TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, OR MARKETABILITY OF THE
"PROPERTY" INCLUDING, WITHOUT LIMITATION, (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF HABITABILITY, (C) ANY
IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (D) ANY IMPLIED
OR EXPRESS WARRANTY OF CONFORMITY TO ANY MODELS OR SPECIFICATIONS, (E) ANY
RIGHTS OF "GRANTEE" UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION, [(F) ANY WARRANTIES IN SECTION 5.023 OF THE TEXAS PROPERTY CODE,]
AND [(F)] [(G)] ANY CLAIM BY "GRANTEE" FOR DAMAGES BECAUSE OF DEFECTS, WHETHER
KNOWN OR UNKNOWN, WITH RESPECT TO SUCH "PROPERTY," IT BEING THE EXPRESS
INTENTION OF "GRANTOR" AND "GRANTEE" THAT THE "PROPERTY" BE CONVEYED TO, AND
ACCEPTED BY, "GRANTEE" IN THE "PROPERTY'S" PRESENT CONDITION AND STATE OF REPAIR
UNLESS OTHERWISE SPECIFIED IN THE "AGREEMENT."
Taxes for the current calendar year have been prorated as of the date hereof.
Grantee does hereby assume and agree to pay any and all ad valorem taxes and
special assessments pertaining to the Property for the calendar year 1996 and
subsequent years, there having been a proper proration of ad valorem taxes for
the current calendar year between Grantor and Grantee, and Grantee further
assumes and agrees to pay any and all ad valorem taxes relating to a subsequent
change in the usage or ownership of the Property, whether by reason of this
conveyance or hereafter.
EXECUTED on __________, 1996, by Grantor, and on __________, 1996, by Grantee,
but to be effective __________, 1996.
GRANTOR:
CHEVRON U.S.A. INC.
By: ____________________
Name:
Title:
GRANTEE:
MIDSTREAM COMBINATION CORP.
BY:
NAME:
TITLE:
THE STATE OF _________ ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of CHEVRON U.S.A. INC., a
Pennsylvania corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
THE STATE OF _________ ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of MIDSTREAM COMBINATION CORP., a
Delaware corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
PLEASE RETURN RECORDED DOCUMENT TO:
MIDSTREAM COMBINATION CORP.
ATTN: MR. KENNETH E. RANDOLPH
NGC CORPORATION
13430 NORTHWEST FREEWAY, SUITE 1200
HOUSTON, TEXAS 77040
EXHIBIT "A" TO DEED
(LEGAL DESCRIPTION OF THE PROPERTY)
<PAGE>
EXHIBIT "B" TO DEED
(RESERVATIONS OF EASEMENTS AND OTHER RIGHTS
AND IMPROVEMENTS NOT BEING CONVEYED)
GRANTOR HEREBY RESERVES FOR AND UNTO GRANTOR AND GRANTOR'S SUCCESSORS AND
ASSIGNS, THE FOLLOWING EASEMENTS AND OTHER RIGHTS:
[Insert, where applicable, as per the Agreement: Grantor hereby reserves for and
unto Grantor and Grantor's successors and assigns, all rights, title, and
interest in and to any and all minerals and mineral interests, rights, and
estates of every kind and character including, without limitation, all oil, gas,
sand, gravel, and salt in, on, and under the Property, except for such minerals
and mineral rights as have heretofore been reserved or granted by prior
grantors; provided, however, that (a) Grantor and Grantor's successors and
assigns shall have no right to enter upon the surface of the Property for the
purpose of drilling for, or otherwise removing, said minerals,(b) this
reservation shall not include any salt dome storage caverns located under the
Property, and (c) Grantee and Grantee's successors and assigns shall have the
full rights relating to or regarding the subsurface storage of natural gas and
natural gas liquids on or under the Property.]
THE FOLLOWING IMPROVEMENTS SITUATED ON THE PROPERTY ARE NOT BEING GRANTED,
BARGAINED, SOLD, OR CONVEYED, AND TITLE THERETO SHALL REMAIN IN GRANTOR:
[deedpipe.doc GOES HERE]
EXHIBIT 10 (B)
BILL OF SALE
UNITED STATES OF AMERICA
BY SS. STATE OF TEXAS
SS.
CHEVRON U.S.A. INC. SS. COUNTY OF _______________
SS.
TO SS. STATE OF TEXAS
SS.
MIDSTREAM COMBINATION CORP. SS. COUNTY OF _______________
BE IT KNOWN, that on the _____ day of ___________________, 1996, and on
the ____ day of ______________________, 1996, before us respectively,
_______________________ and _____________________, Notaries Public, respectively
duly commissioned and qualified in and for the State and County or Counties
aforesaid, and in the presence of the undersigned competent witnesses,
PERSONALLY CAME AND APPEARED:
CHEVRON U.S.A. INC., a Pennsylvania corporation, formerly known as Gulf
Oil Corporation, with offices at 1301 McKinney, Houston, Texas 77010,
who is represented by _______________, its duly authorized
_______________ by virtue of Resolutions of its Board of Directors
annexed hereto and made a part hereof, and whose Employer
Identification Number is 25-052-7925,
(hereinafter referred to as "Seller"),
who declares that Seller does by these presents grant, bargain, sell, convey,
transfer, assign, set over, abandon, and deliver with no warranty except those
express warranties set forth in that certain Combination Agreement and Plan of
Merger dated May 22, 1996, (the "Agreement") by and among NGC Corporation,
Seller, and Buyer (as hereinafter named), which express warranties to NGC, if
any, shall survive the delivery of this Bill of Sale but only for the period of
time and as specified in the Agreement, and without any other warranties of any
kind, unto:
MIDSTREAM COMBINATION CORP., a Delaware corporation, with offices at
13430 Northwest Freeway, Suite 1200, Houston, Texas 77040, herein
represented by ___________________, its duly authorized
_________________________ by virtue of Resolutions of its Board of
Directors annexed hereto and made a part hereof, and whose Employer
Identification Number is _________________,
(hereinafter referred to as "Buyer"),
here present, accepting, and purchasing for Buyer and Buyer's successors and
assigns, and acknowledging due delivery and possession thereof, all and singular
the equipment and other personal property described on Exhibit "A" attached
hereto and made a part hereof for all purposes (the "Personal Property"), and
which Personal Property is attached to or located in, on, or under the real
property described on Exhibit "B" hereto (the "Real Property").
Except as specified hereinafter or in the Agreement, the Personal
Property is sold by Seller to Buyer, and Buyer accepts the Personal Property,
and Buyer does hereby agree that, except as specified herein or in the
Agreement, the Personal Property is sold to Buyer, AS IS and WITH ALL FAULTS,
and that "SELLER" MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED (INCLUDING THOSE IMPLIED BY THE TERMS "GRANT," "BARGAIN," "SELL,"
"CONVEY," "TRANSFER," "ASSIGN," "SET OVER," "ABANDON," AND "DELIVER" OR THOSE
IMPLIED BY ANY OTHER TERM HEREIN), OR ARISING BY OPERATION OF LAW WITH RESPECT
TO THE TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, OR MARKETABILITY OF THE
"PERSONAL PROPERTY" INCLUDING, WITHOUT LIMITATION, (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
HABITABILITY, (C) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, (D) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO ANY MODELS OR
SPECIFICATIONS, (E) ANY RIGHTS OF "BUYER" UNDER APPROPRIATE STATUTES TO CLAIM
DIMINUTION OF CONSIDERATION, AND (F) ANY CLAIM BY "BUYER" FOR DAMAGES BECAUSE OF
DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH RESPECT TO SUCH "PERSONAL PROPERTY," IT
BEING THE EXPRESS INTENTION OF "SELLER" AND "BUYER" THAT THE "PERSONAL PROPERTY"
BE CONVEYED TO, AND ACCEPTED BY, "BUYER" IN THE "PERSONAL PROPERTY'S" PRESENT
CONDITION AND STATE UNLESS OTHERWISE SPECIFIED IN THE "AGREEMENT."
To have and to hold the Personal Property unto Buyer and Buyer's
successors and assigns forever; without warranty of any kind except as provided
hereinabove.
This sale is made and accepted for and in consideration of, and in
exchange for, the issuance of shares of Buyer's Common Stock and Series A
Participating Preferred Stock, the assumption by Buyer of certain liabilities as
specified in the Agreementand other good and valuable consideration which Buyer
has well and truly issued, assumed, and paid to Seller, who hereby acknowledges
the receipt thereof and grants full acquittance and discharge therefor. The
value of the stock and/or cash and/or other consideration attributable to the
Personal Property as of the date hereof is $__________.
Taxes for the current calendar year have been prorated as of the date
hereof, and Buyer , by Buyer's acceptance hereof, does hereby assume and agree
to pay any and all ad valorem taxes, special assessments, and any other personal
property taxes pertaining to the Personal Property for the calendar year 1996
and subsequent years, there having been a proper proration of such taxes for the
current calendar year between Seller and Buyer.
Seller and Buyer do hereby waive and dispense with the production of
any and all certificates and/or researches required by law and relieve and
release us, Notaries, and the sureties on our respective notarial bonds from any
and all liability and/or responsibility for the nonproduction thereof.
THUS DONE AND PASSED in my office in Houston, Texas, on
________________, 1996, but to be effective ________________, 1996, all in the
presence of the undersigned competent witnesses, who hereunto sign their names
with Seller and me, Notary.
WITNESSES: SELLER:
CHEVRON U.S.A. INC.
_______________________ BY: ___________________________
NAME:
_______________________ ITS:
-----------------
NOTARY PUBLIC
THUS DONE AND PASSED in my office in ____________, __________, on
_____________________, 1996, but to be effective ________________, 1996, all in
the presence of the undersigned competent witnesses, who hereunto sign their
names with Buyer and me, Notary.
WITNESSES: BUYER:
MIDSTREAM COMBINATION CORP.
_________________________ BY: ___________________________
NAME:
_________________________ ITS:
-----------------
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
EQUIPMENT AND OTHER PERSONAL PROPERTY
<PAGE>
EXHIBIT "B"
REAL PROPERTY UPON WHICH PERSONAL PROPERTY IS LOCATED
<PAGE>
BILL OF SALE
STATE OF _____________ ss.
ss.
COUNTY OF ss.
THIS BILL OF SALE is entered into by and between CHEVRON U.S.A. INC., a
Pennsylvania corporation, formerly known as Gulf Oil Corporation, successor in
interest to Warren Petroleum Corporation, now known as Warren Petroleum Company
(formerly a Division of Gulf Oil Corporation and presently a Division of Chevron
U.S.A. Inc.) ("Seller"), with offices at 1301 McKinney, 22nd Floor, Houston,
Texas 77010 and MIDSTREAM COMBINATION CORP., a Delaware corporation ("Buyer"),
with offices at 13430 Northwest Freeway, Suite 1200, Houston, Texas 77040.
NOW, THEREFORE, Seller and Buyer agree as follows:
BILL OF SALE. For valuable consideration, receipt of which is hereby
acknowledged, Seller hereby sells, transfers, conveys, and assigns to Buyer
certain equipment and other personal property described on Exhibit "A" attached
hereto and made a part hereof for all purposes (the "Personal Property"), which
Personal Property is attached to or located in, on, or under the real property
described on Exhibit "B" attached hereto and made a part hereof for all purposes
(the "Real Property"). Except for those express warranties set forth in that
certain Combination Agreement and Plan of Merger dated May 22, 1996, among NGC
Corporation, Seller, and Buyer (the "Agreement"), which warranties, if any, are
only made to NGC Corporation as specified in the Agreement and shall survive the
delivery of this Bill of Sale but only for the period of time and as specified
in the Agreement, the Personal Property is sold by Seller to Buyer, and Buyer
accepts the Personal Property, and Buyer does hereby agree that, except as
specified herein or in the Agreement, the Personal Property is sold to Buyer AS
IS and WITH ALL FAULTS and that "SELLER" MAKES NO REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESSED OR IMPLIED (INCLUDING THOSE IMPLIED BY THE TERMS "SELL,"
"TRANSFER," "CONVEY," OR "ASSIGN," OR THOSE IMPLIED BY ANY OTHER TERM HEREIN),
OR ARISING BY OPERATION OF LAW WITH RESPECT TO THE TITLE, MAINTENANCE, REPAIR,
CONDITION, DESIGN, OR MARKETABILITY OF THE "PERSONAL PROPERTY" INCLUDING,
WITHOUT LIMITATION, (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B)
ANY IMPLIED OR EXPRESS WARRANTY OF HABITABILITY, (C) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (D) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO ANY MODELS OR SPECIFICATIONS, (E) ANY RIGHTS OF
"BUYER" UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND (F)
ANY CLAIM BY "BUYER" FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN,
WITH RESPECT TO SUCH "PERSONAL PROPERTY," IT BEING THE EXPRESS INTENTION OF
"SELLER" AND "BUYER" THAT THE "PERSONAL PROPERTY" BE CONVEYED TO, AND ACCEPTED
BY, "BUYER" IN THE "PERSONAL PROPERTY'S" PRESENT CONDITION AND STATE UNLESS
OTHERWISE SPECIFIED IN THE "AGREEMENT."
Taxes for the current calendar year have been prorated as of the date
hereof, and Buyer, by Buyer's acceptance hereof, does hereby assume and agree to
pay any and all ad valorem taxes, special assessments, and any other personal
property taxes pertaining to the Personal Property for the calendar year 1996
and subsequent years, there having been a proper proration of such taxes for the
current calendar year between Seller and Buyer.
IN WITNESS WHEREOF, Seller executed this Bill of Sale on _______________, 1996,
and Buyer executed this Bill of Sale on _______________, 1996, but which is to
be effective as of ____________, 1996.
SELLER:
CHEVRON U.S.A. INC.
By:____________________
Name:
Title:
BUYER:
MIDSTREAM COMBINATION CORP.
By:
Name
Title:
<PAGE>
THE STATE OF _________ ss.
ss.
COUNTY OF ___________ ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of CHEVRON U.S.A. INC., a
Pennsylvania corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
THE STATE OF _________ ss.
ss.
COUNTY OF ___________ ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of MIDSTREAM COMBINATION CORP., a
Delaware corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
<PAGE>
EXHIBIT "A"
TO BILL OF SALE
LIST OF EQUIPMENT AND OTHER PERSONAL PROPERTY
<PAGE>
EXHIBIT "B"
TO BILL OF SALE
REAL PROPERTY DESCRIPTION
<PAGE>
BILL OF SALE
STATE OF ss.
ss.
COUNTY OF ss.
THIS BILL OF SALE is entered into by and between CHEVRON U.S.A. INC., a
Pennsylvania corporation, formerly known as Gulf Oil Corporation, successor in
interest to Warren Petroleum Corporation, now known as Warren Petroleum Company
(formerly a Division of Gulf Oil Corporation and presently a Division of Chevron
U.S.A. Inc.) ("Seller"), with offices at 1301 McKinney, 22nd Floor, Houston,
Texas 77010 and MIDSTREAM COMBINATION CORP., a Delaware corporation ("Buyer"),
with offices at 13430 Northwest Freeway, Suite 1200, Houston, Texas 77040.
NOW, THEREFORE, Seller and Buyer agree as follows:
BILL OF SALE. For valuable consideration, receipt of which is hereby
acknowledged, Seller hereby sells, transfers, conveys, and assigns to Buyer
certain equipment and other personal property described on Exhibit "A" attached
hereto and made a part hereof for all purposes (the "Personal Property"), which
Personal Property is attached to or located in, on, or under the real property
described on Exhibit "B" attached hereto and made a part hereof for all purposes
(the "Real Property"). Except for those express warranties set forth in that
certain Combination Agreement and Plan of Merger dated May 22, 1996, among NGC
Corporation, Seller, and Buyer (the "Agreement"), which warranties, if any, are
only made to NGC Corporation as specified in the Agreement and shall survive the
delivery of this Bill of Sale but only for the period of time and as specified
in the Agreement, the Personal Property is sold by Seller to Buyer, and Buyer
accepts the Personal Property, and Buyer does hereby agree that, except as
specified herein or in the Agreement, the Personal Property is sold to Buyer AS
IS and WITH ALL FAULTS and that "SELLER" MAKES NO REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESSED OR IMPLIED (INCLUDING THOSE IMPLIED BY THE TERMS "SELL,"
"TRANSFER," "CONVEY," OR "ASSIGN," OR THOSE IMPLIED BY ANY OTHER TERM HEREIN),
OR ARISING BY OPERATION OF LAW WITH RESPECT TO THE TITLE, MAINTENANCE, REPAIR,
CONDITION, DESIGN, OR MARKETABILITY OF THE "PERSONAL PROPERTY" INCLUDING,
WITHOUT LIMITATION, (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B)
ANY IMPLIED OR EXPRESS WARRANTY OF HABITABILITY, (C) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (D) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO ANY MODELS OR SPECIFICATIONS, (E) ANY RIGHTS OF
"BUYER" UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND (F)
ANY CLAIM BY "BUYER" FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN,
WITH RESPECT TO SUCH "PERSONAL PROPERTY," IT BEING THE EXPRESS INTENTION OF
"SELLER" AND "BUYER" THAT THE "PERSONAL PROPERTY" BE CONVEYED TO, AND ACCEPTED
BY, "BUYER" IN THE "PERSONAL PROPERTY'S" PRESENT CONDITION AND STATE UNLESS
OTHERWISE SPECIFIED IN THE "AGREEMENT."
Taxes for the current calendar year have been prorated as of the date
hereof, and Buyer, by Buyer's acceptance hereof, does hereby assume and agree to
pay any and all ad valorem taxes, special assessments, and any other personal
property taxes pertaining to the Personal Property for the calendar year 1996
and subsequent years, there having been a proper proration of such taxes for the
current calendar year between Seller and Buyer.
IN WITNESS WHEREOF, Seller executed this Bill of Sale on _______________, 1996,
and Buyer executed this Bill of Sale on _______________, 1996, but which is to
be effective as of ____________, 1996.
SELLER:
CHEVRON U.S.A. INC.
By:
Name:
Title:
BUYER:
MIDSTREAM COMBINATION CORP.
By:
Name:
Title:
<PAGE>
THE STATE OF _________ ss.
ss.
COUNTY OF ___________ ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of CHEVRON U.S.A. INC., a
Pennsylvania corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
THE STATE OF _________ ss.
ss.
COUNTY OF ___________ ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of MIDSTREAM COMBINATION CORP., a
Delaware corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires:
<PAGE>
EXHIBIT "A"
TO BILL OF SALE
LIST OF EQUIPMENT AND OTHER PERSONAL PROPERTY
<PAGE>
EXHIBIT "B"
TO BILL OF SALE
REAL PROPERTY DESCRIPTION
<PAGE>
BILL OF SALE
UNITED STATES OF AMERICA
BY SS. STATE OF TEXAS
SS.
CHEVRON U.S.A. INC. SS. COUNTY OF
SS.
TO SS. STATE OF TEXAS
SS.
MIDSTREAM COMBINATION CORP. SS. COUNTY OF
BE IT KNOWN, that on the _____ day of ___________________, 1996, and on
the ____ day of ______________________, 1996, before us respectively,
_______________________ and _____________________, Notaries Public, respectively
duly commissioned and qualified in and for the State and County or Counties
aforesaid, and in the presence of the undersigned competent witnesses,
PERSONALLY CAME AND APPEARED:
CHEVRON U.S.A. INC., a Pennsylvania corporation, formerly known as Gulf
Oil Corporation, with offices at 1301 McKinney, Houston, Texas 77010,
who is represented by _______________, its duly authorized
_______________ by virtue of Resolutions of its Board of Directors
annexed hereto and made a part hereof, and whose Employer Identification
Number is 25-052-7925,
(hereinafter referred to as "Seller"),
who declares that Seller does by these presents grant, bargain, sell, convey,
transfer, assign, set over, abandon, and deliver with no warranty except those
express warranties set forth in that certain Combination Agreement and Plan of
Merger dated May 22, 1996, (the "Agreement") by and among NGC Corporation,
Seller, and Buyer (as hereinafter named), which express warranties to NGC, if
any, shall survive the delivery of this Bill of Sale but only for the period of
time and as specified in the Agreement, and without any other warranties of any
kind, unto:
MIDSTREAM COMBINATION CORP., a Delaware corporation, with offices at
13430 Northwest Freeway, Suite 1200, Houston, Texas 77040, herein
represented by ___________________, its duly authorized
_________________________ by virtue of Resolutions of its Board of
Directors annexed hereto and made a part hereof, and whose Employer
Identification Number is _________________,
(hereinafter referred to as "Buyer"),
here present, accepting, and purchasing for Buyer and Buyer's successors and
assigns, and acknowledging due delivery and possession thereof, all and singular
the equipment and other personal property described on Exhibit "A" attached
hereto and made a part hereof for all purposes (the "Personal Property"), and
which Personal Property is attached to or located in, on, or under the real
property described on Exhibit "B" hereto (the "Real Property").
Except as specified hereinafter or in the Agreement, the Personal
Property is sold by Seller to Buyer, and Buyer accepts the Personal Property,
and Buyer does hereby agree that, except as specified herein or in the
Agreement, the Personal Property is sold to Buyer, AS IS and WITH ALL FAULTS,
and that "SELLER" MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED (INCLUDING THOSE IMPLIED BY THE TERMS "GRANT," "BARGAIN," "SELL,"
"CONVEY," "TRANSFER," "ASSIGN," "SET OVER," "ABANDON," AND "DELIVER" OR THOSE
IMPLIED BY ANY OTHER TERM HEREIN), OR ARISING BY OPERATION OF LAW WITH RESPECT
TO THE TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, OR MARKETABILITY OF THE
"PERSONAL PROPERTY" INCLUDING, WITHOUT LIMITATION, (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
HABITABILITY, (C) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, (D) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO ANY MODELS OR
SPECIFICATIONS, (E) ANY RIGHTS OF "BUYER" UNDER APPROPRIATE STATUTES TO CLAIM
DIMINUTION OF CONSIDERATION, AND (F) ANY CLAIM BY "BUYER" FOR DAMAGES BECAUSE OF
DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH RESPECT TO SUCH "PERSONAL PROPERTY," IT
BEING THE EXPRESS INTENTION OF "SELLER" AND "BUYER" THAT THE "PERSONAL PROPERTY"
BE CONVEYED TO, AND ACCEPTED BY, "BUYER" IN THE "PERSONAL PROPERTY'S" PRESENT
CONDITION AND STATE UNLESS OTHERWISE SPECIFIED IN THE "AGREEMENT."
To have and to hold the Personal Property unto Buyer and Buyer's
successors and assigns forever; without warranty of any kind except as provided
hereinabove.
This sale is made and accepted for and in consideration of, and in
exchange for, the issuance of shares of Buyer's Common Stock and Series A
Participating Preferred Stock, the assumption by Buyer of certain liabilities as
specified in the Agreementand other good and valuable consideration which Buyer
has well and truly issued, assumed, and paid to Seller, who hereby acknowledges
the receipt thereof and grants full acquittance and discharge therefor. The
value of the stock and/or cash and/or other consideration attributable to the
Personal Property as of the date hereof is $__________.
Taxes for the current calendar year have been prorated as of the date
hereof, and Buyer , by Buyer's acceptance hereof, does hereby assume and agree
to pay any and all ad valorem taxes, special assessments, and any other personal
property taxes pertaining to the Personal Property for the calendar year 1996
and subsequent years, there having been a proper proration of such taxes for the
current calendar year between Seller and Buyer.
Seller and Buyer do hereby waive and dispense with the production of any
and all certificates and/or researches required by law and relieve and release
us, Notaries, and the sureties on our respective notarial bonds from any and all
liability and/or responsibility for the nonproduction thereof.
THUS DONE AND PASSED in my office in Houston, Texas, on
________________, 1996, but to be effective ________________, 1996, all in the
presence of the undersigned competent witnesses, who hereunto sign their names
with Seller and me, Notary.
WITNESSES: SELLER:
CHEVRON U.S.A. INC.
_______________________ BY: ___________________________
NAME:
_______________________ ITS:
-----------------
NOTARY PUBLIC
THUS DONE AND PASSED in my office in ____________, __________, on
_____________________, 1996, but to be effective ________________, 1996, all in
the presence of the undersigned competent witnesses, who hereunto sign their
names with Buyer and me, Notary.
WITNESSES: BUYER:
MIDSTREAM COMBINATION CORP.
_________________________ BY: ___________________________
NAME:
_________________________ ITS:
-----------------
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
EQUIPMENT AND OTHER PERSONAL PROPERTY
<PAGE>
EXHIBIT "B"
REAL PROPERTY UPON WHICH PERSONAL PROPERTY IS LOCATED
<PAGE>
EXHIBIT 10(c)
ASSIGNMENT OF RIGHTS AND OBLIGATIONS
UNDER AGREEMENTS
THIS ASSIGNMENT is entered into as of ___ day of [June], 1996, by and
between CHEVRON U.S.A. INC., a Pennsylvania corporation ("Assignor") and
MIDSTREAM COMBINATION CORP., a Delaware corporation ("Assignee").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, Assignor and Assignee agree and covenant as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee all of
Assignor's right, title and interest in and to those Agreements listed in
Exhibit "A" attached hereto and hereby incorporated as a part hereof
("Agreements").
2. Assignee hereby assumes and agrees to keep, perform and fulfill all
of Assignor's covenants, conditions and obligations under the Agreement which
are required to be kept, performed and fulfilled by Assignor hereunder.
3. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
IN WITNESS WHEREOF, the undersigned have duly executed this Assignment
as of the date set forth above.
ASSIGNOR:
CHEVRON U.S.A. INC.
By _______________________________
Title ____________________________
ASSIGNEE:
MIDSTREAM COMBINATION CORP.
By _______________________________
Title ____________________________
<PAGE>
EXHIBIT 10(d)
[NAME OF LEASED PROPERTY]
STATE OF ___________ ss.
ss.
COUNTY OF _________ ss.
ASSIGNMENT OF LEASE
THIS ASSIGNMENT OF LEASE (this "Assignment") is made and entered into
by and between CHEVRON U.S.A. INC., a Pennsylvania corporation, formerly known
as Gulf Oil Corporation, successor in interest to Warren Petroleum Corporation,
now known as Warren Petroleum Company (formerly a Division of Gulf Oil
Corporation and presently a Division of Chevron U.S.A. Inc.) ("Assignor"), with
offices at 1301 McKinney, Houston, Texas 77010 and MIDSTREAM COMBINATION CORP.,
a Delaware corporation ("Assignee"), with offices at 13430 Northwest Freeway,
Suite 1200, Houston, Texas 77040, in connection with that certain lease
agreement described in Exhibit "A" attached hereto (the "Lease") between that
certain lessor or landlord or sublessor or sublandlord, as the case may be and
as described in the Lease and in Exhibit "A" hereto, or incorporated in Exhibit
"A" ("Landlord") and Assignor, as lessee or tenant or sublessee or subtenant, as
the case may be and as described in the Lease, pursuant to which Landlord is
leasing to Assignor that certain parcel or tract of land, together with any and
all improvements thereon, situated in the above-named county and state, as more
particularly described in the Lease and in Exhibit "A" hereto (the "Leased
Property"). Reference is made herein to the Lease, and reference is made in
Exhibit "A" hereto to the Lease and the recording thereof, for a description of
the Leased Property, which is covered by the Lease, and for all other purposes.
1. DEFINED TERMS. As used in this Assignment, the following capitalized
terms have the following meanings:
(a) "Assignment Date" means the effective date of this
Assignment as specified below.
(b) "Conditions to Assignment" means the conditions set forth
in Section 4 of this Assignment.
(c) "Required Consents" means any and all consents to the
assignment by Assignor to Assignee described herein that are required
under the Lease or under applicable law or under any rules or
regulations of the United States of America, or the state in which the
Leased Property is situated, or other governmental or tribal entities,
authorities, or agencies.
2. ASSIGNMENT OF LEASE; HABENDUM CLAUSE; ASSUMPTION. For Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which Assignor hereby acknowledges, Assignor hereby grants,
conveys, and assigns to Assignee, effective as of the Assignment Date but
subject to (a) the Conditions to Assignment, (b) any and all exceptions,
encumbrances, and other matters affecting the Lease or the Leased Property of
whatsoever nature that are listed and described in Schedule 5.18 to that certain
Combination Agreement and Plan of Merger dated May 22, 1996, by and among NGC
Corporation, Assignor, and Assignee (the "Agreement"), (c) any and all zoning
laws, regulations, and ordinances of municipal or other governmental
authorities, if any, relating to the Leased Property, and (d) any and all of the
covenants, terms and conditions set forth in the Lease, all of Assignor's right,
title, interest, and estate in and to the Lease, TO HAVE AND TO HOLD the Lease
unto Assignee and its successors and assigns, subject only to the matters stated
herein. Assignee covenants and hereby assumes and agrees to pay, perform, and
discharge Assignor's obligations under the Lease, under all amendments and
modifications and renewals thereof and under all matters to which the Lease is
subject as stated herein, but only to the extent that any of the foregoing are
valid and enforceable, relate to the Lease or the Leased Property, and are
attributable to the period of time commencing on and after the Assignment Date.
3. DELIVERY OF LEASED PROPERTY. On the Assignment Date, Assignor shall
deliver the Leased Property to Assignee in its present condition, and Assignee
does hereby agree that except for those express warranties set forth in the
Agreement, which warranties, if any, are only made to NGC Corporation as
specified in the Agreement and shall survive the delivery of this Assignment but
only for the period of time and as specified in the Agreement, the Lease and the
rights thereunder with respect to the Leased Property are granted, conveyed, and
assigned to Assignee AS IS and WITH ALL FAULTS and Assignee acknowledges and
agrees that "ASSIGNOR" MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER,
EXPRESSED OR IMPLIED (INCLUDING THOSE IMPLIED BY THE TERMS "GRANT," "CONVEY," OR
"ASSIGN," OR THOSE IMPLIED BY ANY OTHER TERM HEREIN), OR ARISING BY OPERATION OF
LAW WITH RESPECT TO THE TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, OR
MARKETABILITY OF THE "LEASED PROPERTY" INCLUDING, WITHOUT LIMITATION, (A) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS
WARRANTY OF HABITABILITY, (C) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (D) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO ANY
MODELS OR SPECIFICATIONS, (E) ANY RIGHTS OF "ASSIGNEE" UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND (F) ANY CLAIM BY "ASSIGNEE"
FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH RESPECT TO SUCH
"LEASED PROPERTY," IT BEING THE EXPRESS INTENTION OF "ASSIGNOR" AND "ASSIGNEE"
THAT THE "LEASED PROPERTY" BE GRANTED, CONVEYED, AND ASSIGNED TO, AND ACCEPTED
BY, "ASSIGNEE" IN THE "LEASED PROPERTY'S" PRESENT CONDITION AND STATE UNLESS
OTHERWISE SPECIFIED IN THE "AGREEMENT."
4. CONDITIONS TO ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, no assignment by Assignor to Assignee described herein shall
be effective until Assignor and Assignee shall have obtained all Required
Consents.
5. FURTHER ASSURANCES. Each party hereto shall execute, acknowledge,
and deliver to each other party all documents, and shall take all actions,
reasonably required by such other party from time to time to confirm or effect
the matters set forth herein, or otherwise to carry out the purposes of this
Assignment.
6. NOTICES. All notices, demands, approvals and other communications
provided for in this Assignment shall be in writing and be delivered to the
appropriate party at its address as follows:
If to Assignor:
Chevron U.S.A. Inc.
1301 McKinney
Houston, Texas
Attention: Mr. David Stevenson
Facsimile No.: (713) 754-3366
If to Assignee:
Mr. Kenneth E. Randolph
Senior Vice President and General Counsel
NGC Corporation
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Facsimile No.: (713) 507-6808
Addresses for notice may be changed from time to time by written notice to all
other parties. All communications shall be effective when actually received;
provided, however, that nonreceipt of any communication as the result of a
change of address of which the sending party was not notified or as the result
of a refusal to accept delivery shall be deemed receipt of such communication.
7. NO THIRD PARTIES BENEFITED. This Assignment is made for the purpose
of setting forth certain rights and obligations of Assignee and Assignor, and no
other person shall have any rights hereunder or by reason hereof as a third
party beneficiary or otherwise.
8. MISCELLANEOUS. This Assignment shall bind, and shall inure to the
benefit of, the successors and assigns of the parties hereto. This Assignment
may be executed in counterparts with the same force and effect as if the parties
had executed one instrument, and each such counterpart shall constitute an
original hereof. No provision of this Assignment that is held to be inoperative,
unenforceable or invalid shall affect the remaining provisions, and to this end
all provisions hereof are hereby declared to be severable. Time is of the
essence of this Assignment. This Assignment shall be governed by the laws of the
state referred to in the caption of this Assignment, which is the state in which
the Leased Property is situated.
IN WITNESS WHEREOF, this Assignment was executed on _______________,
1996, by Assignor, and on _______________, 1996, by Assignee, but to be
effective as of _______________, 1996.
ASSIGNOR:
CHEVRON U.S.A. INC.
By:
Name:
Its:
ASSIGNEE:
MIDSTREAM COMBINATION CORP.
By:
Name:
Its:
<PAGE>
THE STATE OF ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of CHEVRON U.S.A. INC., a
Pennsylvania corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires: ___________________
THE STATE OF ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1996, by
____________________, ____________________ of MIDSTREAM COMBINATION CORP., a
Delaware corporation, on behalf of said corporation.
-------------------------
Notary Public
Notary's printed name: ___________________
My commission expires: ___________________
PLEASE RETURN RECORDED DOCUMENT TO:
MIDSTREAM COMBINATION CORP.
ATTN: MR. KENNETH E. RANDOLPH
NGC CORPORATION
13430 NORTHWEST FREEWAY, SUITE 1200
HOUSTON, TEXAS 77040
<PAGE>
EXHIBIT "A"
TO ASSIGNMENT OF LEASE
NAME OF LANDLORD:
NAME OF TENANT: CHEVRON U.S.A. INC., FORMERLY KNOWN AS GULF OIL CORPORATION,
SUCCESSOR IN INTEREST TO WARREN PETROLEUM CORPORATION, NOW
KNOWN AS WARREN PETROLEUM COMPANY (FORMERLY A DIVISION OF GULF
OIL CORPORATION AND PRESENTLY A DIVISION OF CHEVRON U.S.A.
INC.
DATE OF LEASE:
EXPIRATION DATE OF INITIAL TERM OF LEASE:
RENEWAL OR EXTENSION OPTION: YES _____ NO _____
(IF YES, COMPLETE THE FOLLOWING: TENANT HAS THE OPTION TO RENEW OR
EXTEND THE TERM OF THE LEASE FOR _____ SUCCESSIVE PERIODS OF _____
YEARS, EACH COMMENCING ON THE EXPIRATION OF THE INITIAL TERM OF THE
LEASE.)
RECORDING INFORMATION:
OR
LEGAL DESCRIPTION OF LEASED PREMISES:
THIS EXHIBIT "A" SHALL ALSO SERVE AS NOTICE OF THE TERMS, PROVISIONS, AND
CONDITIONS OF THE LEASE AND IS NOT INTENDED, AND SHALL NOT BE CONSTRUED, TO
DEFINE, LIMIT, OR MODIFY THE TERMS AND PROVISIONS OF THE LEASE.
<PAGE>
CONSENT OF LANDLORD
LANDLORD:
TENANT: CHEVRON U.S.A. INC.
DATE OF LEASE: _________________
RECORDING INFORMATION:
OR
LEGAL DESCRIPTION OF LEASED PROPERTY:
Landlord hereby consents to that certain assignment set forth in Section 2 of
the Assignment of Lease dated as of (the "Assignment") by and between CHEVRON
U.S.A. INC., a Pennsylvania corporation, formerly known as Gulf Oil Corporation,
as Assignor, and MIDSTREAM COMBINATION CORP., a Delaware corporation, as
Assignee, to which this Consent of Landlord is attached [*and agrees to, and
hereby does, effective on the Assignment Date (as defined in the Assignment),
release Assignor, as tenant or lessee or subtenant or sublessee ("Tenant") under
the Lease from all of the Tenant's obligations under the Lease, accruing and/or
relating from and following the Assignment Date and agrees that as of the
Assignment Date, shall be deemed the "Tenant" under the Lease*].
Dated: , 1996
LANDLORD:
By:
Name:
Its:
<PAGE>
EXHIBIT 10(e)
INTELLECTUAL PROPERTY LICENSE AGREEMENT
This Intellectual Property License Agreement is entered into as of June 1, 1996
by and among CHEVRON U.S.A. INC., a Pennsylvania Corporation ("Chevron"),
CHEVRON PIPE LINE COMPANY, a Delaware corporation ("CPL"), CHEVRON CHEMICAL
COMPANY, a Delaware corporation ("CCC") (Chevron, CPL and CCC are hereinafter
sometimes referred to collectively as the "Contributing Parties") and MIDSTREAM
COMBINATION CORP., a Delaware corporation ("Newco").
WITNESSETH:
WHEREAS, Chevron, Newco and NGC Corporation, a Delaware corporation ("NGC") have
entered into a Combination Agreement and Plan of Merger dated as of May_____,
1996 ("Combination Agreement") and a Contribution and Assumption Agreement of
even date herewith ("Contribution Agreement"), pursuant to which certain assets
of the Contributing Parties (collectively the "Contributed Businesses") will be
transferred to Newco in exchange for shares of Common Stock and Preferred Stock
of Newco and other consideration;
WHEREAS, the Contributing Parties have conducted the Contributed Businesses
Operations using certain technology or other intellectual property owned by the
Contributing Parties or their Affiliates;
WHEREAS, consistent with the terms and conditions of the Combination and
Contribution Agreements, Newco desires to acquire the right to use such
technology and other intellectual property in the operation of the Contributed
Businesses and the Contributing Parties desire to grant such rights;
NOW THEREFORE, in consideration of the mutual promises contained herein, the
mutual benefits to be derived for each party hereunder and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Contributing Parties and Newco hereby agrees as follows:
ARTICLE 1
DEFINITIONS
All capitalized terms used herein without definition shall have the meanings
assigned to them in the Combination Agreement and Contribution Agreement and the
following terms shall have the following indicated meanings:
1.1. Licensor shall mean Chevron, CPL and CCC both collectively and
individually, as the case may be.
1.2. Contributed Business Operations shall mean the operations of the
Contributed Businesses as of the Closing Date or within the previous
five (5) years thereto. Whether capitalized or uncapitalized the term
operation with respect to the Contributed Businesses shall include the
sale or transfer of products therefrom directly or indirectly to
others.
1.3. Licensor Proprietary Information shall mean know-how, software
applications, software and other technology owned by Licensor and used
in the Contributed Business Operations.
1.4. Affiliate Proprietary Information refers to know-how, software,
software applications and other technology owned by Licensor's
Affiliates and used in the Contributed Business Operations.
1.5. Party shall mean Chevron, CPL, CCC or Newco as the case may be.
1.6. Licensor Patent Rights shall mean U.S. and foreign patents and patent
applications owned by the Licensor as of the Closing Date and used in
the Contributed Business Operations which Licensor has the right to
grant licenses under without accounting to others.
1.7. Licensor Copyrights shall mean copyrights owned by Licensor on
documents, plans, drawings or other materials relating to the
Contributed Business Operations.
ARTICLE 2
TECHNOLOGY LICENSE
2.1 Subject to the terms of this Agreement and the Combination and
Contributing Agreements, Licensor hereby grants Newco a royalty-free,
non-exclusive, irrevocable license to use the Licensor Proprietary
Information and Affiliate Proprietary Information in the operation of
the Contributed Businesses with the proviso that Licensor and
Licensor's Affiliates shall be under no obligation under this Agreement
to update or support Licensor Proprietary Information or Affiliate
Proprietary Information.
ARTICLE 3
PATENT LICENSE
3.1 Subject to the terms and conditions of this Agreement and the
Combination and Contributing Agreements, Licensor hereby grants Newco a
royalty-free, irrevocable immunity from suit for infringement of any
claim of Licensor Patent Rights with respect to the use of Licensor
Proprietary Information or Affiliate Proprietary Information in the
operation of the Contributed Businesses.
-2-
ARTICLE 4
COPYRIGHT LICENSE
4.1 To the extent reasonably necessary to facilitate Newco's operation of
the Contributed Businesses, Licensor hereby grant Newco a nonexclusive
royalty free license to make copies of materials covered by Licensor's
Copyrights in connection with the operation of the Contributing
Businesses but excluding (1) computer programs or software not directly
relating to the processing, gathering, treating, fractionating,
transportation or marketing of natural gas; and (2) materials relating
to the microwave service network and related equipment and licenses.
ARTICLE 5
TRADEMARK EXCLUSION
5.1 Except as expressly provided in the Combination and Contribution
Agreements, Newco shall have no right to use, and agrees not to use,
any trademarks, service marks, or trade names and the like owned by
Licensor or Licensor's Affiliates.
ARTICLE 6
CONFIDENTIALITY
6.1. Newco shall receive and maintain all Licensor Proprietary Information
and Affiliate Proprietary Information in confidence and shall exercise
reasonable measures to avoid the disclosure of any or all of the
Licensor Proprietary Information and Affiliate Proprietary Information
to others except to Newco's Affiliates, officers and employees and
permitted assigns, who require such information for the operation of
the Contributed Businesses.
6.2. Newco's obligations under Sections 6.1 hereinabove shall not apply to
any portion of information which Newco can show (i) was known to Newco
prior or its first receipt directly or indirectly from Licensor; (ii)
is now published or otherwise generally known on a nonconfidential
basis in the related field; (iii) through no fault of Newco is
subsequently published or becomes generally known; or (iv) is lawfully
disclosed to Newco by others, as a matter of right without restriction
on disclosure.
6.3. The obligations of Section 6.1 shall expire ten (10) years after the
Closing Date.
6.4. Notwithstanding the obligations of Section 6.1, Newco shall have the
right to disclose so much Licensor Proprietary Information and
Affiliate Proprietary Information to others as is reasonably necessary
for the operation of the Contributed Businesses provided that prior to
such disclosure such others enter into written agreements with Newco
containing obligations of confidentiality at least as strict as those
provided in this Article 6.
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ARTICLE 7
EXPORT CONTROL
7.1 With respect to any unpublished technical information of U.S. origin
which is disclosed under this Agreement, Newco agrees to comply with
all applicable United States Statutes and Regulations controlling the
export of such technical information or the direct product thereof.
ARTICLE 8
REPRESENTATIONS
8.1. Licensors warrant that they have the right to grant the licenses,
sublicenses and permissions granted to Newco under this Agreement.
8.2. Licensors represent that as of the Closing Date they are not aware of
any actual or threatened litigation alleging that the operation of the
Licensor infringe the intellectual property rights of others. Licensors
also represents that they are not aware of any patent rights which
would be infringed by the operation of Contributed Businesses as of the
Closing Date but, do not warrant that the operation of the Contributed
Businesses will not infringe the patent rights of others and hereby
disclaim any liability relative thereto.
ARTICLE 9
ASSIGNABILITY
9.1 This Agreement may be assigned by Newco to Newco's successor to all the
Contributed Businesses provided that such successor agrees, in writing,
with Licensor to be bound in a like manner as Newco is hereunder. Any
other assignment of this Agreement or any rights thereunder shall be
void unless agreed to in writing by Licensor.
ARTICLE 10
GOVERNING LAW
10.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, as if both parties hereto were resident
and doing business in such state, except to the extent that the law of
the states in which any of the assets are located necessarily apply to
the construction of this Agreement as it applies to the portion of the
assets located in such states.
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ARTICLE 11
HEADINGS; TERMS
11.1 The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meanings of the provisions
hereof.
IN WITNESS WHEREOF, Chevron, CPL, CCC and Newco have duly executed this
Agreement as of the date set forth above, but effective for all purposes as of
12:01 a.m., Houston, Texas time on the Closing Date.
CHEVRON U.S.A. INC. CHEVRON PIPE LINE COMPANY
By By
Title Title
CHEVRON CHEMICAL COMPANY MIDSTREAM COMBINATION CORP.
By By
Title Title
EXHIBIT 10.41
EXHIBIT 2.1(C)
PROMISSORY NOTE
$_______________ _______________, 1996
For value received, MIDSTREAM COMBINATION CORP., a Delaware corporation
("Payor"), hereby promises to pay to the order of CHEVRON U.S.A. INC., a
Pennsylvania corporation ("Payee"), on behalf of Payee, Chevron Chemical
Company, a Delaware corporation, and Chevron Pipe Line Company, a Delaware
corporation, the principal sum of _______________ Million Dollars
($_______________) which shall be due and payable in accordance with Section
2.2(h) of that certain Combination Agreement and Plan of Merger by and among NGC
Corporation, a Delaware corporation, Chevron U.S.A. Inc., a Pennsylvania
corporation and Midstream Combination Corp., a Delaware corporation, dated as of
May ___, 1996.
Payment of principal shall be made in lawful money of the United States
of America and delivered to Payee by wire transfer to the bank account
designated by Payee for this purpose.
This Note shall be governed by the laws of the State of Delaware,
without regard to the conflicts of law principles thereof.
IN WITNESS WHEREOF, Payor has caused this Note to be executed in its
name by the signature of its duly authorized officer on and as of this ___ day
of ___________, 1996.
MIDSTREAM COMBINATION CORP., a
Delaware corporation
By:____________________________
Its:___________________________
EXHIBIT 10.42
VOTING AGREEMENT
VOTING AGREEMENT ("Agreement") dated as of May __, 1996, by and between
the undersigned stockholder (the "Stockholder") of NGC CORPORATION, a Delaware
corporation ("NGC") and CHEVRON U.S.A. INC, a Pennsylvania corporation
("Chevron").
W I T N E S E T H:
WHEREAS, contemporaneously with the delivery of this Agreement, NGC,
Chevron and Midstream Combination Corp. ("Newco") are entering into that certain
Combination Agreement and Plan of Merger dated as of May __, 1996 (the
"Combination Agreement"), providing for, among other items, the merger of NGC
with and into Newco (the "Merger");
WHEREAS, Stockholder owns the number of shares of NGC Corporation Stock
shown on Schedule I hereto (the "Shares");
WHEREAS, in order to induce Chevron to enter into the Combination
Agreement, Stockholder agrees to vote the Shares in favor of the proposed Merger
and the transactions contemplated by the Combination Agreement, upon the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of Chevron's entering into the
Combination Agreement and the mutual covenants and agreements set forth herein,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. VOTING. Stockholder hereby revokes any and all previous voting
agreements and proxies granted with respect to the Shares which are inconsistent
with this Agreement. Stockholder agrees to vote the Shares at any meeting or
action by written consent at which a vote is taken or requested (i) in favor of
the Merger pursuant to the Combination Agreement and the transactions
contemplated thereby and (ii) in opposition to any proposal (other than pursuant
to the Combination Agreement) for the amendment of NGC's Certificate of
Incorporation or Bylaws or any merger, consolidation, sale, or purchase of any
assets, reorganization, recapitalization, liquidation or winding up of or by NGC
or sale of all or substantially all of the stock or assets of a subsidiary of
NGC, in any case, other than as permitted or contemplated by the Combination
Agreement (an "Other Proposal"). Upon the request of Chevron, Stockholder will
execute a proxy, in favor of Chevron, to vote the Shares (i) in favor of the
Merger pursuant to the Combination Agreement and the transactions contemplated
thereby and (ii) in opposition
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to any Other Proposal. Any such proxy will be irrevocable for the term of this
Agreement and will be coupled with any interest.
2. NO GRANT OF OTHER PROXIES. Except pursuant to this Agreement or as
permitted or contemplated by the Combination Agreement, Stockholder shall not,
without the prior written consent of Chevron, directly or indirectly grant any
proxies or enter into any voting trust or other agreement or arrangement with
respect to the voting of the Shares inconsistent with this Agreement.
3. MISCELLANEOUS.
(a) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by an court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but except as
otherwise specifically provided, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by any of the
parties without the prior written consent of the other.
(c) AMENDMENTS AND MODIFICATION. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) SPECIFIC PERFORMANCE. The parties hereto acknowledge that Chevron
will be irreparably harmed and that there will be no adequate remedy at law for
a violation of any of the covenants or agreements of Stockholder set forth
herein. Therefore, it is agreed that, in addition to any other remedies which
may be available to Chevron upon any such violation, Chevron shall have the
right to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Chevron at law or in
equity.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telecopy, telegram or telex, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) to the respective
parties as follows:
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If to Chevron:
Chevron U.S.A. Inc.
1301 McKinney
Houston, Texas 77010
Attention: Mr. David Stevenson
Facsimile No.: (713) 754-5777
With a copy to:
Mr. Terry Michael Kee
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Facsimile No.: (415) 983-1200
If to Stockholder, to the address set forth on Schedule I,
or to such other address any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall only be
effective upon receipt.
(f) GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware as applied to
contracts entered into solely between residents of, and to be performed entirely
in, such state.
(g) ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties in respect of the subject matter hereof, and supersedes all prior
negotiations and understandings between the parties with respect to such subject
matters.
(h) EFFECT OF HEADINGS. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
(i) DEFINITIONS. All capitalized terms used herein shall have the
meanings defined in the Combination Agreement, unless otherwise defined herein.
(j) TERM AND EFFECT. The obligation of Stockholder under this Agreement
shall terminate on the earliest of (i) the effective date of the Merger as
provided in the Combination Agreement, (ii) the date of termination of the
Combination Agreement in accordance with Article 13 thereof or (iii) December
31, 1996.
-3-
(k) COUNTERPARTS. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first above written.
CHEVRON U.S.A. INC.
By
Title
Stockholder
-4-
Schedule I
NAME AND ADDRESS OF NGC STOCKHOLDER NUMBER OF SHARES
BG Holdings, Inc. 38,623,211
1100 Louisiana
Suite 2500
Houston, Texas 77002
-5-
The following agreements, in accordance with Instruction 2 of Item 601, are
substantially identicl in all material respects to the agreement filed as
Exhibit 10.42 to the Registration Statement:
1. Voting Agreement dated May 22, 1996 between Chevron U.S.A. Inc. and
Nova Gas Services (U.S.) Inc.
2. Voting Agreement dated May 22, 1996 between Chevron U.S.A. Inc. and
C.L. Watson.
3. Voting Agreement dated May 22, 1996 between Chevron U.S.A. Inc. and
Stephen W. Bergstrom.
4. Voting Agreement dated May 22, 1996 between Chevron U.S.A. Inc. and
H. Keith Kaelber.
5. Voting Agreement dated May 22, 1996 between Chevron U.S.A. Inc. and
Kenneth E. Randolph.
6. Voting Agreement dated May 22, 1996 between Chevron U.S.A. Inc. and
Bruce M. Withers.
The following is a list of material details in which such agreements differ from
Exhibit 10.42:
1. The Voting Agreement is among Chevron U.S.A. Inc. and a stockholder
of NGC Corporation. Therefore the party relating to the stockholder
is different for each Voting Agreement as is the number of shares in
which each stockholder owns.
EXHIBIT 10.43
SCOPE OF BUSINESS AGREEMENT
This SCOPE OF BUSINESS AGREEMENT (the "Agreement") is entered into as
of May 22, 1996 between Chevron Corporation, a Delaware corporation ("Chevron),
and Midstream Combination Corp., a Delaware corporation ("Newco").
WHEREAS, Newco intends to enter into a Combination Agreement and Plan
of Merger with NGC Corporation, a Delaware corporation ("NGC"), and Chevron
U.S.A. Inc., a Pennsylvania corporation ("CUSA"), providing, among other things,
for the merger of NGC with and into Newco (the "Merger"); and
WHEREAS, immediately prior to the Merger, CUSA, Chevron Pipe Line
Company, a Delaware corporation, and Chevron Chemical Company, a Delaware
corporation (collectively the "Contributing Parties") will have entered into a
Contribution and Assumption Agreement with Newco pursuant to which, among other
things, the Contributing Parties will have contributed certain businesses to
Newco; and
WHEREAS, the Contributing Parties are each members of a group of
companies consisting of Chevron and its direct and indirect wholly owned
subsidiaries (collectively the "Chevron Group"); and
WHEREAS, Chevron and Texaco Inc. are parties to that certain Caltex
Operating Agreement, dated January 24, 1967, as amended (the "Caltex Operating
Agreement"), concerning the Caltex Petroleum Corporation, a Delaware corporation
("Caltex"); and
WHEREAS, Chevron enjoys certain benefits by virtue of the Caltex
Operating Agreement, including certain rights to supply Caltex and its
subsidiaries with crude oil, liquified petroleum gases and other products
usually and normally refined as petroleum products from crude oils; and
WHEREAS, Newco is presently an indirect, wholly owned subsidiary of
Chevron, and, from and after the Merger, Chevron, through CUSA, will be a
significant stockholder of Newco and entitled to representation on Newco's Board
of Directors pursuant to a Stockholders' Agreement, dated as of May 22, 1996,
among CUSA, BG Holdings, Inc., a Delaware corporation, and NOVA Gas Services
(U.S.) Inc., a Delaware corporation; and
WHEREAS, Chevron and Newco believe that mutually beneficial commercial
opportunities may exist for Newco to do business with Caltex, including the
opportunity to obtain certain benefits potentially open to Chevron under the
Caltex Operating Agreement,
NOW, THEREFORE, the parties do hereby agree as follows:
1. EXCHANGE OF INFORMATION. One or more members of the Chevron Group
may provide Newco from time to time with information about Caltex or the Chevron
Group to facilitate discussions of Caltex-related commercial opportunities
suitable for exploitation in whole or in part by Newco. Such information may
include confidential or proprietary information ("Confidential Caltex
Information"). Newco shall hold all Confidential Caltex Information in strict
confidence and, unless
-2-
otherwise agreed by Chevron, shall use such information only for the purposes
contemplated under this Agreement. Newco shall not disclose Confidential Caltex
Information to any third party without Chevron's consent, except as otherwise
required by law. Any officer, director or employee of Newco who receives such
information shall be bound by the same restrictions.
2. DEVELOPMENT AND EXPLOITATION OF COMMERCIAL OPPORTUNITIES. Following
an exchange of Confidential Caltex Information, Chevron and Newco shall consult
concerning the mutual desirability and feasibility of Newco, alone or in
conjunction with members of the Chevron Group, exploiting the Caltex-related
commercial opportunities. Such consultations may involve the development of a
joint proposal to Caltex or other plans through which Newco, directly or through
the Chevron Group, could participate in such commercial opportunities. Following
such consultations, Newco may conduct business with Caltex through or with one
or more members of the Chevron Group, or separately, as the case may be, but in
each case as mutually agreed between Chevron and Newco. Such agreements would be
incorporated herein and made a part hereof.
3. AMENDMENTS. This Scope of Business Agreement may be amended from
time to time by mutual consent. Any such amendment shall be in writing and
signed by both parties. Such an amendment may authorize Newco to conduct other
activities in addition to those contemplated above.
4. OTHER ACTIVITIES. Nothing in this Agreement shall preclude Newco
from undertaking an activity otherwise permitted
-3-
without a stockholder vote by its Certificate of Incorporation, as the same may
from time to time be amended, except as such activity may result in a breach of
Newco's obligations concerning use and disclosure of Caltex Confidential
Information, or except as Newco and Chevron otherwise agree.
5. TERMINATION. This Agreement shall terminate if, from and after the
Merger, (a) members of the Chevron Group shall collectively own less than
11,586,983 shares of Newco Common Stock, as adjusted (i) to reflect any
reclassification, subdivision or combination of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock and (ii) to give
effect to any recapitalization, merger or consolidation in which all outstanding
shares of Newco Common Stock are exchanged for capital stock of a successor to
Newco, and (b) no nominee of the Chevron Group is represented on the Board of
Directors of Newco or any corporate successor to Newco. This Agreement shall
also terminate if no member of the Chevron Group remains an owner of shares of
Caltex or any successor thereto, or otherwise as mutually agreed by the parties
hereto.
6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the
parties and their successors in interest. The
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rights and obligations of the parties hereunder shall not be assignable except
as otherwise mutually agreed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date herein above written.
CHEVRON CORPORATION
By LYDIA S. BEEBE
MIDSTREAM COMBINATION CORP.
By R. E. GALVIN
R. E. Galvin, President
-5-
EXHIBIT 10.44
STOCKHOLDERS AGREEMENT
AMONG
BG HOLDINGS, INC.,
NOVA GAS SERVICES (U.S.) INC.
AND
CHEVRON U.S.A. INC.
DATED MAY 22, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN TERMS;
REPRESENTATIONS AND WARRANTIES
1.1 Certain Terms....................................................... 1
1.2 Representations and Warranties...................................... 7
ARTICLE II
BOARD OF DIRECTORS; VOTING OF CAPITAL STOCK;
CERTAIN OTHER MATTERS
2.1 Board of Directors and Executive Committee.......................... 8
2.2 Certain Transactions................................................ 10
ARTICLE III
RESTRICTIONS ON TRANSFER AND ACQUISITION
3.1 General Provisions.................................................. 10
3.2 Permitted Transfers; Transfers Not Subject to Preferential Right.... 10
3.3 Transfers Subject to Preferential Right............................. 11
3.4 Procedures with Respect to Transfers Subject to Section 3.3......... 14
3.5 Conditions to Transfer of Rights In Connection with a Permitted
Transfer........................................................ 17
3.6 Restrictions on Certain Acquisitions................................ 17
3.7 Effect of Distributions and Certain Transactions.................... 19
ARTICLE IV
EFFECTIVENESS; TERMINATION
4.1 Effectiveness and Term.............................................. 19
4.2 Termination......................................................... 19
ARTICLE V
AGREEMENTS OF GENERAL EFFECT
5.1 Shares Subject to this Agreement.................................... 20
5.2 Legends............................................................. 20
5.3 Rights and Duties................................................... 20
5.4 Designated Parties; Change in Number of Shares Owned................ 21
5.5 Taking of Necessary Action.......................................... 21
5.6 Restrictions on Other Agreements.................................... 21
5.7 Other Activities of the Parties; Fiduciary Duties................... 21
5.8 Late Payment........................................................ 22
5.9 U.S. Currency....................................................... 22
5.10 International Joint Ventures........................................ 22
ARTICLE VI
MISCELLANEOUS
6.1 Amendment; Waivers.................................................. 22
6.2 Assignment.......................................................... 23
6.3 Notices............................................................. 23
6.4 Counterparts........................................................ 23
6.5 Headings............................................................ 23
6.6 Choice of Law....................................................... 23
6.7 Entire Agreement.................................................... 23
6.8 Construction........................................................ 23
6.9 No Partnership...................................................... 24
6.10 Number; Gender; Without Limitation; Interpretation of
Certain Defined Terms........................................... 24
6.11 Severability........................................................ 24
6.12 Indemnification..................................................... 24
6.13 Specific Performance................................................ 24
Exhibit A - Form of Adoption Agreement.......................................A-1
ii
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered into as of
May 22, 1996 among BG Holdings, Inc., a Delaware corporation, NOVA Gas Services
(U.S.) Inc., a Delaware corporation and Chevron U.S.A. Inc., a Pennsylvania
corporation.
WITNESSETH:
WHEREAS, pursuant to a Combination Agreement and Plan of Merger (the
"Combination Agreement") dated as of the date hereof among NGC Corporation, a
Delaware corporation ("Old NGC"), Chevron U.S.A. Inc. and Midstream Combination
Corp., a Delaware corporation (the "Corporation"), Old NGC will be merged with
and into the Corporation (the "Merger") and the Corporation will change its name
to "NGC Corporation";
WHEREAS, it is a condition to the consummation of the transactions
provided for in the Combination Agreement, including the Merger, that the
parties hereto enter into this Agreement; and
WHEREAS, the parties believe that the Merger and the terms set forth in
this Agreement with respect to their ownership of shares of Capital Stock of the
Corporation will foster conditions that promote the long-term best interests of
the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
CERTAIN TERMS;
REPRESENTATIONS AND WARRANTIES
1.1 CERTAIN TERMS. (a) When used herein the following terms shall have
the meanings indicated:
"Acquisition," including the correlative term "Acquire," means any
purchase or other acquisition of Common Stock (or any interest therein or right
thereto) or Common Stock Equivalents other than the conversion of shares of
Series A Preferred Stock; PROVIDED, HOWEVER, that an exchange, merger,
recapitalization, consolidation or reorganization involving the Corporation in
which securities of the Corporation or any other Person are issued in respect of
shares of Common Stock of the Corporation shall not be deemed an Acquisition if
all shares of Common Stock are treated identically in such transaction.
2
"Adoption Agreement" means an agreement in the form of Exhibit A hereto
or in such other form that is reasonably satisfactory to the Parties.
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934.
"Applicable Interest Rate" means the lesser of (i) the prime rate
announced from time to time by The First National Bank of Chicago, N.A. or its
successor (the "Prime Rate") or (ii) the highest rate permitted by applicable
law, from the date due until paid in full.
"Board" means the board of directors of the Corporation.
"British Gas" means BG Holdings, Inc., a Delaware corporation.
"business day" means any day other than (i) a Saturday or Sunday or
(ii) a day that is a banking holiday in any of the United States, the United
Kingdom or Canada.
"Capital Stock" means any and all shares, interests, participations, or
other equivalents (however designated) of capital stock of a corporation, any
and all similar ownership interests in a Person (other than a corporation), and
any and all warrants, options, or other rights to purchase or acquire any of the
foregoing.
"Chevron" means Chevron U.S.A. Inc., a Pennsylvania corporation.
"Class A Group" means a Group that continuously from the time that such
Group becomes a Group under this Agreement owns not less than a number of shares
of Common Stock equivalent to 34,760,890 shares of Original Stock.
"Class B Group" means a Group that continuously from the time that such
Group becomes a Group under this Agreement owns a number of shares of Common
Stock equivalent to at least 23,173,926 shares of Original Stock but less than
34,760,890 shares of Original Stock.
"Class C Group" means a Group that continuously from the time that such
Group becomes a Group under this Agreement owns a number of shares of Common
Stock equivalent to at least 11,586,963 shares of Original Stock but less than
23,173,926 shares of Original Stock.
"Common Stock" means shares of the common stock, par value $.01 per
share, of the Corporation issued and outstanding from time to time after the
consummation of the Merger (including, without limitation, shares of Common
Stock issued upon conversion of shares of Series A Preferred Stock of the
Corporation) and all securities of the
3
Corporation or any other Person issued in respect of shares of such common stock
in connection with any exchange, merger, recapitalization, consolidation,
reclassification, reorganization or other transaction to which the Corporation
is a party, but excluding any shares or securities which cease to be
outstanding.
"Common Stock Equivalents" means any and all rights, warrants, options,
convertible securities, or exchangeable securities or indebtedness of the
Corporation including, without limitation, the Series A Preferred Stock of the
Corporation, or other rights, exercisable for or convertible into or
exchangeable for, directly or indirectly, Common Stock, whether at the time of
issuance or upon the passage of time or the occurrence of some future event, but
does not include Common Stock.
"Corporation" shall have the meaning set forth in the recitals and
includes any successor corporation.
"Designated Party" means a Party designated by all Parties of a Group
to represent such Parties under this Agreement and bind such Parties as
contemplated in this Agreement.
"Director" means a member of the Board.
"Duties" means all obligations of a Party and its Group under this
Agreement, including, without limitation, the obligation to vote shares of
Common Stock in accordance with Article II and the obligation to comply with the
restrictions on Transfer and Acquisition of shares of Common Stock set forth in
Article III.
"Effective Time" shall have the meaning set forth in the Combination
Agreement.
"Group" means one or more Persons, at least one of which is a Party to
this Agreement, including only one Ultimate Parent Entity and any direct or
indirect wholly owned Subsidiaries of the Ultimate Parent Entity.
"HM" means Hicks, Muse, Tate & Furst Incorporated, a Delaware
corporation.
"HM Stockholders Agreement" means that certain Stockholders Agreement
dated as of October 21, 1994 among HM, Old NGC and certain other persons.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
4
"Independent Director" means a natural person who is not a Party or an
Affiliate of a Party, or an officer or employee thereof or of the Corporation.
"Market Price" means, as of any trading day, the closing price, regular
way, of a share or unit of the subject security on the principal securities
exchange on which such security is listed, or if such security shall not be then
listed, the last sales price on the Nasdaq Stock Market, or if such security
shall not be quoted in the Nasdaq Stock Market, the average of the high and low
bid and asked prices in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization.
"Marketable Securities" means equity securities of a class listed for
trading on The New York Stock Exchange, the American Stock Exchange, the
International Stock Exchange of the United Kingdom and the Republic of Ireland
or the Nasdaq Stock Market of an issuer with total market capitalization
(excluding shares held by affiliates of the issuer) of not less than $1 billion
calculated by determining the Volume Weighted Market Price for the equity
securities of such issuer that are also so listed for trading as of the date of
the relevant Offer Date, and PROVIDED, that, if the equity securities of such
issuer to be received by the Offeror have a total market capitalization of less
than $1 billion (excluding any shares held by affiliates of the issuer and
calculated based on the Volume Weighted Market Price for such securities), the
shares to be received by the Offeror do not constitute more than 1/3 of the
aggregate number of shares of such class of securities to be outstanding
immediately following the issuance thereof (excluding any shares held by
affiliates of the issuer).
"NOVA" means NOVA Gas Services (US) Inc., a Delaware corporation.
"Offer Expiration Time" means (i) with respect to any Offer made
pursuant to Section 3.3 in which the Purchase Price for all Shares Subject to
the Offer is less than $10,000,000, 5:30 p.m. Houston Time on the 10th business
day following the Offer Date; (ii) with respect to any Offer made pursuant to
Section 3.3 in which the Purchase Price for all Shares Subject to the Offer is
greater than $50,000,000, 5:30 p.m. Houston time on the 40th business day
following the Offer Date; and (iii) with respect to any other Offer made
pursuant to Section 3.3, 5:30 p.m. Houston time on the 20th business day
following the Offer Date; PROVIDED, HOWEVER, that in the case of an Offer for
which the Purchase Price is based on the Volume Weighted Market Price of any
security other than the Common Stock or is determined, in whole or in part, by
an investment banking firm pursuant to Section 3.4(f), the Offer Expiration Time
shall be the number of business days set forth above, in each case following the
date of determination of the Purchase Price pursuant to Section 3.4(f).
"Officer" means an officer of the Corporation elected by the Board.
5
"Original Stock" means Common Stock outstanding immediately after the
Effective Time, as adjusted (i) to reflect any reclassification, subdivision or
combination of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock and (ii) to give effect to any
recapitalization, merger or consolidation in which all of the outstanding shares
of Common Stock are exchanged for Capital Stock.
"Other Securities" means debt securities rated "A-" or higher (or
equivalent) by Standard & Poor's Corporation or Moody's Investors Services, Inc.
of an issuer that has a class of equity securities listed for trading on The New
York Stock Exchange, the American Stock Exchange, the International Stock
Exchange of the United Kingdom and the Republic of Ireland or the Nasdaq Stock
Market with total market capitalization (excluding shares held by affiliates of
the issuer) of not less than $1 billion calculated by determining the Volume
Weighted Market Price for the equity securities of such issuer that are also so
listed for trading as of the date of the relevant Offer Date.
"Party" means any party to this Agreement during the period in which it
is a party.
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, or other organization, whether or not a legal entity, and any government
or agency or political subdivision thereof.
"Private Transaction" means any voluntary Transfer other than a Public
Transaction.
"Public Transaction" means (i) a public offering and sale of Common
Stock registered under the Securities Act, (ii) a sale of Common Stock pursuant
to Rule 144 promulgated under the Securities Act, or (iii) if the Party making
such sale is not an Affiliate of the Corporation, a sale of Common Stock on the
New York Stock Exchange or any other exchange on which the Common Stock may be
traded or through any inter-dealer quotation system; PROVIDED, that, in the case
of a sale pursuant to clause (i), to the knowledge, after reasonable
investigation, of the Party making such sale, as of the time of such sale, no
sales of Common Stock are made to any Person (other than, if applicable, the
underwriters that are underwriting such public offering) who would immediately
thereafter own more than 4.9% of the Common Stock.
"Rights" means all rights and benefits of a Party and its Group under
this Agreement, including, without limitation, the ability to nominate and
select Directors and approve certain transactions in accordance with Article II
and the preferential rights to acquire shares of Common Stock in accordance with
Article III.
6
"Series A Preferred Stock" shall mean the Series A Participating
Preferred Stock, par value $.01 per share, of the Corporation.
"Shares" means shares of Common Stock and/or Common Stock Equivalents.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture, business trust, limited liability company or similar
entity, in which such Person holds a majority interest with respect to the right
to receive dividends and distributions and the right to elect the governing body
of such entity.
"trading day" means a day on which trading in the Common Stock occurs,
if the Common Stock is listed on a securities exchange, on the principal
securities exchange on which Common Stock is listed, or, if the Common Stock is
not listed on a securities exchange but is quoted in the Nasdaq Stock Market, in
the Nasdaq Stock Market, or if the Common Stock is not quoted in the Nasdaq
Stock Market, in the domestic over-the-counter market.
"Transfer", including the correlative terms "Transferring" and
"Transferred", means any transfer, assignment, sale, gift, pledge, hypothecation
or other encumbrance, or any other disposition (whether voluntary or involuntary
or by operation of law), of Common Stock (or any interest therein or right
thereto) or Common Stock Equivalents other than the conversion of shares of
Series A Preferred Stock; PROVIDED, HOWEVER, that an exchange, merger,
recapitalization, consolidation or reorganization involving the Corporation in
which securities of the Corporation or any other Person are issued in respect of
shares of the Common Stock of the Corporation shall not be deemed a Transfer if
all shares of Common Stock are treated identically in such transaction.
"Ultimate Parent Entity" means, with respect to any Party, that Person
that is the "ultimate parent entity" of such Party under Rule ss. 801.1(a)(3)
promulgated under the HSR Act.
"Volume Weighted Average Market Price" means, as of a specified date,
the volume weighted average of the Market Price of the subject security for the
20 consecutive trading days immediately preceding such date, in the case of
shares of Common Stock, or following such date, in the case of any other
security (with such volume weighted average calculated by (i) multiplying the
Market Price as of the end of each such trading day by the number of shares or
units of the subject security traded on such day (on the principal securities
exchange on which such security is listed, or if such security shall not be then
listed, on the Nasdaq Stock Market, or if such security shall not be quoted on
the Nasdaq Stock Market, then in the domestic over-the-counter market), (ii)
totaling the sum of such calculations for all 20 such trading days and (iii)
then dividing the result by the total number of shares or units of the subject
security traded during such 20 days).
7
(b) In addition, the following terms shall have the meaning specified
in the Section of this Agreement identified below:
TERM SECTION
- ----------------------- -------------------------------
Acquisition Agreement ..... 3.3(b)
Acquisition Proposal ...... 3.3(c)
Agreement ................. Opening paragraph
Closing ................... 3.4(c)
Combination Agreement ..... Recitals
Indemnitees ............... 6.12
Indemnitor ................ 6.12
Invalid Transfer .......... 3.3(g)
Merger .................... Recitals
notice .................... 6.3
Offer ..................... The applicable paragraph of Section 3.3
Offer Date ................ 3.4(a)
Offeror ................... The applicable paragraph of Section 3.3
Offer Price ............... The applicable paragraph of Section 3.3
Participating Offerees .... 3.4(c)
Positive Receipt Notice ... 3.4(c)
Purchase Price ............ 3.4(f)
Record Date ............... 3.7
Shares Subject to the Offer The applicable paragraph of Section 3.3
Subject Shares ............ 3.6(b)
Third Party Sale .......... 3.3(b)
1.2 REPRESENTATIONS AND WARRANTIES. (a) Each Party represents and
warrants to the other Parties that as of the date hereof:
(i) such Party has full power and authority to execute and
deliver this Agreement and the execution and delivery by such Party of
this Agreement have been duly authorized by all necessary action;
(ii) this Agreement has been duly and validly executed and
delivered by such Party and constitutes the binding obligation of such
Party, enforceable against such Party in accordance with its terms, and
does not conflict with any other agreement or arrangement with respect
to Common Stock or Common Stock Equivalents of such Party, including,
without limitation, agreements or arrangements with respect to the
acquisition, disposition or voting of shares of Common Stock or Common
Stock Equivalents;
8
(iii) assuming that the Common Stock to be issued to it
pursuant to the Combination Agreement is duly and validly issued free
and clear of all liens and other encumbrances, immediately after the
consummation of the Combination, such Party shall own the number and
kind of shares of Common Stock and the Common Stock Equivalents, if
any, as set forth on SCHEDULE I, and such Shares shall be owned by such
Party free and clear of all liens and other encumbrances arising by,
through or under such Party except for this Agreement and security
interests in favor of commercial lending institutions if Section 3.2(b)
has been complied with; and
(iv) such Party is not a party to any agreement or arrangement
with respect to the acquisition, disposition or voting of shares of
Common Stock or Common Stock Equivalents, other than as contemplated by
the Combination Agreement or, if applicable, the HM Stockholders
Agreement.
(b) British Gas represents and warrants to the other Parties that, as
of the date hereof, it is a direct or indirect wholly owned subsidiary of
British Gas plc, an English company, its Ultimate Parent Entity, and that
British Gas is the Designated Party of its Group.
(c) Chevron represents and warrants to the other Parties that, as of
the date hereof, it is a direct or indirect wholly owned subsidiary of Chevron
Corporation, a Delaware corporation, its Ultimate Parent Entity, and that
Chevron is the Designated Party of its Group.
(d) NOVA represents and warrants to the other Parties that, as of the
date hereof, it is a direct or indirect wholly owned subsidiary of NOVA
Corporation, an Alberta corporation, its Ultimate Parent Entity, and that NOVA
is the Designated Party of its Group.
ARTICLE II
BOARD OF DIRECTORS; VOTING OF CAPITAL STOCK;
CERTAIN OTHER MATTERS
2.1 BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE. (a) The Parties shall
take all action within their respective power, including the voting of Capital
Stock of the Corporation, as is necessary to cause the Board at all times from
and after the Effective Time to consist of 13 Directors and to elect the
Directors nominated as follows:
(i) CLASS A GROUP NOMINEES: Each Class A Group shall nominate
three Directors.
(ii) CLASS B GROUP NOMINEES: Each Class B Group shall nominate
two Directors.
9
(iii) CLASS C GROUP NOMINEES: Each Class C Group shall
nominate one Director.
(iv) MANAGEMENT NOMINEES: The Board shall nominate two
Directors from among the Officers, except that the Chief Executive
Officer of the Corporation shall nominate such Officer Directors as
long as his employment agreement with the Corporation so provides.
(v) INDEPENDENT DIRECTOR NOMINEES: The Board shall nominate
two Independent Directors, except that prior to March 14, 1997, one
member shall be a nominee of HM to the extent provided in the HM
Stockholders Agreement.
(vi) OTHER DIRECTORS: All other Directors, if any, shall be
nominated and elected in accordance with applicable law, and this
Agreement shall not limit or otherwise restrict any Party's actions
with respect to the nomination or election of such Directors.
(b) EXECUTIVE COMMITTEE. Each Class A Group and each Class B Group, if
any, shall select one Director to be a member of the Executive Committee of the
Board or any similar committee. Each of the other Directors selected by such
Class A Group or Class B Group, as the case may be, shall be designated as
alternative members of each such committee to serve in the place and stead of
the member who is a Director designated by such Class A Group or Class B Group.
Any such alternate member may replace any absent or disqualified member at any
meeting of such committee.
(c) REMOVAL OR RESIGNATION. With respect to any Person nominated by a
Group in accordance with paragraphs (a) and (b) above as a Director or a member
of any committee of the Board:
(i) such Person shall be removed at the request of such Group,
and may be removed for cause or because such Group is no longer
entitled to make such nomination; and
(ii) if such Person is unable to serve, or once having
commenced to serve, is removed or resigns such Group shall nominate a
replacement unless such Group is no longer entitled to make such
nomination.
(d) Neither the Board nor any committee thereof shall take any action
without first giving effect to any nomination of Directors by a Group in
accordance with this Section, PROVIDED, HOWEVER, that if a Group fails to make a
nomination within 10 business days after receipt of notice from the Corporation
or another Party requesting that such Group make a nomination, the Board may
fill the vacancy and the Board or committee thereof may then take action;
PROVIDED FURTHER that the Director so appointed by the Board shall be
10
removed if the Group entitled to select the Director to fill such vacancy
subsequently makes a nomination.
2.2 CERTAIN TRANSACTIONS. No Party shall vote, or permit any member of
its Group to vote, any shares of Common Stock in favor of, or consent in its
capacity as a stockholder of the Corporation to, any actions listed below,
unless each Class A Group has provided notice to the other Groups of its
approval of the proposed action:
(i) Any amendment to the Certificate of Incorporation or
Bylaws of the Corporation;
(ii) Any sale of all or substantially all of the assets of the
Corporation, including any amendment to the terms of such sale; and
(iii) Any merger or consolidation of the Corporation with any
Person, or any liquidation or dissolution of the Corporation, including
any amendment to the terms of such merger, consolidation, liquidation
or dissolution.
Notwithstanding the foregoing, this Section 2.2 shall not require that any of
the actions listed above be approved by the stockholders of the Corporation if
such approval would not be required in the absence of this Agreement.
ARTICLE III
RESTRICTIONS ON TRANSFER AND ACQUISITION
3.1 GENERAL PROVISIONS. No Party shall make any Transfer or any
Acquisition, directly or indirectly, through an Affiliate or otherwise, except
as expressly permitted herein.
3.2 PERMITTED TRANSFERS; TRANSFERS NOT SUBJECT TO PREFERENTIAL RIGHT.
(a) TRANSFERS WITHIN A GROUP. Any member of a Group may, from time to
time, make a Transfer to any other member of the same Group, provided that the
transferee becomes a Party to this Agreement by executing an Adoption Agreement.
(b) CERTAIN PLEDGES. Any Party may pledge Common Stock and/or Common
Stock Equivalents such Party owns to a commercial lending institution as
security for indebtedness of such Party if prior to any such pledge, the pledgee
shall deliver to the other Parties its written agreement, in form and substance
satisfactory to the other Parties, (i) that such lender will not Transfer such
Common Stock and/or Common Stock Equivalents except in compliance with the
provisions of this Agreement, (ii) that the pledgee or its assignee must offer
to sell the stock pursuant to Section 3.3(e)(ii) before it may accept any
11
offer at foreclosure or in lieu of foreclosure or before it or its assignee may
acquire such shares and (iii) that the lender or any Person acquiring such
stock, whether by foreclosure or otherwise, will assume and be bound by all of
the obligations of the pledging Party under this Agreement; provided, however,
that prior to January 1, 1997, no Party may pledge pursuant to this Section
3.2(b) more than 20% of the Common Stock and Common Stock Equivalents such Party
owns.
(c) LIMITED TRANSFERS IN PUBLIC TRANSACTION. After January 1, 1997, a
Party may Transfer up to that number of shares of Common Stock that is
equivalent to 3,862,321 shares of Original Stock in one or more Public
Transactions.
(d) CERTAIN INDIRECT TRANSFER TRANSACTIONS. An Ultimate Parent Entity
of any Party may cease to control such Party PROVIDED such cessation of control
is a result of a reorganization or other transaction (i) in which one Person
becomes the Ultimate Parent Entity of such Party and such former Ultimate Parent
Entity, or (ii) in which the former Ultimate Parent Entity is merged or
otherwise combined with the new Ultimate Parent Entity or (iii) in which all
Parties which are members of a Group become members of a new Group with a new
Ultimate Parent Entity through a spinoff in which all Shares held by any member
of such Group are, directly or indirectly, distributed to the former Ultimate
Parent Entity's shareholders, or through a widely distributed public offering,
or through a similar transaction so long as the book value of the Shares is less
than 50% of the book value of all assets of the new Ultimate Parent Entity (on a
consolidated basis) as of the date of such transaction, in which event the
applicable Group shall be deemed to be the new Ultimate Parent Entity and all of
its direct and indirect wholly owned Subsidiaries.
(e) SALE OF COMMON STOCK RECEIVED ON CONVERSION OF SERIES A PREFERRED
STOCK. In addition to any Shares which it may Transfer pursuant to Section
3.2(c) above, Chevron may Transfer in a Public Transaction any shares of Common
Stock received on conversion of shares of the Series A Preferred Stock at any
time on or after January 1, 1997.
(f) TRANSFERS NOT SUBJECT TO PREFERENTIAL RIGHTS. Any Transfer pursuant
to this Section 3.2 will not be subject to the preferential rights set forth in
Section 3.3.
3.3 TRANSFERS SUBJECT TO PREFERENTIAL RIGHT.
(a) OTHER TRANSFERS IN A PUBLIC TRANSACTION AND TRANSFER IN A PRIVATE
TRANSACTION AFTER JANUARY 1, 1997. Except as may otherwise be expressly
permitted herein, on or after January 1, 1997, a Party may make a Transfer in a
Public Transaction in excess of that number of shares of Common Stock permitted
pursuant to Section 3.2(c) and 3.2(e), or a Party may make a Transfer in a
Private Transaction, in each case to a transferee, but only in compliance with
this Section 3.3.
12
(b) RIGHT OF FIRST OFFER. The Designated Party for any Group that
wishes to make a Transfer, other than pursuant to a transaction permitted under
Section 3.2 hereof, may, at its option, make a written offer (the "Offer") to
sell to the other Groups all of such Shares. The Offer shall (i) be executed by
each Party desiring to make a Transfer (the "Offeror"), (ii) specify the number
of Shares the Group desires to sell (the "Shares Subject to the Offer") and
(iii) specify the price (the "Offer Price") and other material terms on which
the other Groups may purchase the Shares Subject to the Offer. If the other
Groups fail to elect timely to purchase all of the Shares Subject to the Offer
prior to the Offer Expiration Time as set forth in Section 3.4, the Offeror may
enter into an agreement (an "Acquisition Agreement") within 60 days after the
Offer Expiration Time to sell all but not less than all of the Shares Subject to
the Offer and may consummate such sale (the "Third Party Sale") at any time on
or prior to the date that is 90 days after the Offer Expiration Time; PROVIDED,
HOWEVER, that (i) if the Purchase Price determined in accordance with Section
3.4(f) with respect to such Third Party Sale is equal to or less than 10% higher
than the Offer Price, the other Groups will have a right of first refusal
pursuant to Section 3.3(c) below to buy such shares at such Purchase Price; and
(ii) in all other cases, the other Groups shall have the right to consent to the
identity of the proposed purchaser, such consent not to be unreasonably
withheld; and PROVIDED, FURTHER, that if such consent has not been given on or
prior to the Offer Expiration Time, the 60 day period during which the Offeror
may enter into an Acquisition Agreement and the 90 day period during which the
Third Party Sale may be consummated shall begin on the date such consent is
given by the other Groups. The other Groups shall have a period of 10 business
days after notice of the identity of a proposed purchaser with which the Offeror
has entered into discussions with respect to an Acquisition Agreement, to
request reasonable information with respect to, and consultation or a meeting
with, such proposed purchaser in connection with exercising its right to consent
to the identity of such proposed purchaser. The other Groups shall exercise such
consent right as soon as practicable and in no event later than 10 business days
after the later of the date of such consultation or meeting, if any, and the
date of receipt of all material information reasonably requested by such other
Groups with respect to such proposed purchaser; provided, however, that if
during such 10 business day period such other Groups reasonably request
supplemental information after review of the information initially furnished,
such right shall be exercised within 5 business days after receipt of such
supplemental information. In granting or withholding such consent, each of the
other Groups may consider the following factors, among others:
(i) the creditworthiness of such proposed purchaser,
(ii) whether such proposed purchaser is an owner or operator
of a significant amount of assets or businesses which are the same as
or substantially similar to a line of business of the Corporation and
such proposed purchaser competes with the Corporation,
13
(iii) any material conflicts of interest between such proposed
purchaser and the Corporation, and
(iv) the general business reputation of such proposed
purchaser in the industries in which it is a participant.
(c) RIGHT OF FIRST REFUSAL. If required pursuant to Section 3.3(b) or
upon a Party's receipt of an acquisition proposal from a BONA FIDE creditworthy
purchaser that is subject only to (i) customary closing conditions (such as
receipt of governmental and third party consents, bring-down of representations
and absence of litigation, etc.) and (ii) non-exercise of the right of first
refusal provided for in this Section 3.3(c), which such Party desires to accept
(an "Acquisition Proposal"), such Party (the "Offeror") shall offer (the
"Offer"), by written notice to each other Group, to sell the Shares referred to
in the Acquisition Proposal (the "Shares Subject to the Offer") to the other
Groups for the Purchase Price determined in accordance with Section 3.4(f) (the
"Offer Price") and on the terms set forth in the Acquisition Proposal. Any Offer
under this Section 3.3(c) shall be irrevocable for so long as any Group has the
right to purchase any Shares Subject to the Offer. The Offer shall be delivered
to each other Group, and shall (i) state the Shares Subject to the Offer, the
consideration to be paid therefor, the Offer Date and the Offer Expiration Time
and (ii) contain a true and complete copy of the Acquisition Proposal. If the
Offer is not accepted to the extent required by Section 3.4(b), the Offeror
shall be permitted at any time within 90 days after the Offer Expiration Time to
make a Transfer of all (but not less than all) of the Shares Subject to the
Offer in accordance with Section 3.4(d) of this Agreement.
(d) TRANSFER IN EXCESS OF PERMITTED AMOUNT IN PUBLIC TRANSACTION.
Except as may otherwise be expressly permitted herein, a Party that desires to
make a Transfer in a Public Transaction of a number of Shares of Common Stock
that exceeds the amount permitted pursuant to Section 3.2(c) (the "Offeror")
must offer (the "Offer"), by written notice to each other Group, to sell the
Shares that it desires to Transfer (the "Shares Subject to the Offer") to the
other Groups. Offers under this Section 3.3(d) shall be irrevocable for so long
as any Group has the right to purchase any Shares Subject to the Offer. Offers
shall be delivered by the Offeror to each other Group and shall state (i) the
number of shares of Common Stock that the Offeror proposes to Transfer, (ii)
whether or not the intended method of Transfer is by underwritten public
offering, (iii) the price per share at which the Offeror proposes to sell the
Shares Subject to the Offer in a Public Transaction and (iv) the Offer
Expiration Time.
(e) BANKRUPTCY AND CERTAIN OTHER EVENTS. If any of the following events
occur:
(i) the filing of a petition in bankruptcy by a Party, the
filing of a petition in bankruptcy against a Party that is not
dismissed within 90 days, the appointment of
14
a receiver of a Party's property or the admission by a Party of its
inability to pay its debts generally; or
(ii) any involuntary Transfer by a Party (including by
operation of law);
then such Party, or its transferee, as the case may be (the "Offeror"), shall be
deemed to have made an Offer (the "Offer") to sell all Shares owned by such
Party, in the case of an event under clause (i) above, or all Shares so
Transferred, in the case of an event under clause (ii) above (the "Shares
Subject to the Offer") to the other Groups for the Purchase Price determined
pursuant to Section 3.4(f), and such Party shall promptly deliver written notice
of the Offer to the other Groups. If the Offer is not accepted to the extent
required by Section 3.4(b) prior to the Offer Expiration Time, the Offeror (or
in the case of clause (ii) of this Section, the Offeror's transferee) may retain
such Shares, but such Shares shall remain subject to this Agreement.
(f) CERTAIN INDIRECT TRANSFER TRANSACTIONS. If (i) any Party ceases to
be a member of its Group, other than pursuant to Section 3.2(d), such Party
shall be deemed to have Transferred all of its Shares, and such Party
("Offeror") shall promptly notify each other Group of such event and offer (the
"Offer"), by written notice to each other Group, to sell all Shares owned by
such Party (the "Shares Subject to the Offer") to the other Groups for the
Purchase Price determined pursuant to Section 3.4(f). Offers under this Section
3.3(f) shall (i) be in writing, (ii) be irrevocable for so long as any Group has
the right to purchase any Shares Subject to the Offer, (iii) be sent by the
Offeror to each other Group, (iv) contain a description of the event resulting
in the Offer, (v) contain the name and address of the new Ultimate Parent Entity
of the Offeror, and (vi) state the Offer Expiration Time.
(g) INVALID TRANSFERS. Any Transfer or attempted Transfer in breach of
this Agreement ("Invalid Transfer") shall be void and of no effect; PROVIDED
that one or more Parties who own at least a majority of the Common Stock owned
by all Parties may determine to treat any Invalid Transfer as an involuntary
Transfer pursuant to Section 3.3(e)(ii), in which event all of the other Groups
shall have the Rights provided in Section 3.3(e)(ii).
3.4 PROCEDURES WITH RESPECT TO TRANSFERS SUBJECT TO SECTION 3.3.
(a) OFFER DATE; SHARES SUBJECT TO THE OFFER; ELECTION PROCEDURE. The
first date an Offer pursuant to Section 3.3 has been deemed received pursuant to
Section 6.3 by all other Groups (or, in the case of a deemed Offer pursuant to
Section 3.3(e) or (f), if no such written notice is delivered by the Offeror, on
the date the other Groups receive evidence, satisfactory to them, of such deemed
Transfer by the Offeror) shall be the "Offer Date." With respect to any Offer
made or deemed made pursuant to Section 3.3 (b), (c), (d), (e) or (f), the other
Groups shall have the option and preferential right, but shall not be
15
obligated, to elect by the Offer Expiration Time, to purchase the Shares Subject
to the Offer. Each Group desiring to purchase Shares Subject to the Offer shall,
prior to the Offer Expiration Time, deliver a written notice to the Offeror with
a copy to each other Group stating that such Group elects to purchase up to
one-half of the Shares Subject to the Offer. If the other Groups elect to
purchase some but not all of the Shares Subject to the Offer, the Group, if any,
that elected to purchase all of the Shares Subject to the Offer that it was
eligible to purchase (the "Electing Offeree") shall have 10 business days to
deliver a written notice to the Offeror with a copy to each other Group stating
the number of additional Shares Subject to the Offer, if any, that such Electing
Offeree elects to purchase, and the Offer Expiration Time shall be extended for
such period.
(b) REQUIREMENT TO PURCHASE SOME OR ALL. With respect to Offers made,
or deemed made, pursuant to Section 3.3 (d), (e) or (f), the other Groups shall
not be required to elect collectively to purchase all of the Shares Subject to
the Offer, but instead may elect to purchase a portion thereof, in which event
the Offeror shall be obligated to sell that portion to the other Groups and
shall be entitled to Transfer only that portion of the Shares Subject to the
Offer that are not purchased by the other Groups. With respect to Offers made
pursuant to Section 3.3(b) or (c), if the other Groups fail to elect to purchase
all of the Shares Subject to the Offer, then the other Groups shall be deemed
not to have accepted the Offer and the Offeror shall be permitted to Transfer
all of the Shares Subject to the Offer on the terms set forth in the applicable
paragraph of Section 3.2 and subject to the provisions of Section 3.4(d).
(c) ELECTION TO PURCHASE. If one or more of the other Groups elect to
purchase the Shares Subject to the Offer to the extent required by Section
3.4(b), then the Offer shall be deemed accepted to such extent, and the Offeror
shall promptly notify in writing (the "Positive Receipt Notice") each Group
electing to purchase Shares Subject to the Offer (the "Participating Offerees").
The Positive Receipt Notice shall specify the number of Shares that each
Participating Offeree is obligated to purchase and the time, date and place of
the closing of the acquisition of Shares Subject to the Offer by the
Participating Eligible Offerees (the "Closing").
(d) ELECTION NOT TO PURCHASE; TERMS OF TRANSFER TO THIRD PARTY. If the
other Groups do not elect to purchase all of the Shares Subject to the Offer
made under Section 3.3, the Offeror desiring to make the Transfer pursuant to
Section 3.3 shall be permitted at any time within, but not after, the time
period specified in the applicable paragraph of Section 3.3 or, if no time
period is specified, 90 days after the Offer Expiration Time, to make a Transfer
of all (but not less than all) of the Shares Subject to the Offer, other than
the Shares, if any, to be purchased by the other Groups pursuant to Section
3.4(c); PROVIDED, HOWEVER, that no such Transfer shall be made (i) on more
favorable terms (including lower price) than the terms specified in the Offer,
(ii) in the case of an Offer pursuant to Section 3.3(b) or (c), to a Person
other than the proposed transferee consented to by the other Groups or specified
in the Acquisition Proposal, as the case may be or (iii) in
16
the case of an Offer pursuant to Section 3.3(d), in a manner other than that
specified in the Offer.
(e) CLOSING. Unless otherwise agreed to by the Offeror and each
Participating Offeree, the Closing shall be at 9:00 a.m., on (i) with respect to
any Offer made pursuant to Section 3.3 in which the Purchase Price for all
Shares Subject to the Offer is less than $10,000,000, the 10th business day
following the date of the applicable Positive Receipt Notice; and (ii) with
respect to any other Offer made pursuant to Section 3.3, the 40th business day
following the date of the applicable Positive Receipt Notice, subject to any
delay in the Closing permitted pursuant to Section 3.4(g). At the Closing, the
Purchase Price (if cash, in the form of a cashier's check or by wire transfer in
same day funds) shall be delivered to the Offeror or its designee, and the
Offeror shall deliver to the Participating Offerees such certificates
representing the Shares so purchased, duly endorsed for transfer or accompanied
by duly executed stock powers, free and clear of all liens, encumbrances and
adverse claims with respect thereto and such other documents, if any, as are
necessary for the proper Transfer of the Shares so purchased to the
Participating Offerees on the books of the Corporation. For the purpose of the
foregoing, fractional interests shall be sold into the public market with the
net proceeds allocated pro rata among the Participating Offerees.
(f) AMOUNT AND FORM OF PAYMENT. The purchase price with respect to any
Shares Subject to the Offer (the "Purchase Price") shall be equal to (i) the
purchase price specified in the Offer (or if an Acquisition Agreement is entered
into by the Offeror and a third party, the purchase price proposed to be paid by
the applicable third party purchaser under an Acquisition Agreement) pursuant to
Section 3.3(b) or an Acquisition Proposal pursuant to Section 3.3(c), as the
case may be, calculated in accordance with this Section 3.4(f), (ii) the price
set forth in the Offer pursuant to Section 3.3(d) or (iii) in the case of an
Offer or deemed Offer pursuant to Section 3.3(e) or (f), 98.5% of the Volume
Weighted Market Price as of the applicable Offer Date of the Shares Subject to
the Offer.
The following additional provisions shall apply to any proposed
Transfer pursuant to Section 3.3(b) or (c): In the case of a proposed Transfer
to a third party for consideration payable solely in cash, the Purchase Price
shall equal the aggregate amount of such cash. In the case of a proposed
Transfer to a third party for consideration consisting either solely of
Marketable Securities or of cash and Marketable Securities, the Purchase Price
shall be equal to the amount of the cash component, if any, and 98.5% of the
Volume Weighted Average Market Price as of the applicable Offer Date of the
Marketable Securities included as consideration. In the case of a proposed
Transfer to a third party for consideration consisting either solely of Other
Securities or of cash and/or Marketable Securities and Other Securities, the
Purchase Price shall be equal to (i) the amount of the cash component, if any,
(ii) 98.5% of the Volume Weighted Average Market Price as of the applicable
Offer Date of the Marketable Securities included as consideration, if any, and
(iii) the fair market value of such Other Securities as determined by an
investment banking firm of national reputation selected by the Participating
Offerees and reasonably acceptable to
17
the Offeror, it being understood that, in determining the fair market value
thereof, such investment banking firm shall take into account any discount,
commission and other direct selling expenses that the Offeror would incur in
selling such Other Securities. In the case of a proposed Transfer to a third
party for which at least 80% of the aggregate consideration is to be paid in
assets related to the businesses operated by the Offeror, the Purchase Price
shall be equal to the sum of (a) the fair market value of such assets as
determined by an investment banking firm of national reputation selected by the
Participating Offerees and reasonably acceptable to the Offeror and (b) the
value of the remaining consideration, valued in accordance with clauses (i),
(ii) and (iii) of the preceding sentence. In the case of any other proposed
Transfer to a third party, the Purchase Price shall be equal to 90% of the
Volume Weighted Average Market Price of the Shares Subject to the Offer (or the
underlying shares of Common Stock, in the case of Common Stock Equivalents). The
Purchase Price of all Shares Subject to the Offer purchased by any Group
pursuant to an Offer made or deemed made under Section 3.3(b) through 3.3(f)
shall be paid in cash.
(g) DELAY FOR APPROVALS. If any Positive Receipt Notice is delivered by
the Offeror, the Offeror and the Participating Offerees shall cooperate in good
faith in obtaining all necessary governmental and other third party approvals,
waivers and consents. Any Closing pursuant to Section 3.4(e) shall be delayed,
to the extent required, until the date that is 5 business days following the
expiration of any required waiting periods under the HSR Act and the obtaining
of all necessary governmental approvals; provided, however, that in the case of
such delay, the Purchase Price shall be increased by the Applicable Interest
Rate from the date that the Closing would have otherwise occurred; and provided,
further, however, such delay shall not exceed 90 days, if the Purchase Price for
all Shares Subject to the Offer is less than $50,000,000 or 180 days, if the
Purchase Price for all shares Subject to the Offer is $50,000,000 or more, and
if governmental approvals and waiting periods shall not have been obtained or
expired, as the case may be, by such 90th or 180th day, as the case may be,
following the applicable Preferential Purchase Closing Date, then the other
Groups shall be deemed to have elected not to purchase any of the Shares Subject
to the Offer and the Offeror shall be entitled to Transfer the Shares Subject to
the Offer in accordance with Section 3.4(d) (except that such 90th or 180th day,
as the case may be, shall be deemed to be the applicable Offer Expiration Time).
3.5 CONDITIONS TO TRANSFER OF RIGHTS IN CONNECTION WITH A PERMITTED
TRANSFER. In connection with a Transfer permitted hereunder, a Group may
transfer all, but not less than all, of its Rights under this Agreement to the
transferee of shares of Common Stock; PROVIDED, HOWEVER, that any such
transferee shall be required to become a Party to this Agreement by executing an
Adoption Agreement, and shall have all the Duties of a Party hereunder and the
Rights that are expressly provided for herein.
3.6 RESTRICTIONS ON CERTAIN ACQUISITIONS. (a) Except for the
Acquisitions taking place at the Effective Time pursuant to the Combination
Agreement and as permitted by Section 3.2(a), each Party agrees that neither
such Party nor any member of such Party's
18
Group will Acquire any Shares prior to January 1, 1997 unless the Designated
Parties for each of the other Groups agree in writing to such Acquisition.
(b) For the entire term of this Agreement, each Party agrees that
neither such Party nor any member of such Party's Group will Acquire ownership
of any Shares (the "Subject Shares") unless (i) such Party gives notice and an
opportunity to participate in such Acquisition to the Designating Parties for
each of the other Groups and (ii) at the time of or prior to such Acquisition by
any member of such Party's Group that is not a Party to this Agreement, such
member executes and delivers an Adoption Agreement. Any notice pursuant to
clause (i) of the preceding sentence shall be in writing and shall (i) be
executed by the Party desiring to Acquire Shares, (ii) specify the type and
number of Shares which such Party desires to Acquire and the purchase price or
range of prices at which such Party desires to Acquire Shares and (iii) the
identity of the persons from whom such Party desires to Acquire such Shares, if
known. Each of the other Parties shall have ten business days after receipt of
such notice to elect to participate in such Acquisition. If any Party elects to
so participate, it shall provide a written acceptance notice to the Party
proposing such Acquisition and to each other Party prior to the expiration of
such 10 business day period specifying the number of Shares that it elects to
purchase, which number shall not exceed (i) 1/3 of the Subject Shares if there
are three Groups at the time of such proposed Acquisition or (ii) 1/2 of the
Subject Shares if there are two Groups at the time of such proposed Acquisition;
PROVIDED, HOWEVER, that if there are three Groups at the time of such proposed
Acquisition and one Group does not elect to purchase all of the shares that it
could elect to Acquire pursuant to this Section 3.6(b), then the other Group
making an election to Acquire Shares hereunder shall have an additional 5
business days after the expiration of such 10 business day period to elect to
Acquire up to 1/2 of the Subject Shares that the other Group could have, but did
not, elect to Acquire. For greater certainty, the Parties intend by this Section
3.6(b) to provide a mechanism by which no Group will Acquire any Shares without
offering the other Groups the opportunity to participate equally.
(c) In the event Chevron or any member of its Group elects to convert
shares of Series A Preferred Stock into Common Stock pursuant to Section
4(C)6(A)(i)(a) of the Certificate of Incorporation of the Corporation, then at
any time thereafter, each of the other Groups will be permitted to acquire an
equivalent number of shares of Common Stock in the open market pursuant to this
Section 3.6(c) and neither Chevron nor any member of its Group will be entitled
to participate in such purchase under Section 3.6(b). Chevron agrees that it
will not convert any shares of Series A Preferred Stock pursuant to Section
4(C)(6)(A)(i)(a) of the Certificate of Incorporation of the Corporation unless
(i) it shall have given each of the Parties hereto at least 20 business days'
prior written notice of its intention to make such conversion, which notice
shall set forth the number of shares of Series A Preferred Stock that Chevron
intends to convert, the basis under the Certificate of Incorporation of the
Corporation for such conversion and the date of such conversion and (ii) none of
the other Parties hereto shall have notified Chevron in writing prior to the
conversion date specified in Chevron's notice that such Party desires to Acquire
a number of
19
shares of Common Stock up to the number of shares to be received by Chevron on
such conversion. Chevron agrees that, if any Party gives the notice referred to
in clause (ii) of the previous sentence, Chevron shall not effect such
conversion until the earlier of the date on which such other Party can effect
the purchase referred to in its notice or the date that is 70 days after the
conversion date specified in Chevron's notice.
3.7 EFFECT OF DISTRIBUTIONS AND CERTAIN TRANSACTIONS. If, in connection
with any Offer, any record date for any dividend or distribution by the
Corporation (other than any regular quarterly cash dividend) or any record date
for the issuance of any securities of the Corporation or any other Person in
respect of Common Stock of the Corporation in connection with any exchange,
merger, recapitalization, consolidation, reorganization or other transaction
involving the Corporation (in any such case, a "Record Date") occurs on or after
the date on which the Purchase Price is determined and prior to the Closing,
then the Participating Offeree shall be entitled to receive any such dividends,
distributions or securities, as the case may be, in respect of the Common Stock
they acquire pursuant to such Offer and appropriate documentation shall be
delivered at the Closing by the Offeror to evidence the Participating Offerees'
right to receive such dividends, distributions or securities.
ARTICLE IV
EFFECTIVENESS; TERMINATION
4.1 EFFECTIVENESS AND TERM. The provisions of this Agreement shall
become effective at the Effective Time and no Party shall have any Duties or
Rights hereunder prior to such time. If the Combination Agreement is terminated
in accordance with its terms, the provisions of this Agreement shall be null and
void and of no further force or effect and this Agreement shall be deemed
terminated. Following the Effective Time, this Agreement shall continue for an
initial term of 10 years. Such term shall be extended for a period of up to 3
additional years if any Class A Group so elects by notice to the Designated
Party for each other Group at any time prior to the date that is 90 days prior
to the tenth anniversary of the Effective Time, and will automatically renew on
an annual basis for an additional year commencing on the last day of the initial
term or, if extended, the last day of the renewal term, unless a Party objects
to such renewal not less than 90 days prior to commencement of a renewal period
or unless, in each case, the Agreement is terminated earlier pursuant to Section
4.2.
4.2 TERMINATION. This Agreement shall terminate and no Party shall have
any further Duties or Rights hereunder upon the earliest to occur of (i) the
date on which all Groups having Rights under this Agreement collectively own
less than 30% of the Common Stock, (ii) the date of the dissolution, liquidation
or winding-up of the Corporation without creation of a successor corporation,
(iii) 10 business days following the date of the delivery to the other Parties
of a written termination notice executed by the Designated Party of a
20
Class A Group that owns in excess of 50% of the Common Stock, which notice shall
include copies of a consent to such termination by each other remaining Class A
Group and (iv) 10 business days following the date of the delivery to the other
Parties of a written termination notice executed by the Designated Party of a
Class A Group that owns at least 75% of the Common Stock.
ARTICLE V
AGREEMENTS OF GENERAL EFFECT
5.1 SHARES SUBJECT TO THIS AGREEMENT. Except as otherwise provided for
herein, all Shares now or hereafter owned by any Party hereto or any member of
its Group shall be subject to the terms of this Agreement. For purposes of
determining the Common Stock owned by a Group, such determination shall be made
by aggregating the ownership of all members of such Group but without
duplication so that a share of Common Stock will be deemed owned by only one
member of the Group.
5.2 LEGENDS. (a) A copy of this Agreement shall be filed with the
Secretary of the Corporation. At the Effective Time, each Party shall request
that the Corporation cause each certificate representing Shares to carry a
legend as follows:
THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, RESTRICTIONS ON
TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN A STOCKHOLDERS
AGREEMENT, DATED AS OF MAY 22, 1996, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
(b) Upon the acquisition of additional Shares after the date hereof,
each Party shall cause each certificate representing such shares to carry the
above legend.
5.3 RIGHTS AND DUTIES. Each Party acknowledges and agrees that: (i) as
of the time the first member of its Group becomes a Party to this Agreement,
such Group acquires Rights which may be transferred only in accordance with the
terms of this Agreement; and (ii) notwithstanding any such transfer of Rights,
such Party remains bound by and continues to have Duties under this Agreement
until such Party ceases to be a Party hereto in accordance with this Agreement.
A Party which is a member of a Group that has transferred all of its Rights
under this Agreement shall remain subject to all of its Duties under this
Agreement until such time as its Group ceases to own Shares representing at
least 5% of the outstanding shares of Common Stock, at which time all members of
such Group shall cease to be Parties to this Agreement. Except as provided in
Section 3.5, no transferee of Shares shall accede to any of the Rights of any
Group hereunder or shall be required to become a Party to this Agreement.
21
5.4 DESIGNATED PARTIES; CHANGE IN NUMBER OF SHARES OWNED. The
Designated Party of each Group shall have exclusive authority to act and receive
notices on behalf of such Group under this Agreement. Each Party shall provide
all necessary cooperation and information to its Designated Party to enable such
Designated Party to fulfill such Party's Duties, but no failure of a Designated
Party to fulfill a Party's Duties shall excuse the Party from any
non-performance of such Duties. A Designated Party shall notify the other
Designated Parties if it ceases to be the Designated Party of its Group; such
notice shall name and be subscribed to by the new Designated Party of such
Group. A Designated Party shall notify the other Designated Parties if any Party
ceases to be a member of its Group. Each Party agrees to notify each of the
other Parties in writing promptly after a change in such Party's ownership of
Common Stock and Common Stock Equivalents and after any event that would result
in such Party ceasing to be a member, or becoming a member, of any Group.
5.5 TAKING OF NECESSARY ACTION. Each Party shall, and shall cause each
member of its Group to perform its Duties hereunder and to take all reasonable
efforts to influence those individuals whom its Group has nominated as
Directors, if any, to vote as a Director in such a manner as to ensure that the
Rights of each Group under this Agreement are fully effectuated; PROVIDED,
HOWEVER, that nothing in this Agreement, express or implied, shall relieve any
director of the Corporation or any of its Subsidiaries, as such, of any
fiduciary duties they may have to the Corporation or its stockholders.
5.6 RESTRICTIONS ON OTHER AGREEMENTS. Except as otherwise expressly
provided herein, no Party shall grant any proxy or enter into or agree to be
bound by any voting trust with respect to its Shares nor shall any Party enter
into any stockholder agreement or arrangements of any kind (other than the HM
Stockholders Agreement) with any Person with respect to Shares (whether or not
such agreements and arrangements are with other Parties), including, without
limitation, agreements or arrangements with respect to the acquisition,
disposition or voting of Shares.
5.7 OTHER ACTIVITIES OF THE PARTIES; FIDUCIARY DUTIES. It is understood
and accepted that the Parties and their Affiliates have or may hereafter have
interests in other business ventures that are or may be competitive with the
activities of the Corporation and its Subsidiaries and that, to the fullest
extent permitted by law, nothing in this Agreement shall limit the current or
future business activities of any of the Parties or any of their respective
Affiliates, whether or not such activities are competitive with those of the
Corporation or any of its Subsidiaries or otherwise. Except as expressly
provided herein, nothing in this Agreement shall limit in any manner the ability
of any Party to exercise its Rights under this Agreement or as a stockholder of
the Corporation and this Agreement shall not create, or be deemed or interpreted
to create, any fiduciary or similar duty of any Party owing to any other Party
or the Corporation; PROVIDED, HOWEVER, that nothing in this Agreement, express
or implied, shall relieve any officer or director of the Corporation or any of
its Subsidiaries, as such, of any fiduciary duties they may have to the
Corporation or its stockholders.
22
5.8 LATE PAYMENT. If any Party does not timely pay in full any amount
required of it under this Agreement, interest shall accrue on the amount of such
payment not timely made, from the day such amount is owed until paid in full, at
the Applicable Interest Rate.
5.9 U.S. CURRENCY. All payments required or permitted hereunder shall
be paid in U.S. dollars or other lawful currency constituting legal tender of
the United States of America.
5.10 INTERNATIONAL JOINT VENTURES. For a period of two years from the
Effective Time, the written consent of each Class A Group will be required for
the formation of any partnership or other business arrangement involving shared
ownership between the Corporation and any member of a Class A Group, provided
that such consent will not be required for any such arrangement involving crude
oil, or products refined from crude oil or natural gas liquids or liquified
petroleum gases involving Caltex Petroleum Corporation directly or through one
or more members of the Chevron Group. Thereafter, no Group will, either directly
or indirectly, form any partnership or other business arrangement involving
shared ownership between the Corporation and any member of such Group without
prior consultation with each Class A Group.
ARTICLE VI
MISCELLANEOUS
6.1 AMENDMENT; WAIVERS. This Agreement may only be altered,
supplemented, amended or waived by the written consent of each Party under this
Agreement; PROVIDED, HOWEVER, that no consent will be required to be obtained
from a Party with Duties but not Rights under this Agreement if such Party is
released from its Duties upon the effectiveness of such alteration, supplement,
amendment or waiver. Any Group may (without the consent of any other Person)
waive, in writing, any Duty owed to it hereunder by any other Group and any
Group may (without the consent of any other Person) waive, in writing, any Right
it has hereunder. Any waiver permitted hereunder may be made prospectively or
retroactively.
23
6.2 ASSIGNMENT. Except as otherwise expressly provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the Parties and their permitted assigns; provided, however, assigns
shall only have those Rights that are expressly provided for herein in
accordance with Section 3.5. No such assignment shall relieve the assignor from
any liability accruing hereunder prior to an assignment permitted hereunder.
6.3 NOTICES. Any and all notices, designations, consents, offers,
acceptances, or other communications provided for herein (each a "notice") shall
be given in writing by overnight courier, telegram, or telecopy which shall be
addressed, or sent, to the respective addresses or telecopy numbers of the
Designated Parties set forth on Schedule I (or such other address or telecopy
number as any Designated Party may specify by notice). All notices shall be
deemed effective, delivered and received (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified above and receipt
thereof is confirmed; (b) if given by overnight courier, on the business day
immediately following the day on which such notice is delivered to a reputable
overnight courier service; or (c) if given by telegram, when such notice is
delivered at the address specified above.
6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
6.5 HEADINGS. Headings contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit, or extend the scope or
intent of this Agreement or any provisions hereof.
6.6 CHOICE OF LAW. This Agreement shall be governed by the internal
laws of the State of Delaware without regard to the principles of conflicts of
laws thereof.
6.7 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties hereto respecting the subject matter hereof and as of the
Effective Time will supersede all prior agreements, discussions and
understandings with respect thereto, including, without limitation, the
Stockholders Agreement dated as of October 21, 1994 among British Gas, NOVA, Old
NGC and certain other parties.
6.8 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement.
24
6.9 NO PARTNERSHIP. No term or provision of this Agreement shall be
construed to establish any relationship of partnership, agency or joint venture
between the parties hereto.
6.10 NUMBER; GENDER; WITHOUT LIMITATION; INTERPRETATION OF CERTAIN
DEFINED TERMS. Pronouns, wherever used in this Agreement, and of whatever
gender, shall include Persons of every kind and character, and the singular
shall include the plural whenever and as often as may be appropriate. Any
reference herein to "including" and words of similar import refer to "including
without limitation". When reference is made herein to one or more Groups or
other specified Parties or Persons, the determination as to which Persons are
thereby referenced shall be made as of the time in question.
6.11 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties hereto shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions, the
economic effect of which approximates as nearly as possible that of the invalid,
illegal or unenforceable provisions.
6.12 INDEMNIFICATION. Each Party (the "Indemnitor") hereby agree to
protect, defend, indemnify and hold harmless all other Parties and their
respective successors, heirs and assigns (the "Indemnitees") against any and all
claims, lawsuits, damages and other liabilities and expenses (including
reasonable attorneys' fees) suffered or incurred by any of the Indemnitees and
which arise out of any breach by the Indemnitor of its representations,
warranties, covenants or other obligations hereunder.
6.13 SPECIFIC PERFORMANCE. The Parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent or cure any breach of this
Agreement and to enforce specifically the provisions of this Agreement, this
being in addition to any other remedy to which any Party may be entitled by law
or equity. The Parties further agree that none of the Parties hereto shall raise
the defense that there is an adequate remedy at law.
25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written, but effective for all purposes as of the
Effective Time.
BG HOLDINGS, INC.
By:
Printed Name:
Title:
NOVA GAS SERVICES (U.S.) INC.
By:
Printed Name:
Title:
CHEVRON U.S.A. INC.
By:
Printed Name:
Title:
EXHIBIT "A"
ADOPTION AGREEMENT (form)
This Adoption Agreement ("Adoption") is executed pursuant to the terms
of the Stockholders Agreement dated as of , 1996, a copy of which is attached
hereto and is incorporated herein by reference (the "Stockholders Agreement"),
by the transferee ("Transferee") executing this Adoption. By the execution of
this Adoption, the Transferee agrees as follows:
1. ACKNOWLEDGMENT; REPRESENTATIONS AND WARRANTIES. (a) Transferee
acknowledges that Transferee is acquiring _____ [number of shares to be acquired
to be inserted] shares of the Common Stock from a Party, subject to the terms
and conditions of the Stockholders Agreement. Capitalized terms used herein
without definition are defined in the Stockholders Agreement and are used herein
with the same meanings set forth therein. Transferee represents and warrants to
the other Parties to the Stockholders Agreements that as of the date hereof (i)
Transferee has full power and authority to execute and deliver this Adoption
Agreement and the execution and delivery by such Transferee of this Adoption
Agreement have been duly authorized by all necessary action; (ii) this Adoption
Agreement has been duly and validly executed and delivered by Transferee and
constitutes the binding obligation of Transferee, enforceable against Transferee
in accordance with its terms and does not conflict with any other agreement or
arrangement with respect to Common Stock or Common Stock Equivalents, including,
without limitation, agreements or arrangements with respect to the acquisition,
disposition or voting of shares of Common Stock or Common Stock Equivalents;
(iii) Transferee owns the number of shares of Common Stock and Common Stock
Equivalents, if any, indicated below their signature, and such shares are owed
by Transferee free and clear of all liens and other encumbrances arising by,
through or under Transferee except for this Adoption Agreement; and (iv)
Transferee is not a party to any agreement or arrangement with respect to the
acquisition, disposition or voting of Shares of Common Stock or Common Stock
Equivalents.
(b) Transferee represents and warrants to the other Parties that as of
the date hereof it is a direct or indirect wholly owned subsidiary of [name of
Ultimate Parent Entity], its Ultimate Parent Entity, and that [_______________]
is the Designated Party of its Group. Transferee further represents that the
total number of shares owned by its Group is ---------.
2. AGREEMENT. Transferee (i) agrees that the shares of the Common Stock
acquired by Transferee, and shares of Common Stock and Common Stock Equivalents
that are currently owned or that may be acquired by Transferee in the future,
shall be bound by and subject to the terms of the Stockholders Agreement
pursuant to the terms hereof, and (ii) hereby adopts the Stockholders Agreement
with the same force and effect as if it were originally a Party thereto.
A-2
3. NOTICE. Any notice required as permitted by the Stockholders
Agreement shall be given to Transferee at the address listed below Transferee's
signature below.
[4. JOINDER. The spouse of the undersigned Transferee, if applicable,
executes this Adoption to acknowledge its fairness and that it is in such
spouse's best interests, and to bind such spouse's community interest, if any,
in the shares of common stock and other securities referred to above and in the
Stockholders Agreement to the terms of the Stockholders Agreement.]
A-3
EXECUTED AND DATED this the ___ day of __________, 19__.
TRANSFEREE:
By:
Title:
Address:
With a copy to
Number of Shares:
TRANSFEROR:
By:
Title:
Address:
Acknowledged:
BG Holdings, Inc.
By:
NOVA Gas Services (U.S.) Inc.
By:
Chevron U.S.A. Inc.
By:
SCHEDULE I
EFFECTIVE TIME COMMON STOCK AND
NGC PARTY COMMON STOCK EQUIVALENTS OWNERSHIP
BG Holdings, Inc. 38,623,211 shares of Common Stock
Address:
1100 Louisiana, Ste 2500
Houston, TX 77002
Attn: Hugh Tarpley, President - BG Americas
Telecopier: (713) 754-7785
with copies to:
British Gas plc
Rivermill House
152 Grosvenor Road
London SW1V 3JL England
Attn: William M. Friedrich, General Counsel
Telecopier: 011-44-171-269-4891
and:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attn: Alfred J. Ross, Jr.
Telecopier: (212) 848-7179
NOVA Gas Services (U.S.) Inc. 38,623,211 shares of Common Stock
Address: 690 Mechanic Street
Leominster, MA 01453
Attn: Dave Carpenter, Secretary
Telecopier: (508) 840-6683
with copies to:
Jack S. Mustoe
Senior Vice President and General Counsel
NOVA Corporation
801 Seventh Avenue, S.W.
Calgary, Alberta CANADA T2P 3P7
Telecopier: (403) 261-3557
and:
Alan Talkington
Orrick Herrington & Sutcliffe
400 Sansome Street
San Francisco, CA 94111
Telecopier: (415) 773-5759
I-1
Chevron U.S.A. Inc. 38,623,211 shares of Common Stock
Address: 1301 McKinney Street and 7,815,363 shares of Series A
Houston, TX 77010 Preferred Stock
Attn: President of Chevron U.S.A. Production
Company
With copies to:
Harvey D. Hinman
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Telecopier: (415) 894-6017
and:
Terry Michael Kee
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 982-1200
I-2
EXHIBIT 10.45
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of
__________, 1996, is by and among NGC Corporation, a Delaware corporation (the
"COMPANY"), BG Holdings, Inc., a Delaware Corporation ("BG"), NOVA Gas Services
(U.S.) Inc., a Delaware corporation ("NOVA"), and Chevron U.S.A. Inc., a
Pennsylvania corporation ("CHEVRON"). BG, NOVA and Chevron may hereinafter be
referred to collectively as "STOCKHOLDERS".
WHEREAS, the Company has entered into (I) that certain Combination
Agreement and Plan of Merger (the "COMBINATION AGREEMENT") dated as of May 22,
1996 among NGC Corporation, a Delaware corporation ("OLD NGC"), Chevron and the
Company (formerly known as Midstream Combination Corp.), pursuant to which Old
NGC was merged with and into the Company and the Company changed its name to
"NGC CORPORATION" and (ii) certain other agreements referenced therein;
WHEREAS, the Combination Agreement contemplates that Stockholders will
receive, at the Effective Time (as such term is defined in the Combination
Agreement), that number of shares of common stock, par value $.01 per share of
the Company (the "COMMON STOCK") and of securities convertible into Common
Stock, set forth beside each stockholder's name on the signature page hereof;
and
WHEREAS, in connection with the Combination Agreement and the Merger
contemplated thereby, the Company has agreed to grant to each Stockholder
certain registration rights set forth below.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each Stockholder and the Company, the parties hereto agree as
follows:
SECTION 1.
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. The following capitalized terms shall have
the meanings ascribed to them in this SECTION 1.1:
"AFFILIATE" shall have the meaning set forth in Rule 12b-2
under the Exchange Act.
"AGREEMENT" shall have the meaning set forth in the preamble
hereto.
2
"BG" shall have the meaning set forth in the preamble hereto.
"BG HOLDER" means BG and each transferee of Registerable
Common Stock directly or indirectly (in a chain of title) from BG to
whom the right to cause one or more demand registrations under SECTION
2.1 has been expressly assigned in writing directly or indirectly (in a
chain of title) from BG.
"CHEVRON" shall have the meaning set forth in the preamble
hereto.
"CHEVRON HOLDER" means Chevron and each transferee of
Registrable Common Stock directly or indirectly (in a chain of title)
from Chevron to whom the right to cause one or more demand
registrations under Section 2.1 has been expressly assigned in writing
directly or indirectly (in a chain of title) from Chevron.
"COMBINATION AGREEMENT" shall have the meaning set forth in
the recitals hereto.
"COMMON STOCK" shall have the meaning set forth in the
recitals hereto.
"COMPANY" shall have the meaning set forth in the preamble
hereto.
"EFFECTIVE TIME" shall have the meaning set forth in the
Combination Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"EXISTING REGISTRATION RIGHTS" shall mean the registration
rights provided pursuant to SECTION 3.1 of and EXHIBIT A to the Amended
and Restated Stockholders Agreement entered into April 15, 1993 by and
among Old NGC and certain of its stockholders, a copy of which has been
provided to the other parties hereto.
"FORMER TRIDENT HOLDERS REGISTRATION RIGHTS" shall mean the
registration rights provided pursuant to SECTION 4.1 of the
Stockholders Agreement dated as of October 21, 1994 among Old NGC,
Hicks, Muse, Tate and Furst Incorporated, the Major Holders (as defined
therein) and the other parties thereto.
"INDEMNIFIED PARTY" shall have the meaning set forth in
SECTION 8.3.
"INDEMNIFYING PARTY" shall have the meaning set forth in
SECTION 8.3.
"INSPECTORS" shall have the meaning set forth in SECTION
5.1(L).
"LOSS"or "LOSSES" shall have the meaning set forth in SECTION
8.1.
3
"MERGER" shall have the meaning set forth in the Combination
Agreement.
"NOVA" shall have the meaning set forth in the preamble
hereto.
"NOVA HOLDER" means NOVA and each transferee of Registerable
Common Stock directly or indirectly (in a chain of title) from NOVA to
whom the right to cause one or more demand registrations under SECTION
2.1 has been expressly assigned in writing directly or indirectly (in a
chain of title) from NOVA.
"PERSON" shall mean any business entity (including, without
limitation, a corporation, partnership (limited or general), limited
liability company or business trust) or a natural person.
"PROSPECTUS" shall have the meaning set forth in Section 8.1.
"REGISTER" "REGISTERED" and "REGISTRATION" and words of
similar import refer to a registration effected by preparing and filing
with the SEC a registration statement in compliance with the Securities
Act, and the declaration and ordering by the SEC of effectiveness of
such registration statement or document.
"REGISTRABLE COMMON STOCK" shall mean any Common Stock of the
Company held or acquired by any Stockholder (or its permitted assigns)
at or after the Effective Time (including, without limitation, shares
of Common Stock issued upon conversion of shares of Series A Preferred
Stock of the Corporation), and any securities issued or issuable in
respect of any Registrable Common Stock by way of any stock split or
stock dividend or in connection with any combination of shares,
recapitalization, merger, consolidation, reorganization or otherwise.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"STOCKHOLDERS" shall have the meaning set forth in the
preamble hereto.
1.2 OTHER DEFINITIONS. Other capitalized terms used herein but not
defined in SECTION 1.1 shall have the respective meanings ascribed to them
throughout this Agreement.
SECTION 2
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION RIGHTS. (a) Upon receipt of a written request
from a BG Holder, a NOVA Holder or a Chevron Holder to register under the
Securities Act
4
(whether for purposes of a public offering, an exchange offer or otherwise) all
or part of the Registrable Common Stock held by such BG Holder, NOVA Holder, or
Chevron Holder, as the case may be, the Company shall as expeditiously as
reasonably possible (but in any event not later than sixty (60) days after
receipt of such request) prepare and file, and use its best efforts to cause to
become effective as soon thereafter as practicable, a registration statement
under the Securities Act to effect the offering of such Registrable Common Stock
in the manner specified in such request.
(b) The BG Holder, the NOVA Holder or the Chevron Holder, as the case
may be, shall be entitled to select and retain one or more investment bankers or
managers reasonably acceptable to the Company in connection with any
underwritten offerings made pursuant to this SECTION 2.1.
(c) Subject to the terms and conditions set forth in SECTION 2.2, any
BG Holder, NOVA Holder or Chevron Holder may request the Company to register
Registrable Common Stock under the Securities Act pursuant to this SECTION 2.1
at any time and from time to time; PROVIDED, HOWEVER, that neither a BG Holder,
a NOVA Holder nor a Chevron Holder may request the Company to register
Registrable Common Stock pursuant to this SECTION 2.1 more than once in any
365-day period.
2.2 TERMS AND CONDITIONS OF DEMAND REGISTRATION RIGHTS. Notwithstanding
anything to the contrary contained elsewhere herein, the registration rights
granted to the BG Holders, the NOVA Holders and the Chevron Holders in SECTION
2.1 are expressly subject to the following terms and conditions:
(a) The BG Holders, collectively, the NOVA Holders, collectively and
the Chevron Holders, collectively, shall each only be entitled to three (3)
requests to register Registrable Common Stock under the terms of SECTION 2.1. A
"request" as it is used in this SECTION 2.2(A) shall be deemed to have occurred
only upon completion of a requested registration and the subsequent sale of
Registrable Common Stock.
(b) In no event shall the Registrable Common Stock to be offered under
a registration statement prepared and filed pursuant to SECTION 2.1 constitute
less than five percent (5%) of the then outstanding shares of Common Stock. For
purposes of meeting the five percent (5%) threshold of this SECTION 2.2(B), the
BG Holders, the NOVA Holders and the Chevron Holders may aggregate their shares
of Registrable Common Stock to be included therein.
(c) The Company shall be entitled to defer for a reasonable period of
time, but not in excess of ninety (90) days, the filing of any registration
statement otherwise required to be prepared and filed by it under SECTION 2.1 if
the Company notifies the BG Holder, the NOVA Holder or the Chevron Holder, as
the case may be, within five (5) business days after such BG Holder, NOVA Holder
or Chevron Holder requested the registration under SECTION 2.1
5
that the Company (i) is at such time conducting or about to conduct an
underwritten public offering of its securities for its own account and the Board
of Directors of the Company determines in good faith that such offering would be
materially adversely affected by such registration requested by the BG Holders,
the NOVA Holders or the Chevron Holders or (ii) would, in the opinion of its
counsel, be required to disclose in such registration statement information not
otherwise then required by law to be publicly disclosed and, in the good faith
judgment of the Board of Directors of the Company, such disclosure might
adversely affect any material business transaction or negotiation in which the
Company is then engaged. If the Company elects to defer the filing of a
registration statement pursuant to this SECTION 2.2(C), the BG Holder, the NOVA
Holder or the Chevron Holder, as the case may be, may withdraw its request, in
writing, during the time of such deferral and such request shall not be counted
toward the limit set forth in SECTION 2.2(A).
(d) Neither the BG Holders, the NOVA Holders nor the Chevron Holders
shall exercise their rights pursuant to SECTION 2.1 during the 60-day period
immediately following the effective date of any registration statement filed by
the Company under the Securities Act (other than on Form S-8 or another similar
form) in respect of an offering or sale of securities of the Company by or on
behalf of the Company or any other stockholder of the Company.
SECTION 3
PIGGYBACK REGISTRATION RIGHTS
3.1 PIGGYBACK REGISTRATION RIGHTS. If at any time or from time to time
the Company shall propose to register any Common Stock for public sale under the
Securities Act, the Company shall give each Stockholder prompt written notice of
the proposed registration and shall include in such registration on the same
terms and conditions as the other securities included in such registration such
number of shares of Registrable Common Stock as any Stockholder shall request
within five (5) business days after the giving of such notice; PROVIDED,
HOWEVER, that the Company may at any time prior to the effectiveness of any such
registration statement, in its sole discretion and without the consent of
Stockholders, abandon the proposed offering in which a Stockholder had requested
to participate; and PROVIDED FURTHER that any Stockholder shall be entitled to
withdraw any or all of its shares of Registrable Common Stock to be included in
a registration statement under this SECTION 3.1 at any time prior to the date on
which the registration statement with respect to such shares of Registrable
Common Stock is declared effective by the SEC. The Company shall be entitled to
select the investment bankers and/or managers, if any, to be retained in
connection with any registration referred to in this SECTION 3.1, provided such
investment bankers and/or managers are reasonably acceptable to the Stockholders
who hold a majority of the stock held by all Stockholders who elect to
participate in such offering.
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3.2 RESTRICTIONS ON PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein, the
registration rights granted to stockholders in SECTION 3.1 are expressly subject
to the following terms and conditions:
(a) The Company shall not be obligated to include shares of Registrable
Common Stock in an offering as contemplated by SECTION 3.1 if the Company is
advised in writing by the managing underwriter or underwriters of such offering
(with a copy to each Stockholder), that the success of such offering would in
its or their good faith judgment be jeopardized by such inclusion (after
consideration of all relevant factors, including without limitation, the impact
of any delay caused by including such shares); PROVIDED, HOWEVER, that the
Company shall in any case be obligated to include such number of shares of
Registrable Common Stock in such offering, if any, as such underwriter or
underwriters shall determine will not jeopardize the success of such offering.
(b) The Company shall not be obligated to include any shares of
Registrable Common Stock in any registration by the Company of any Common Stock
in connection with any merger, acquisition, exchange offer, or any other
business combination, including any transaction within the scope of Rule 145
promulgated pursuant to the Securities Act, subscription offer, dividend
reinvestment plan or stock option or other director or employee incentive or
benefit plan.
(c) The Company shall use all commercially reasonable efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Common Stock requested to be included in a registration
of Company Common Stock pursuant to this SECTION 3 to be included on the same
terms and conditions as any similar securities included therein. Notwithstanding
the foregoing, the Company shall not be required to include any Stockholder's
Registrable Common Stock in such offering unless such Stockholder accepts the
terms of the underwriting agreement between the Company and the managing
underwriter or underwriters and otherwise complies with the provisions of
SECTION 8 below. If the managing underwriter or underwriters of a proposed
underwritten offering advise the Company in writing that in its or their good
faith judgment the total amount of securities, including securities requested to
be included in a registration of Company Common Stock pursuant to this SECTION 3
and other similar securities, to be included in such offering is sufficiently
large to jeopardize the success of such offering, then in such event the
securities to be included in such offering shall be allocated first to the
Company and then, to the extent that any additional securities can, in the good
faith judgment of such managing Underwriter or Underwriters, be sold without
creating any such jeopardy to the success of such offering, PRO RATA among each
Stockholder participating in the offering based upon the number of shares of
Common Stock requested to be included in such registration by each such holder.
7
(d) In the event that some but less than all of a Stockholder's shares
of Registrable Common Stock are included in an offering contemplated by a
registration statement pursuant to SECTION 3, such Stockholder shall execute one
or more "lockup" letters, in customary form, setting forth an agreement by such
Stockholder not to offer for sale, sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of Common Stock, or any
securities convertible into or exchangeable into or exercisable for any shares
of Common Stock, for a period of 90 days from the date such offering commences.
SECTION 4
FAVORED NATIONS, CONFLICTING RIGHTS
4.1 FAVORED NATIONS. Except as herein provided, the Company shall not
provide registration rights to any other party which, taken as a whole, are more
favorable than those provided to Stockholders hereunder, without also offering
to Stockholders such more favorable rights (other than the Former Trident
Holders Registration Rights or the Existing Registration Rights). The Company
shall give Stockholders notice within 15 days after the execution of any
agreement (including the terms thereof) between the Company and a third party
which triggers a right of Stockholders to invoke the favored nations provision
of this SECTION 4.
4.2 CONFLICTING RIGHTS. Notwithstanding anything to the contrary set
forth in this Agreement, or any other agreement pursuant to which the Company
hereafter grants any person registration rights, in the event any of the rights
of the Stockholders under the Agreement or such other persons under such other
agreement conflicts with or diminishes any of the rights granted to any of the
persons who are or become parties (the "Trident Parties") to the Former Trident
Holders Registration Rights or the Existing Registration Rights, the rights of
the Trident Parties shall be deemed superior to, and shall take precedence over
the rights of the Stockholders hereunder or any other persons to which the
Company has granted registration rights, and the rights of such Stockholders and
such other persons shall be subject to the rights of the parties to the Former
Trident Holders Registration Rights and the Existing Registration Rights. The
application of the rights of the Stockholders under this Agreement shall be
reduced, modified or eliminated, as reasonably necessary in order to implement
the provisions of the foregoing sentence. The Company covenants and agrees that
in the event it grants registration rights to any persons, the instrument
granting such rights shall contain a provision similar to this SECTION 4.2
ensuring the superiority of the Trident Parties' rights in accordance with this
SECTION 4.2.
8
SECTION 5
COVENANTS
5.1 COVENANTS OF THE COMPANY. In connection with any offering of shares
of Registrable Common Stock pursuant to this Agreement, the Company shall:
(a) Prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for a period of not less than 120
days, or such shorter period which will terminate when all Registrable Common
Stock covered by such registration statement has been sold or withdrawn at the
request of participating holders of Common Stock; and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
(b) Furnish to each Stockholder and to each managing underwriter, if
any, (i) at least two (2) business days prior to filing with the SEC, any
registration statement covering shares of Registrable Common Stock, any
amendment or supplement thereto, and any prospectus used in connection
therewith, which documents will be subject to the reasonable review of such
Stockholders and such underwriter, and, with respect to a registration statement
prepared pursuant to SECTION 2.1, the Company shall not file any such documents
with the SEC to which any such Stockholder shall reasonably object; and (ii) a
copy of any and all transmittal letters or other correspondence with the SEC or
any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering of shares of Registrable Common Stock;
(c) Furnish to each Stockholder and each managing underwriter, if any,
such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein) and the prospectus included in such
registration statement (including each preliminary prospectus and prospectus
supplement) as such Stockholder or such underwriter may reasonably request in
order to facilitate the sale of the shares of Registrable Common Stock;
(d) After the filing of such registration statement, promptly notify
each Stockholder of any stop order issued or, to the knowledge of the Company,
threatened to be issued by the SEC and promptly take all reasonable actions to
prevent the entry of such stop order or to obtain its withdrawal if entered;
(e) Use its commercially reasonable efforts to qualify such shares of
Registrable Common Stock for offer and sale under the securities, "blue sky" or
similar laws of such jurisdictions (including any foreign country or any
political subdivision thereof in which shares of Common Stock are then listed)
as any Stockholder or any underwriter shall reasonably request and use its
commercially reasonable efforts to obtain all appropriate registrations,
9
permits and consents required in connection therewith, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it is not so qualified, or
to subject itself to taxation or to file a general consent to service of process
in any such jurisdiction;
(f) Furnish to each managing underwriter, if any, an opinion of counsel
for the Company addressed to each of them, dated as of the date of the closing
of the offering of shares of Registrable Common Stock, and a "comfort" letter or
letters signed by the Company's independent public accountants, each in
reasonable and customary form and covering such matters of the type customarily
covered by opinions or comfort letters delivered by such parties in underwritten
public offerings, and use its commercially reasonable efforts to have such
opinions and comfort letters addressed to and delivered to each stockholder;
(g) Furnish unlegended certificates representing ownership of the
shares of Registrable Common Stock being sold in such denominations as shall be
requested by a Stockholder or the managing underwriter, if any, provided such
request is made at least two (2) business days prior to the closing of the sale
of such shares;
(h) Promptly inform each Stockholder (i) in the case of any offering of
shares of Registrable Common Stock in respect of which a registration statement
is filed under the Securities Act, of the date on which such registration
statement or any post-effective amendment thereto becomes effective and, if
applicable, of the date of filing a Rule 430A prospectus (and, in the case of an
offering abroad of shares of Registrable Common Stock, of the date when any
required filing under the securities and other laws of such foreign
jurisdictions shall have been made and when the offering may be commenced in
accordance with such laws) and (ii) of any request by the SEC, any securities
exchange, government agency, self-regulatory body or other body having
jurisdiction for any amendment of or supplement to any registration statement or
preliminary prospectus or prospectus included therein or any offering memorandum
or other offering document relating to such offering;
(i) Subject to subparagraph (k) below, until the earlier of (i) such
time as all of the shares of Registrable Common Stock being offered have been
disposed of in accordance with the intended method of disposition by such
Stockholder set forth in the registration statement or other offering document
(and the expiration of any prospectus delivery requirements in connection
therewith) or (ii) the expiration of nine (9) months after such registration
statement or other offering document becomes effective (unless the offering is a
continuous offering of securities under Rule 415, in which case until the
earliest of the date the offering is completed and the second anniversary of
such effective date), keep effective and maintain any registration,
qualification or approval obtained in connection with the offering of the shares
of Registrable Common Stock, and amend or supplement the registration statement
or prospectus or other offering document used in connection therewith to the
extent necessary in order to comply with applicable securities laws;
10
(j) Use its commercially reasonable efforts to have the shares of
Registrable Common Stock listed on any domestic and foreign securities exchanges
on which the Common Stock is then listed;
(k) As promptly as practicable, notify each Stockholder at any time
when a prospectus relating to the sale of the shares of Registrable Common Stock
is required by law to be delivered in connection with sales by an underwriter or
dealer, of the occurrence of an event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading, and as promptly as
practicable make available to each Stockholder and to each managing underwriter,
if any, any such supplement or amendment; in the event the Company shall give
such notice, the Company shall extend the period during which such registration
statement shall be maintained effective as provided in SECTION 5.1(I) by the
number of days during the period from and including the date of the giving of
such notice to the date when the Company shall make available to each
Stockholder such supplemented or amended prospectus;
(l) Make available for inspection during the normal business hours of
the Company by any Stockholder, any underwriter participating in such offering,
and any attorney, accountant or other agent retained by any such Stockholder or
any such underwriter in connection with the sale of shares of Registrable Common
Stock (collectively, the "INSPECTORS"), all relevant financial and other
records, pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any such Inspector in
connection with such registration statement; PROVIDED, HOWEVER, that (i) in
connection with any such inspection, any such Inspectors shall cooperate to the
extent reasonably practicable to minimize any disruption to the operation by the
Company of its business and (ii) any records, information or documents shall be
kept confidential by such Inspectors, unless (1) such records, information or
documents are in the public domain or otherwise publicly available or (2)
disclosure of such records, information or documents is required by a court or
administrative order or by applicable law (including, without limitation, the
Securities Act);
(m) Enter into usual and customary agreements (including an
underwriting agreement in usual and customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the sale of the
Registrable Common Stock.
(n) Make "generally available to its security holders" (within the
meaning of Rule 158 of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of the 12- month period beginning with the
first day of the Company's first fiscal quarter commencing after
11
the effective date of the registration statement, which earnings statement shall
cover said 12- month period;
(o) If requested by the managing underwriter or underwriters or the
Stockholder, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters or any
participating Holder, as the case may be, reasonably requests to be included
therein, including, without limitation, information with respect to the number
of shares of Registrable Common Stock being sold by the Stockholder to any
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of an
underwritten offering of the Registrable Common Stock to be sold in such
offering, and promptly make all required filings of such prospectus by
supplement or post-effective amendment;
(p) As promptly as practicable after filing with the SEC of any
document which is incorporated by reference in a prospectus contained in a
registration statement, deliver a copy of such document to each Stockholder; and
(q) Take all other steps necessary to effect the registration of the
Registrable Common Stock contemplated hereby.
5.2 COVENANT OF STOCKHOLDERS. Each Stockholder agrees and covenants
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in SECTION 5.1(K) hereof, such Stockholder will forthwith
discontinue disposition of Registrable Common Stock pursuant to the registration
statement covering such Registrable Common Stock until such Stockholder's
receipt of the copies of the supplemented or amended prospectus contemplated by
SECTION 5.1(K) hereof, and, if so directed by the Company, such Stockholder will
deliver to the Company all copies, other than permanent file copies, then in
such Stockholder's possession of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice.
SECTION 6
RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS
The Company agrees:
(a) Not to effect any public sale or distribution of any securities
during the 90- day period commencing on the effective date of a registration
statement filed pursuant to SECTION 2.1, except in connection with any merger,
acquisition, exchange offer, or any other business combination, including any
transaction within the scope of Rule 145 promulgated pursuant to the Securities
Act, subscription offer, dividend reimbursement plan or stock option or other
director or employee incentive or benefit plan;
12
(b) That any agreement entered into after the date hereof pursuant to
which the Company grants registration rights with respect to the Company's
securities shall contain a provision under which holders of such securities
agree, to the extent not inconsistent with applicable laws, not to effect any
public sale or distribution of any such securities (excluding any sale in
accordance with Rule 144 under the Securities Act) during the period commencing
with the effective date of a registration statement pursuant to SECTION 2.1
through the 90-day period beginning on the date that the registration statement
filed pursuant to SECTION 2.1 becomes effective.
SECTION 7
EXPENSES
All expenses incurred in connection with the registration of
Registrable Common Stock, including, without limitation, all filing fees, escrow
fees, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of the Company's counsel in connection with
blue sky qualifications of the Registrable Common Stock), rating agency fees,
printing expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of the Company's
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed, and fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of a single counsel for selling
Stockholders and the Company's independent certified public accountants
(including the expenses of any special audit or "cold comfort" letters required
by or incident to such performance) directly attributable to the registration of
securities, Securities Act liability insurance (if the Company elects to obtain
such insurance) , and the fees and expenses of any special experts or other
persons retained by the Company will be borne by the Company. The Company shall
have no obligation to pay and shall not pay any underwriting fees, discounts or
commissions in connection with any Registrable Common Stock registered pursuant
to this Agreement or any out-of-pocket expenses of the holders in connection
therewith (except as expressly contemplated by the preceding sentence).
SECTION 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless each Stockholder, its officers, directors and agents, and will
agree to indemnify and hold harmless any underwriter of Registrable Common
stock, and each person, if any, who controls any of the foregoing persons within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (individually, a "LOSS" collectively, "LOSSES") arising from or
caused by
13
(x) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Common Stock (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (y) any violation or alleged violation by the Company of the
Securities Act, any blue sky laws, securities laws or other applicable laws of
any state in which shares of Registrable Common Stock are offered and relating
to action or inaction required of the Company in connection with such offering;
and will reimburse each such person for any legal or other out-of-pocket
expenses reasonably incurred in connection with investigating, or defending
against, any such Loss (or any proceeding in respect thereof), subject to the
provisions of SECTION 8.3, except that the indemnification provided for in this
SECTION 8.1 shall not apply to Losses that are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Stockholder expressly for use therein. Notwithstanding the foregoing, the
Company shall not be liable in any such case to the extent that any such Loss
arises out of, or is based upon, an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus if (i) a
Stockholder failed to send or deliver a copy of the prospectus included in the
relevant registration statement at the time it became effective (the
"PROSPECTUS") with or prior to the delivery of written confirmation of the sale
of Registrable Common Stock to the person asserting such Loss or who purchased
such Registrable Common Stock which are the subject thereof if, in either case,
such delivery is required by the Securities Act and (ii) the Prospectus would
have corrected such untrue statement or omission or alleged untrue statement or
alleged omission; and the Company shall not be liable in any such case to the
extent that any such Loss arises out of, or is based upon, an untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact in the Prospectus, if such untrue statement or alleged
untrue statement or omission or alleged omission is corrected in any amendment
or supplement to the Prospectus and if, having previously been furnished by or
on behalf of the Company with copies of the Prospectus as so amended or
supplemented, a Stockholder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to and concurrently with the sale of Registrable
Common Stock if such delivery is required by the Securities Act.
8.2 INDEMNIFICATION BY STOCKHOLDERS. Each Stockholder agrees to
indemnify and hold harmless the Company, its officers and directors, and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the indemnity made pursuant to clause (x) of SECTION 8.1 above from the Company
to such Stockholder, but only with reference to information furnished in writing
by or on behalf of such Stockholder expressly for use in any registration
statement or prospectus relating to shares of Registrable Common Stock, or any
amendment or supplement thereto, or any preliminary prospectus.
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8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to SECTION 8.1 or
8.2, such person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing,
provided that the omission to so notify the Indemnifying Party will not relieve
the Indemnifying Party of any liability it may have under this Agreement or
otherwise except to the extent of any loss, damage, liability or expense arising
from such omission. The Indemnifying Party, upon the request of the Indemnified
Party, shall retain counsel reasonably satisfactory to such Indemnified Party to
represent such Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention, (ii) the Indemnifying Party shall have failed to comply with its
obligations under the preceding sentence or (iii) the Indemnified Party shall
have been advised by its counsel in writing that actual or potential differing
interests exist between the Indemnifying Party and the Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. The Indemnifying Party shall not agree to any settlement as the result
of which any remedy or relief, other than monetary damages for which the
Indemnifying Party shall be fully responsible, shall be applied to or against an
Indemnified Party without the prior written consent of such Indemnified Party.
8.4 CONTRIBUTION. If the indemnification provided for in this SECTION
8.4 from the Indemnifying Party is unavailable to an Indemnified Party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liability or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in SECTION 8.3, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. No party shall be liable for contribution with respect to any action
or claim settled without its written consent, which consent shall not be
unreasonably withheld.
15
Notwithstanding the provisions of this SECTION 8.4, no Stockholder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Common Stock of such Stockholder was
offered to the public exceeds the amount of any damages which such Stockholder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission of alleged omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this SECTION 8.4
were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 9
TERMINATION
This Agreement shall terminate with respect to any Stockholder upon the
earlier of (i) the first such instance as such Stockholder ceases to own any
shares of Common Stock or (ii) the first such instance after the fifth
anniversary of the Effective Time as such Stockholder ceases to own at least
five percent of the outstanding shares of Common Stock. For the purposes of this
SECTION 9, a Stockholder shall be deemed to own any and all Common Stock owned
by (i) such Stockholder and (ii) its Affiliates. Notwithstanding the foregoing,
the Company's and Stockholders' rights, duties and obligations under SECTION 7
and SECTION 8 shall survive the termination of this Agreement.
SECTION 10
AVAILABLE INFORMATION
The Company shall take such reasonable action and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 and Rule 144A, or any successor
provisions.
SECTION 11
ASSIGNMENT OF RIGHTS
11.1 ASSIGNMENT OF RIGHTS. Subject to SECTION 11.2 and the provisions
of the Stockholders Agreement (in the form attached as Exhibit 3.2 to the
Combination Agreement), the Registrable Common Stock and rights of any
Stockholder under this Agreement with respect to any Registrable Common Stock
owned by such Stockholder may be assigned to any person who acquires Common
Stock from a Stockholder, except that any person who acquires such
16
Common Stock (x) pursuant to a public offering registered under the Securities
Act, or (y) pursuant to a transfer made in accordance with Rule 144 under the
Securities Act (or any similar successor provision) may not be assigned rights
hereunder with respect to such Common Stock. Notwithstanding the foregoing,
rights to cause one or more demand registrations under SECTION 2.1 may only be
assigned if such rights are expressly assigned in writing from BG, NOVA,
Chevron, a BG Holder, a NOVA Holder or a Chevron Holder. Any assignment of
registration rights pursuant to this SECTION 11.1 shall be effective upon
receipt by the Company of written notice from such assigning Stockholder (i)
stating the name and address of any assignee, (ii) describing the manner in
which the assignee acquired Common Stock from such Stockholder and (iii)
identifying the Registrable Common Stock with respect to which the rights under
this Agreement are being assigned.
11.2 SCOPE OF ASSIGNMENT. The rights of an assignee under SECTION 11.1
shall be the same rights granted to the assigning Stockholder under this
Agreement, except that in no event shall the Company's obligations hereunder be
increased due to any such assignment, In connection with any such assignment,
the term "Stockholder" as used herein shall, where appropriate to assign the
rights and obligations of the assigning Stockholder hereunder to such assignee,
be deemed to refer to the assignee. After any such assignment, the assigning
Stockholder shall retain its rights under this Agreement with respect to all
other Registrable Common Stock owned by such Stockholder.
SECTION 12
MISCELLANEOUS
12.1 PROVISION OF INFORMATION. Each Stockholder shall, and shall cause
its officers, directors, employees and agents to complete and execute all such
questionnaires as the Company shall reasonably request in connection with any
registration pursuant to this Agreement.
12.2 INJUNCTIONS. Irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with its
specified terms or were otherwise breached. Therefore, the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms of provisions
hereof in any court having jurisdiction, such remedy being in addition to any
other remedy to which they may be entitled at law or in equity.
12.3 SEVERABILITY. If any term or provision of this Agreement is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and
17
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term or provision.
12.4 FURTHER ASSURANCES. Subject to the specific terms of this
Agreement, each Stockholder and the Company shall make, execute, acknowledge and
deliver such other instruments and documents, and take all such other actions,
as may be reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
12.5 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all agreements and understandings entered into prior to
the execution hereof, including the rights, if any, of the Parties hereto under
the agreements providing for the Existing Registration Rights and the Former
Trident Holders Registration Rights. This Agreement may be modified only by a
written instrument duly executed by or on behalf of (i) the Company, (ii) each
BG Holder, (iii) each NOVA Holder and (iv) each Chevron Holder. No breach of any
covenant, agreement, warranty or representation shall be deemed waived unless
expressly waived in writing by or on behalf of the party who might assert such
breach.
12.6 COUNTERPARTS. For the convenience of the parties hereto, any
number of counterparts of this Agreement may be executed by the parties hereto,
but all such counterparts shall be deemed one and the same instrument.
12.7 NOTICES. All notices, consents, requests, demands, and other
communications hereunder shall be in writing and shall be given by hand or by
mail (return receipt requested) or sent by overnight delivery service, cable,
telegram, or facsimile transmission to the parties at the address specified
beside each party's name on the signature pages hereto or at such other address
as shall be specified by the parties by like notice.
Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the fourth business day after posting, in the
case of notice so given by overnight delivery service, on the day after notice
is deposited with such service, and in the case of notice so given by cable,
telegram, facsimile transmission or, as the case may be, personal delivery, on
the date of actual delivery.
12.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD
TO ANY CHOICE OF LAW PRINCIPLES WHICH MIGHT REQUIRE OR PERMIT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
18
12.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by and against the successors
and permitted assigns of the parties hereto. Except as provided herein, the
parties may not assign their rights under this Agreement and the Company may not
delegate its obligations under this Agreement. Any attempted assignment or
delegation prohibited hereby shall be void.
12.10 PARTIES IN INTEREST. Except as otherwise specifically provided
herein, nothing in this Agreement expressed or implied is intended or shall be
construed to confer any right or benefit upon any person, firm or corporation
other than Stockholder and the Company and their respective successors and
permitted assigns.
12.11 SHARES SUBJECT TO THIS AGREEMENT; EFFECTIVE TIME. All shares of
Registrable Common Stock owned or acquired by any Stockholder at or after the
Effective Time shall be subject to, and entitled to the benefit of this
Agreement, such rights to be effective from and after the Effective Time. This
Agreement shall be null and void and of no effect upon the termination of the
Combination Agreement in accordance with its terms.
19
IN WITNESS WHEREOF, each Stockholder and the Company have caused this
Agreement to be duly executed as of the date first above written.
NGC CORPORATION
By:
Address: 13430 Northwest Freeway Name:
Houston, TX 77040 Title:
BG HOLDINGS, INC.
Number of Shares of
Common Stock: 38,623,211
By:
Address: 1100 Louisiana, Suite 2500 Name:
Houston, TX 77002 Title:
Telecopier: (713) 754-7785
with a copy to:
NOVA GAS SERVICES (U.S.) INC.
Number of Shares of
Common Stock: 38,623,211
Address: 690 Mechanic Street By:
Leominster, MA 01453 Name:
Attn: Dave Carpenter, Secretary Title:
Telecopier: (508) 840-6683
with copies to: Jack S. Mustoe
Senior Vice President and General Counsel
NOVA Corporation
801 Seventh Avenue, S.W.
Calgary, Alberta CANADA T2P 3P7
Telecopier: (403) 261-3557
and: Alan Talkington
20
Orrick Herrington & Sutcliffe
400 Sansome Street
San Francisco, CA 94111
Telecopier: (415) 773-5759
CHEVRON U.S.A. INC.
Number of Shares of
Common Stock: 38,623,211
Number of Shares of Series A
Preferred Stock: 7,815,363
Address: 1301 McKinney Street By:
Houston, TX 77010 Name:
Attn: President of Chevron Title:
U.S.A. Production Company
Telecopier:
with copies to: Harvey D. Hinman
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Telecopier: (415) 894-6017
and: Terry Michael Kee
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 982-1200
EXHIBIT 10.46
May 17, 1996
MASTER ALLIANCE AGREEMENT
This Master Alliance Agreement ("Alliance Agreement") is entered into
as of the ______ day of _____________, 1996 (the "Effective Date"), between
Chevron U.S.A. Production Company, a division of Chevron U.S.A. Inc. ("Chevron
Production"), Chevron Products Company, a division of Chevron U.S.A. Inc.
("Chevron Products"), Chevron Chemical Company ("CCC"), Chevron Pipe Line
Company ("CPL"), and Chevron Overseas Petroleum Inc. ("COPI") (collectively "the
Chevron Entities") and NGC Corporation ("NGC"), Natural Gas Clearinghouse ("NGC
Gas"), NGC Liquids Marketing, Inc., ("NGC Liquids"), NGC Oil Trading and
Transportation, Inc. ("NGC Oil"), NGC Energy Resources Ltd. Partnership ("NGC
Energy"), Trident NGL, Inc. ("Trident") Warren Petroleum Company, Limited
Partnership ("Warren"), and Electric Clearinghouse ("NGC Electric")
(collectively the "NGC Entities");
Whereas, CUSA and NGC have merged Chevron Production's midstream assets
(Warren Petroleum Company and the Natural Gas Business Unit of Chevron
Production) with assets of NGC to accomplish the parties desire to enhance and
grow the value of those assets; and
Whereas, the Chevron Entities have entered or may enter into long term
commercial arrangements with NGC Entities, under which a substantial volume of
natural gas, natural gas liquids, electricity, and possibly other energy
products (not including, however, refined petroleum products) will be sold and
certain energy-related services will be provided (such products and services
hereafter referred to as "Energy Products or Services"); and
Whereas, the parties intend that the NGC Entities and the Chevron
Entities will provide Energy Products and Services to each other under
commercially reasonable, mutually beneficial, and market-based terms and
conditions; and
Whereas, the parties intend that in administering, interpreting, and
performing such contracts for the provision of Energy Products or Services, the
parties will (a) recognize the contributions made by each party to the overall
value of the transaction in question, and share the benefits thereof in a manner
appropriately reflecting such contributions and the terms and conditions of such
contracts, and (b) act with due regard for the interests of the other party; and
Whereas, the Chevron Entities and the NGC Entities desire to establish
a long term, cooperative business relationship whereby all of the separate
contractual relations between them are maintained and administered on a mutually
beneficial basis, with due regard given to increasing efficiency, improving
products and services, expediting the resolution of disputes, and providing
other mutual benefits to all affected Entities;
Now, therefore, the parties agree as follows:
A. DEFINITIONS
1. The term "Alliance" means the commercial relationship existing
between the Chevron Entities and the NGC Entities, as embodied in this Alliance
Agreement and each of the Covered Contracts.
2. The term "Chevron Entity" means any of the Chevron Entities named
above or any other Subsidiary of Chevron Corporation which may enter into a
Covered Contract with an NGC Entity and ratify this Alliance Agreement.
3. The term "Covered Contract" means any contract in existence during
the term of this Alliance Agreement between a Chevron Entity and an NGC Entity.
4. The term "Entity" means one of the parties hereto.
5. The term "NGC Entity" means any of the NGC Entities named above or
any other Subsidiary of NGC Corporation which may enter into a Covered Contract
with a Chevron Entity and ratify this Alliance Agreement.
6. The term "Subsidiary" means any company in which Chevron Corporation
or NGC owns, directly or indirectly, one hundred percent of the shares entitled
to vote at a general election of directors, or, in the case of a general or
limited partnership, one hundred percent of the partnership interest.
7. The term "Effective Date" means __________________, 1996.
B. EXECUTION OF CONTRACTS AND GENERAL INTENT
1. EXISTING CONTRACTS. All Contracts entered into between Chevron
Entities and NGC Entities prior to or as of the Effective Date of this Alliance
Agreement shall be Covered Contracts subject hereto.
2. FUTURE CONTRACTS. Whenever any Chevron Entity requires, during the
term of this Alliance Agreement, Energy Products or Services which can be
supplied by an NGC Entity, it is the intent of this Alliance Agreement that the
Chevron Entity will contact the appropriate NGC Entity to determine whether the
NGC Entity is willing and able to supply the Energy Products or Services on a
cost-effective basis. If so, and if the Entities involved are able to negotiate
a mutually agreeable contract for the provision of the Energy Products or
Services, the resulting contract shall become a Covered Contract and shall be
subject to the principles and procedures outlined herein. Whenever any NGC
Entity requires Energy Products or Services which can be supplied by a Chevron
Entity, it is the intent of this Alliance Agreement that the NGC Entity will
contact the appropriate Chevron Entity and the same procedure will be followed.
Failure to follow the foregoing procedures in any particular case shall not be
deemed to be a breach of this Alliance Agreement, but shall be taken into
consideration by the parties in determining, for
2
purposes of Section G hereof whether the Alliance is producing the mutual
benefits intended by the parties and should be extended beyond its primary term.
3. INTENT OF PARTIES. Both parties acknowledge that the purpose and
intent of this Alliance Agreement is to efficiently manage and optimize the
economic benefits of the Covered Contracts to the Chevron Entities and the NGC
Entities, to ensure that the Covered Contracts remain mutually beneficial, to
facilitate new business between Chevron Entities and NGC Entities with respect
to Energy Products or Services, to minimize disputes arising from the Covered
Contracts, and to resolve quickly and efficiently any disputes which may arise
thereunder. By entering into this Alliance Agreement, the parties also expect
that they will improve their financial results by reducing downtime and
unproductive activities, while maximizing cooperation.
C. ALLIANCE IMPROVEMENT TEAM AND PROCEDURES.
1. APPOINTMENT OF ALLIANCE REPRESENTATIVES. In each case where a
Chevron Entity and an NGC Entity are parties to a Covered Contract, each Entity
shall appoint at least one Alliance Representative to serve on an Alliance
Improvement Team (the "Entity-level AIT") which will perform the duties outlined
below with respect to the Covered Contract(s) between those Entities. In those
cases where the nature of the contractual relationship between the Chevron
Entity and the NGC Entity requires broader representation, each Entity may
appoint more than one Alliance Representative to serve on the Entity Level AIT.
In addition, the Entities involved may establish separate AITs (local AITs)
between individual business units or major facilities of the two Entities in
order to better facilitate management of the contractual relationship(s) between
them.
2. ROLE OF ALLIANCE IMPROVEMENT TEAMS. The duties of the AITs will be
to:
2.1. administer the Alliance relationship(s) between the Entities,
including recommending to the appropriate Entities any amendments,
extensions, and other modifications to the Covered Contract(s) as the
AITs may deem appropriate.
2.2. establish and periodically review standards of performance for the
contractual relationship(s), as deemed appropriate by the AIT to
optimize the mutual benefits flowing from the Alliance;
2.3. determine appropriate measurements for the quality improvement
processes of the two Entities, insofar as they pertain to the Alliance
relationship, and oversee efforts for long-range process improvement
efforts between the two Entities with respect to the Covered
Contract(s);
2.4. conduct regular planning, problem solving and performance review
meetings at such periodic intervals as shall be mutually agreed;
2.5. review all significant equipment, design, and process changes
affecting the contractual relationship(s) between the two Entities;
3
2.6. determine and develop strategies with respect to future business
relationships between the Entities involved;
2.7. share with AITs from other Entities any best practices or other
process improvements which might be applicable to other Covered
Contracts; and
2.8. endeavor to resolve any disputes concerning the contractual
relationship(s) between the two Entities as provided in Section E
hereof to the extent such disputes are not resolved in accordance with
the terms and conditions of the Covered Contracts by the individuals
responsible for the day-to-day administration of the Covered Contracts.
3. SHARING OF INFORMATION AND DEVELOPMENT PLANS. Except as constrained
by business, policy, or legal considerations, Chevron Entities and NGC Entities
which are parties to Covered Contracts will share their knowledge of activities
and trends in their lines of business, and of their specific development or
expansion plans which may relate to the provision of Energy Products or Services
by one to the other. All such information shall be kept strictly confidential
and shall not be used by the receiving party except in furtherance of the mutual
objectives outlined in this Alliance Agreement.
6. SIGNIFICANT PERFORMANCE PROBLEMS. If an unexcused failure by
either party to a Covered Contract to perform such party's obligations results
in a Material Event, as defined below, a representative of the defaulting party
at no lower than the vice-president level of management shall, upon request,
provide a briefing to and conduct direct discussions with, a representative of
the non-defaulting party at a similar management level for the purposes of
evaluating the cause of the failure, assuring that any deficient processes that
contributed to the failure are promptly addressed, ensuring that the defaulting
party fully understands the consequences of the failure to the non-defaulting
party, and committing to take appropriate steps to avoid such failures in the
future. Any unexcused failure to deliver Energy Products or Services in
accordance with an obligation in a Covered Contract which results in a shutdown
or forced cutback of a refinery unit ,chemical processing unit, or other energy
consuming facility, the involuntary shutting in of gas production, or an
inability to perform contractual obligations with third parties will be deemed
to be a Material Event for purposes of this Agreement. Nothing in this Section
is intended to relieve either party to a Covered Contract from liability for
monetary damages payable in accordance with the Covered Contract or to supersede
any other remedy that may be available under the Covered Contract, nor is
anything in this Section intended as a definition of "material breach" or
similar event for purposes of any Covered Contract.
D. CORPORATE GUARANTEES.
1. CHEVRON GUARANTEE. In consideration of the NGC Entities' entering
into Covered Contracts with the Chevron Entities, Chevron U.S.A. Inc. hereby
unconditionally guarantees the performance of each Covered Contract by Chevron
Production, Chevron Products and any other division or subsidiary of Chevron
U.S.A. Inc. which may enter into a Covered Contract with an NGC Entity. For the
same consideration, Chevron Chemical Company, Chevron Pipe Line
4
Company, and Chevron Overseas Petroleum Inc. each hereby unconditionally
guarantees the performance of each Covered Contract by any of their respective
divisions or subsidiaries which may enter into a Covered Contract with an NGC
Entity.
2. NGC GUARANTEE. In consideration of the Chevron Entities' entering
into Covered Contracts with the NGC Entities, NGC Corporation hereby
unconditionally guarantees the performance of each Covered Contract by each NGC
Entity which enters into a Covered Contract with a Chevron Entity.
3. SAVINGS CLAUSE. The foregoing corporate guarantees shall remain in
full force and effect for the life of each Covered Contract. Termination of this
Master Alliance Agreement shall not relieve any guarantor of its guarantee
obligations hereunder.
E. DISPUTE RESOLUTION.
1. GENERAL PROCEDURE. Chevron Entities and NGC Entities which are
parties to a Covered Contract shall utilize the procedure set forth in this
Section E to resolve in good faith any dispute, controversy or claim related to
the Covered Contract, including any dispute over the performance, breach,
termination, interpretation, or validity of the Covered Contract. Nothing herein
is intended to limit any the parties to any Covered Contract from resolving
informally between them any controversy, claim or dispute that may arise, and
thus avoiding the necessity of presenting such matter to an AIT.
2. SUBMISSION TO AIT. Any Chevron Entity or NGC Entity may request that
any dispute, controversy or claim arising under a Covered Contract be submitted
to the appropriate AIT, in accordance with such procedures as the AIT may
establish and with such explanation or documentation as the parties deem
appropriate to aid the AIT in its consideration of the issues presented. The
date the matter is first considered by the AIT as an agenda item at a regular or
special meeting of the AIT shall be referred to as the "Submission Date". The
AIT shall attempt in good faith, through the process of discussion and
negotiation, to resolve within forty-five days after the Submission Date any
dispute, controversy or claim presented to it. In those cases where affected
Entities have established local AITs between individual business units or
facilities, any dispute should first be submitted to the local AIT, but if the
dispute is not promptly resolved by the local AIT it will then be submitted to
the appropriate Entity-level AIT for resolution. The references in this Section
to "Submission Date" shall be deemed to refer to the date the issue is submitted
to the Entity-level AIT, not the earlier date when the issue was considered by a
local AIT. With respect to those Covered Contracts which contain periodic price
renegotiation provisions and a special procedure for resolving any disagreements
arising from those renegotiations, it is recognized that submission to an
Entity-level AIT may create undue delays and the parties may elect to proceed
directly from informal negotiations at the local AIT level to the special
dispute resolution procedure in the Covered Contract.
3. MEDIATION. If an Entity-level AIT cannot resolve any dispute,
controversy or claim submitted to it within forty-five days after the Submission
Date, the parties shall attempt in good faith to settle the matter by submitting
the dispute, controversy or claim to mediation within sixty
5
days after the Submission Date using any mediator upon which they mutually
agree. If the parties are unable to mutually agree upon a mediator within
seventy five days after the Submission Date, the case shall be referred to the
Houston office of Judicial Arbitration and Mediation Services, Inc. ("JAMS") for
mediation. The cost of the mediator will be split equally between the parties
unless they agree otherwise. As indicated in Section E.3., above, it is
recognized that disputes arising from price renegotiation provisions in the
Covered Contracts may be resolved in accordance with those provisions without
first being submitted to mediation.
4. BINDING ARBITRATION
4.1 ALL DISPUTES ARBITRATION. All disputes between the parties arising
under any Covered Contract and not resolved through negotiation or mediation
shall be submitted to arbitration in accordance with this Section E.4. or, if
one exists, the similar arbitration provision of the applicable Covered
Contract, and the parties hereby expressly waive all rights to have any such
disputes heard before a court of law, except the right to enforce an arbitration
award as described in Section E.4.5. Arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. ss. 1, et seq., and not by the arbitration
acts, statutes or rules of any other jurisdiction. In the event of a conflict
between the terms of this Section E.4. and the terms of an express arbitration
provision in any individual Covered Contract, the arbitration provision in the
individual Covered Contract shall control as to any disputes arising under that
contract.
4.2 PROCEDURE. In the event the parties are unable to resolve a dispute
arising under any Covered Contract after exercising good faith efforts to do so,
either party may require that the matter be resolved through binding arbitration
by submitting a written notice to the other. The notice shall name the noticing
party's arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen days after receipt of a notice of arbitration, the
other party shall name its arbitrator by written notice and may designate any
additional issue(s) for arbitration. The two named arbitrators shall select the
third arbitrator within fifteen days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree on the selection
of the third arbitrator, either party shall be entitled to request the Senior
Judge of the United States District Court of the Southern District of Texas to
select the third arbitrator. All arbitrators shall be qualified by education or
experience within the energy industry to decide the issues presented for
arbitration. No arbitrator shall be a current or former director, officer or
employee of either party, or its affiliates; an attorney (or member of a law
firm) who has rendered legal services to either party, or its affiliates, within
the preceding three years; or an owner of any of the common stock of either
party or its affiliates.
4.3 ARBITRATION HEARINGS. The three arbitrators shall commence the
arbitration hearing within twenty-five days following the appointment of the
third arbitrator. The proceeding shall be held at a mutually acceptable site in
Houston, Texas. If the parties are unable to agree on a site, the arbitrators
shall select a site. The arbitrators shall have the authority to establish rules
and procedures governing the arbitration hearing. Each party shall have the
opportunity to present its evidence at the hearing. The arbitrators may call for
the submission of pre-hearing statements of position and legal authority, but no
post-hearing briefs shall be submitted. After the presentation of the evidence
has concluded, each party shall submit to the arbitration panel a final offer of
its
6
proposed resolution of the dispute. The arbitration panel shall not have the
authority to award punitive or exemplary damages or any type of damages
expressly waived in the applicable Covered Contract, nor shall the arbitration
panel have any authority to terminate a Covered Contract unless that issue is
made subject to arbitration under the express terms of the Covered Contract. The
arbitrators' decision must be rendered within thirty days following the
conclusion of the hearing or submission of evidence, but no later than 90 days
after appointment of the third arbitrator. All evidence submitted in an
arbitration proceeding, transcripts of such proceedings, and all documents
submitted by the parties in an arbitration proceeding shall be deemed
confidential information subject to Section F below.
4.4 ARBITRATION DECISION. The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the parties as
to the issue submitted. Each party shall bear the expense and cost of own
attorneys and witnesses, its own arbitrator and one-half of the expense and cost
of the third arbitrator.
4.5 ENFORCEMENT OF AWARD. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The prevailing
party shall be entitled to reasonable attorneys' fees in any court proceeding
necessary to enforce or collect any award or judgment rendered by the
arbitrators.
F. CONFIDENTIALITY
Each Party agrees that it will maintain the terms of this Alliance
Agreement in strictest confidence and that it will not cause or permit
disclosure of those terms to any third party without the express written consent
of the other Parties hereto; provided, however, that such third party
restriction does not apply to affiliated companies. Disclosures otherwise
prohibited by this Section may be made by any Party (1) to the extent necessary
for such Party to enforce its rights hereunder against another Party, (2) to the
extent a Party is contractually or legally bound to disclose financial
information to a third party such as a royalty owner or partner, or (3) to the
extent to which a Party hereto is required to disclose all or part of this
Agreement by a statute or by a court, agency, or other governmental body
exercising jurisdiction over the subject matter hereof, by order, by regulation
or by other compulsory process (including, but not limited to, deposition,
subpoena, interrogatory, or request for production of documents).
G. TERM
This Alliance Agreement shall be effective for a primary term of ten
years, commencing on the Effective Date, and year to year thereafter until and
unless terminated by either party at the end of the primary term, or at the end
of any annual period after the primary term, by giving the other party not less
than one hundred and eighty days' prior written notice of termination.
H. LAWS AND REGULATIONS; EFFECT OF THIS AGREEMENT
1. This Alliance Agreement is subject to, and the parties shall comply
with, all applicable laws and regulations.
7
2. Notwithstanding the parties' intent to create a mutually beneficial
commercial relationship pursuant to this Alliance Agreement, nothing herein is
intended or shall be construed as preventing either party or their Subsidiaries
from entering into agreements with any third party for the sale, purchase or
provision of any product or service. In addition, it is understood and agreed
that the Alliance is a contractual relationship which the parties intend to
administer and improve in accordance with the provisions of this Alliance
Agreement. The Alliance is not a partnership, joint venture or any other type of
legal entity. All Energy Products or Services provided by one Entity to another
shall be provided by the first Entity as an independent contractor, retaining
complete and exclusive control and direction over such Entity's personnel and
operations, consistent with the business needs of the parties. No employee or
subcontractor of one Entity shall be, in any sense, an employee or agent of, or
have any authority to represent or bind, any other Entity in any way.
I. ASSIGNMENTS PROHIBITED
This Alliance Agreement may not be assigned by any party without the
prior written consent of the other parties.
WHEREFORE, the parties have caused this Alliance Agreement to be
executed by their authorized representatives as of the date written above.
[Signatures on next page]
8
SIGNATURE PAGES TO MASTER ALLIANCE AGREEMENT
between
Chevron U.S.A. Production Company, Chevron Products Company, Chevron Chemical
Company, Chevron Pipe Line Company, Chevron Overseas Petroleum Inc., NGC
Corporation, Natural Gas Clearinghouse, NGC Liquids Marketing, Inc., NGC Oil
Trading and Transportation, Inc., NGC Energy Resources Ltd. Partnership, Trident
NGL, Inc., Warren Petroleum Company, Limited Partnership, and Electric
Clearinghouse
CHEVRON U.S.A. PRODUCTION COMPANY,
A DIVISION OF CHEVRON U.S.A. INC.
By: _______________________________
Title: ____________________________
CHEVRON PRODUCTS COMPANY,
A DIVISION OF CHEVRON U.S.A. INC.
By: _______________________________
Title: ____________________________
CHEVRON CHEMICAL COMPANY
By: _______________________________
Title: ____________________________
CHEVRON PIPE LINE COMPANY
By: _______________________________
Title: ____________________________
CHEVRON OVERSEAS PETROLEUM INC.
By: _______________________________
Title: ____________________________
NGC CORPORATION
By: _______________________________
Title: ____________________________
NATURAL GAS CLEARINGHOUSE
By: _______________________________
Title: ____________________________
ELECTRIC CLEARINGHOUSE
By: _______________________________
Title: ____________________________
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
By: _______________________________
Title: ____________________________
NGC LIQUIDS MARKETING, INC.
By: _______________________________
Title: ____________________________
9
NGC OIL TRADING AND TRANSPORTATION, INC.
By: _______________________________
Title: ____________________________
NGC ENERGY RESOURCES LTD. PARTNERSHIP
By: _______________________________
Title: ____________________________
TRIDENT NGL, INC.
By: _______________________________
Title: ____________________________
10
EXHIBIT 10.47
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST; THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
NATURAL GAS PURCHASE AND SALE AGREEMENT
BETWEEN
CHEVRON U.S.A. INC.
AND
NATURAL GAS CLEARINGHOUSE
TABLE OF CONTENTS
PAGE
I. DEFINITIONS.......................................................... 1
II. COMMITMENT OF GAS AND OBLIGATIONS TO PURCHASE........................ 2
2.1 Committed Gas............................................... 2
2.1.1 Pre-Effective Date Commitment...................... 3
2.1.2 Post-Effective Date Commitment..................... 3
2.1.3 Addition of New Sources of Committed Gas........... 3
2.1.4 Lease Use Gas...................................... 3
2.1.5 Non-Operated Wells................................. 5
2.1.6 Non-Conventional Gas............................... 5
2.1.7 Farmout Acreage.................................... 6
2.2 Availability Reports........................................ 6
2.2.1 Revision of Availability Report.................... 7
2.2.2 NGC Information.................................... 7
2.3 Right to Control Production and Curtailment................. 7
2.4 Dedicated Contracts......................................... 8
2.5 Right to Process............................................ 8
2.5.1 Accounting and Billing Procedures.................. 9
2.5.2 Offshore Condensate................................ 9
2.5.3 Documentation of Charges........................... 9
III. TRANSPORTATION AND PENALTIES......................................... 9
3.1 Upstream Gathering and Transportation Agreements............ 9
3.2 Transporter's Tariff........................................10
3.3 Imbalance Charges...........................................10
3.3.1 Underdeliveries - Cash-Out Costs...................11
3.3.2 Overdeliveries - Cash-Out Costs....................11
3.3.3 Imbalance Trading..................................12
3.4 Operational Flow Orders.....................................12
3.5 Operational Balancing Agreements............................12
IV. COMMODITY PRICE......................................................13
4.1 First of the Month Commodity Price..........................13
4.2 Description of Sources of Supply............................13
4.3 Split Connect Committed Gas.................................14
4.4 Split Connect Committed Gas Price...........................14
4.4.1 Effect of Capacity Constraints.....................15
4.4.2 Measurement Capacity Constraints...................15
4.5 Firm Market Split Connect Committed Gas.....................15
4.6 Downstream Released Firm Transportation.....................16
4.7 Mid-Month Increases.........................................16
4.8 Mid-Month Decreases.........................................18
4.9 Commodity Price of Curtailed Sources of Supply..............20
4.10 Locked Price Option.........................................20
4.10.1 Request for Locked Price...........................21
4.10.2 Procedures.........................................21
4.10.3 Locked Quantities..................................22
4.10.4 Irrevocability.....................................22
4.10.5 Availability of Committed Gas......................22
4.10.6 Failure to Deliver Committed Gas...................22
4.10.7 Cessation of Futures Trading.......................23
4.11 NGC's Failure to Purchase Committed Gas.....................23
V. TITLE AND RESPONSIBILITY.............................................24
5.1 CUSA Responsibility.........................................24
5.2 NGC Responsibility..........................................24
VI. QUALITY, MEASUREMENT AND TESTS.......................................25
6.1 Quality Specifications......................................25
6.2 Volume and Heating Value....................................25
6.3 Test Data and Charts........................................25
VII. ACCOUNTING, BILLING AND PAYMENT......................................25
7.1 Statements..................................................25
7.2 Payment.....................................................26
7.3 Failure to Pay..............................................26
7.4 Two Year Limit on Adjustments...............................26
7.5 Audit.......................................................27
7.6 Accounting Information......................................27
7.7 Setoff......................................................27
7.8 Letter of Credit............................................27
VIII. DISCLAIMER AND WARRANTY..............................................28
8.1 Warranty....................................................28
8.2 Disclaimer..................................................28
IX. FORCE MAJEURE........................................................28
9.1 Suspension of Obligations...................................28
9.2 Force Majeure Defined.......................................28
X. TERM.................................................................29
10.1 Term........................................................29
10.2 Early Termination...........................................29
XI. RENEGOTIATION, PRICE REDETERMINATION AND ARBITRATION.................31
11.1 Renegotiation and Price Redeterminations....................31
11.2 Limits on Arbitration.......................................31
11.3 Price Redetermination.......................................31
11.3.1 Scope of Price Redetermination.....................32
11.3.2 Price Redetermination Procedure....................33
11.3.3 Arbitration of Price Redetermination...............32
11.3.4 Effective Date.....................................33
11.4 Substitution of Published Index Prices......................33
11.5 Unavailability of Published Index Prices....................34
11.6 Dispute Resolution - Other Price Issues.....................34
11.7 Arbitration After the Fifth Anniversary.....................34
11.8 Renegotiation of the Premium................................35
11.9 All Disputes Arbitration....................................35
11.10 Procedure...................................................35
11.11 Arbitration Hearings........................................35
11.12 Arbitration Decision........................................36
XII. GOVERNMENTAL REGULATIONS AND AUTHORIZATIONS..........................36
12.1 Application of Law and Regulation...........................36
12.2 Authorization and Regulatory Filings........................36
XIII. NOTICES..............................................................37
13.1 Procedure...................................................37
XIV. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY CUSA...................37
14.1 Non-Assignability...........................................37
14.2 Transfer of Interest........................................37
XV. MISCELLANEOUS........................................................38
15.1 Waiver......................................................38
15.2 Entire Agreement............................................38
15.3 Choice of Law...............................................38
15.4 Confidentiality.............................................38
15.5 Limitation of Damages.......................................39
15.6 Severability................................................39
EXHIBIT A Sources of Supply, Delivery Points, Published Index Prices,
and Index Price Adjustments
EXHIBIT B Pre-Effective Date Commitments
EXHIBIT C Upstream Gathering and Transportation Agreements
EXHIBIT D Firm Market Split Connect Committed Gas
EXHIBIT E Price Lock Confirmation
EXHIBIT F Letter of Credit
MAY 21, 1996
NATURAL GAS PURCHASE AND SALE AGREEMENT
This Natural Gas Purchase and Sale Agreement is made and entered into
this _____ day of ____________, 1996, but effective as of the _____ day of
_____________, 1996 ("Effective Date"), between CHEVRON U.S.A. INC., a
Pennsylvania corporation ("CUSA"), and NATURAL GAS CLEARINGHOUSE, a Colorado
general partnership ("NGC"), both CUSA and NGC sometimes referred to
collectively as "Parties" or singularly as "Party".
RECITALS
1. CUSA is the owner and producer of natural gas and desires to
sell natural gas to NGC; and
2. NGC is a marketer of natural gas, provides products and
services associated with the production, transportation and
marketing of natural gas, and desires to purchase natural gas
from CUSA;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, CUSA and NGC agree as follows:
I. DEFINITIONS
"Agreement" means the provisions of this document as it may be amended
from time to time.
"Alliance Agreement" means that certain Master Alliance Agreement dated
as of , 1996, executed by CUSA and NGC among other parties.
"Btu" (British Thermal Unit) means the amount of heat energy required
to raise the temperature of one pound of water from fifty-nine degrees
Fahrenheit (59EF) to sixty degrees Fahrenheit (60EF), as determined on
a dry basis.
"Business Day" means a day on which commercial banks are open for
business in Houston, Texas.
"Day" means that period of 24 consecutive hours beginning and ending at
8:00 a.m. Central Time, or such other time as may be specified in the
FERC Gas Tariff, or the equivalent, of a pipeline transporting gas
subject to this Agreement.
"Delivery Point" means the point at which title of gas delivered under
this Agreement passes from CUSA to NGC.
"Effective Date" means , 1996.
"FERC" means the Federal Energy Regulatory Commission or any successor
government authority.
"gas" or "natural gas" means the effluent vapor stream in its natural
state produced from wells, including all hydrocarbon and nonhydrocarbon
constituents and including casinghead gas produced with crude oil, and
residue gas resulting from the processing of gas well gas or casinghead
gas.
"MMBtu" means one million (1,000,000) Btu.
"Month" means the period commencing at 8:00 a.m. Central Time on the
first Day of a calendar month and ending at 8:00 a.m. Central Time on
the first Day of the immediately following calendar month.
"Source of Supply" means the wells, common field point, field, or
similar designation used by CUSA to describe sources of gas supply
subject to this Agreement.
"Transporter" means the pipeline receiving the gas for the account of
Buyer immediately downstream of a delivery point.
II. COMMITMENT OF GAS AND OBLIGATION TO PURCHASE
2.1 COMMITTED GAS. During the term of this Agreement, CUSA agrees
to sell to NGC and NGC agrees to purchase from CUSA under the
terms of this Agreement all Committed Gas. Subject to the
terms and conditions of this Agreement, CUSA's obligation to
sell one hundred percent (100%) of the Committed Gas and NGC's
obligation to purchase one hundred percent (100%) of the
Committed Gas made available by CUSA are firm obligations.
Committed Gas is defined as all gas produced and owned or
controlled by CUSA during the term of this Agreement, EXCEPT
gas that is dedicated to a Pre-Effective Date Commitment, gas
dedicated to a Post-Effective Date Commitment, gas reserved by
CUSA for Lease Use, gas produced from non-conventional sources
of supply, and gas produced from
-2-
acreage farmed out by CUSA to a third party. Committed Gas
includes, without limitation, gas produced from wells in
existence on the Effective Date, wells drilled or recompleted
subsequent to the Effective Date and make up gas accruing to,
and capable of being delivered by, CUSA after the Effective
Date as a result of production or pipeline imbalances
regardless of whether the imbalances occurred before or after
the Effective Date.
2.1.1 PRE-EFFECTIVE DATE COMMITMENT. Exhibit B to this
Agreement describes wells, oil, gas and mineral
leases, gas reserves, or producing properties however
characterized that are not subject to this Agreement
because the gas produced from such properties is
dedicated to the contractual arrangements described
in Exhibit B ("Pre-Effective Date Commitment"). Gas
subject to a Pre-Effective Date Commitment shall
become Committed Gas at such time as the gas may be
sold and delivered to NGC as a result of termination
or cancellation of the Pre-Effective Date Commitment
or other release of the gas from the Commitment.
2.1.2 POST-EFFECTIVE DATE COMMITMENT. For purposes of this
Agreement, a Post-Effective Date Commitment is
defined as an instance where (i) CUSA acquires
well(s), oil, gas and mineral leases, gas reserves,
or producing properties however characterized
("Subsequently Acquired Properties") subsequent to
the Effective Date; and (ii) contractual arrangements
in place at the time of CUSA's acquisition prohibit
CUSA from selling all or a portion of the gas
produced from the Subsequently Acquired Property to
NGC under this Agreement. Gas subject to a
Post-Effective Date Commitment shall become Committed
Gas at such time as the gas may be sold and delivered
to NGC as a result of a termination or cancellation
of the Post-Effective Date Commitment or other
release of the gas from the commitment. CUSA agrees
to exercise reasonable efforts to terminate any
Post-Effective Date Commitment at the earliest
opportunity in accordance with the terms and
conditions of the commitment if, in the reasonable
judgment of CUSA, such termination will not result in
adverse economic consequences to CUSA.
2.1.3 ADDITION OF NEW SOURCES OF COMMITTED GAS. In the
event CUSA acquires or develops new sources of
Committed Gas or enhances the productive capability
of existing Sources of Supply, CUSA shall exercise
reasonable efforts to give NGC notice as soon as
possible of the new sources and increased production,
including an estimate of the date of initial
deliveries or increased production of Committed Gas
to NGC. In addition, CUSA and NGC will cooperate in
the development of a joint strategy to market
Committed Gas from a new Source of Supply.
-3-
2.1.4 LEASE USE GAS. CUSA retains the right to use gas
produced from wells in which CUSA has an interest for
purposes of the operation of such wells, or the
operation of other wells, in quantities deemed
necessary by CUSA acting as a prudent operator. For
purposes of this Agreement, the Lease Use of gas
includes, without limitation, gas lift, pressure
maintenance, enhanced recovery, equipment fuel,
delivery to a third party for purposes of clearing a
positive joint venture partner imbalance incurred by
CUSA, satisfying in-kind royalty obligations to the
extent such obligations require CUSA to deliver
royalty gas to a third party, and delivery of gas to
a third party in consideration of the delivery by
that third party to CUSA of equivalent (although not
always equal) quantities of gas at a different
location. Lease Use Gas utilized by CUSA in
connection with the operation of a well located on
the lease producing such Lease Use Gas, or a well
located on a different lease in instances where
gathering or transportation downstream of the
applicable Delivery Point is not required to
transport the Lease Use Gas to the different lease,
will not appear in an Availability Report, as defined
in Section 2.2 below. Lease Use Gas utilized by CUSA
in connection with the operation of a well in which
CUSA has an interest located on a lease other than
the lease producing such Lease Use Gas, and requiring
gathering or transportation downstream of the
applicable Delivery Point, will: (i) not constitute
Committed Gas but will appear in an Availability
Report as a separate category specifically designated
as Lease Use Gas; (ii) be purchased by NGC at the
applicable First of the Month Commodity Price, as
defined in Section 4.1 below; (iii) be transported by
NGC to the location designated by CUSA; and (iv) be
resold to CUSA at the same First of the Month
Commodity Price, plus any incremental costs
associated with transportation of such Lease Use Gas
to the point designated by CUSA. In addition to the
categories of Lease Use Gas described above in this
Section 2.1.4, CUSA and NGC acknowledge that CUSA
shall have the right from time to time during the
term of this Agreement to supply gas from a Source of
Supply to a third party for emergency use in the
operation of a well in which CUSA has no interest.
For purposes of this Section 2.1.4 such emergency use
is intended to apply in an instance where a third
party requires an immediate short term (typically no
more than seven Days) supply of gas for purposes of
restoring or maintaining the productive capacity of a
well. Typically gathering or transportation
downstream of the applicable Delivery Point is not
required to transport the emergency use gas to the
third party well; however the Parties acknowledge
that such gathering or transportation may be required
in isolated instances, in which cases CUSA will pay
the gathering or transportation charges. In the event
CUSA determines to supply emergency use gas to a
third party in accordance with this Section 2.1.4,
the applicable Availability Report will designate the
quantity of such
-4-
emergency use gas as a separate entry and set forth
the estimated duration of CUSA's delivery of the
emergency use to the third party. Should NGC conclude
that CUSA's delivery of emergency use gas to a third
party may have an adverse impact of NGC's ability to
serve NGC's markets, the Parties will confer in an
attempt to mitigate any such potential adverse
impact. Nothing in this Section 2.1.4 shall authorize
CUSA to deliver gas to a third party for purposes of
pressure maintenance or enhanced recovery. Once gas
has been designated as Committed Gas on an
Availability Report for any Month, CUSA shall not
subsequently reduce the quantity of Committed Gas
designated for delivery in that Month by declaring
any portion of such Committed Gas to be Lease Use
Gas.
2.1.5 NON-OPERATED WELLS. NGC and CUSA acknowledge that
CUSA has interests in wells operated by third parties
and that from time to time NGC and CUSA may determine
that it is more efficient to sell gas attributable to
CUSA's interest in such wells to third parties,
including, without limitation, the operator of a
well. In addition to gas produced from non-operated
wells, CUSA produces casinghead gas from CUSA
operated wells and sells such gas to third parties.
This gas shall be treated as gas produced from
non-operated wells for purposes of determining
whether or not such gas will be Committed Gas under
this Agreement. In respect to instances where, as of
the Effective Date, CUSA sells gas produced from a
non-operated well to a third party, CUSA and NGC will
evaluate each such sale and determine whether to
continue the sale to the third party or to declare
the gas Committed Gas subject to this Agreement. CUSA
and NGC acknowledge that their evaluation will not be
complete on the Effective Date. The Parties will
complete the evaluation within one year of the
Effective Date, or within such other period agreed
upon by the Parties. If during the term of this
Agreement CUSA deems it advisable to sell gas
produced from a non-operated well to a third party,
CUSA will give notice to NGC and the Parties will
determine whether to sell the gas to a third party or
declare the gas Committed Gas under this Agreement.
In the event CUSA and NGC are unable to agree on
whether the gas will be sold to a third party or to
NGC under this Agreement, and in the event the
quantity of gas at issue is less than 200 MMBtu per
Day, CUSA may sell the gas to a third party. In the
event the quantity of gas at issue is more than 200
MMBtu per Day, on average over the preceding three
Months, NGC may declare the gas Committed Gas under
this Agreement. Notwithstanding the foregoing, CUSA
shall be entitled to continue the sale to the third
party at its option if CUSA concludes in its
reasonable judgment that the termination of the sale
will result in adverse economic consequences to CUSA.
-5-
2.1.6 NON-CONVENTIONAL GAS. For purposes of this Agreement,
"Non-Conventional Gas" means gas which is (a)
produced from Devonian shales, coal seams, or tight
gas sands, defined as very low permeability
sandstones ( 0.1 millidarcies or less, as measured
using sound engineering practices) and (b)
administered within CUSA by CUSA's Non-Conventional
Gas Business Team or its successor. Non-Conventional
Gas shall not be Committed Gas subject to this
Agreement and CUSA shall not be obligated to sell
such Non-Conventional Gas to NGC, nor shall NGC be
obligated to purchase such gas from CUSA.
Notwithstanding the foregoing, upon NGC's request,
made not more frequently than once each six Months,
NGC and CUSA shall evaluate CUSA's portfolio of
Non-Conventional Gas and determine whether or not any
quantity of such Non-Conventional Gas is suitable for
treatment as Committed Gas subject to this Agreement.
If the Parties are unable to agree on the treatment
of any quantity of Non-Conventional Gas, it shall
remain Non-Conventional Gas.
2.1.7 FARMOUT ACREAGE. During the term of this Agreement
CUSA shall be entitled to farmout to a third party
undeveloped acreage covered by an oil, gas and
mineral lease or mineral fee interest held by CUSA in
the event CUSA, acting as a prudent operator,
determines that such a farmout is in the best
interests of CUSA. In the event of such a farmout,
CUSA will exercise reasonable efforts to (i) retain a
call on gas produced from the acreage subject to the
farmout, provided that such a call does not diminish
the return to CUSA when compared to the return in the
absence of the call; or (ii) minimize the period of
time elapsing before CUSA is entitled to take and
market its proportionate share of the gas produced
from the farmout acreage. Gas produced from farmout
acreage shall not be Committed Gas under this
Agreement until such time that CUSA is entitled to
take and market such gas.
2.2 AVAILABILITY REPORTS. In each Month during the term of this
Agreement, CUSA shall submit to NGC an Availability Report
setting forth CUSA's best estimate of the quantity of
Committed Gas that CUSA will deliver to NGC from each Source
of Supply during the following Month. If the quantity of
Committed Gas available for delivery from a Source of Supply
is expressed as a single monthly quantity, and unless the
Availability Report states otherwise, it shall be presumed
that such quantity will be delivered at a relatively constant
daily rate of flow throughout the Month. Except as provided
below in this Section 2.2, the Availability Report shall be
delivered to NGC no later than the tenth Business Day before
the first Day of the Month of delivery. It shall identify the
estimated quantity of Committed Gas that will be produced from
each Source of Supply and the estimated quantity that will be
delivered at each Delivery Point. The quantity of Committed
Gas set forth in the Availability Report in effect at 8:00
a.m. on the second Business Day before the Day nominations to
the applicable Transporter are due will form the basis of the
quantity of Committed Gas nominated by NGC for first Day of
the Month delivery into that Transporter. CUSA shall exercise
reasonable efforts to submit the Availability Report
applicable to a Source of Supply operated by a third party no
later than the tenth Business Day before the first Day of the
Month of delivery, and shall, in any event, submit the
Availability Report as soon as possible. However, in the event
such an Availability Report is submitted later than 8:00 a.m.
on the second Business Day before
-6-
the Day nominations to the applicable Transporter are due, the
Committed Gas set forth on the Availability Report will be
treated as Incremental Committed Gas under Section 4.5 below.
To the fullest extent possible, taking into account the
information systems capabilities of CUSA and NGC, the
Availability Report will be delivered via Electronic Data
Interchange ("EDI") in a format permitting the downloading of
data directly into NGC's systems. In the event the delivery of
the Availability Report via EDI is not possible beginning on
the Effective Date, the Parties will strive to develop the
systems required to implement the electronic delivery of the
Availability Report, provided CUSA and NGC are in agreement in
respect to the expenditure of funds required to develop the
systems. CUSA and NGC will each have gas control personnel
accessible twenty-four hours a Day seven Days a week. Nothing
in this Section 2.2 or in Section 2.2.1 below, shall require
CUSA to deliver information via EDI if such information can be
delivered to NGC faster or more efficiently by telephone
followed by facsimile confirmation.
2.2.1 REVISION OF THE AVAILABILITY REPORT. Following
submission of the initial Availability Report, CUSA
shall revise the Availability Report to reflect
changes to CUSA's estimated quantities of Committed
Gas (if the revision is submitted prior to the
beginning of the Month of delivery) or changes in
actual quantities of Committed Gas (if the revision
is submitted during the Month of delivery). The
revisions shall also be delivered to NGC via EDI and
shall be delivered as soon as commercially possible
in order to permit NGC to submit revised pipeline
nominations and to make any market adjustments that
may be required, but in no event later than one hour
before the pipeline nomination deadline of the
pipeline immediately downstream of the Delivery
Point.
2.2.2 NGC INFORMATION. In respect to instances where CUSA
is a Delivery Point operator, and Committed Gas flows
through that point, and upon CUSA's request, NGC will
exercise reasonable efforts to provide CUSA with
information required by CUSA in its role as point
operator, including, without limitation, NGC's
downstream transportation contract number, the
identity of the downstream shipper, and, in the event
NGC purchases gas flowing through that point from
other suppliers, the quantity of gas purchased from
each such supplier. The Parties acknowledge that the
-7-
purpose of this Section 2.2.2 is not to require NGC
to furnish information that CUSA would otherwise be
able to collect on its own, but rather to obligate
NGC to use reasonable efforts to furnish information
not readily accessible to CUSA.
2.3 RIGHT TO CONTROL PRODUCTION AND CURTAILMENT. CUSA reserves the
right, acting as a prudent operator, to limit, curtail or
shut-in production (collectively referred to as "curtail or
curtailment") of Committed Gas from any well or wells if it
determines that curtailment is warranted as a result of any
mechanical, engineering, legal, title, or other field or well
condition. CUSA also reserves the right to curtail production
of Committed Gas from any well or wells if it concludes such
action is warranted due to prevailing market prices for
natural gas. In the event CUSA desires to curtail production
of Committed Gas, CUSA shall give NGC written notice of such
action no later than the tenth Business Day before the first
Day of the Month of delivery. CUSA's notice shall set forth
the quantity of Committed Gas to be curtailed, the Source of
Supply and Delivery Point(s) affected and the estimated
duration of the curtailment. CUSA shall not curtail the
production of Committed Gas if the Gas has been designated in
CUSA's Availability Report as available for delivery to NGC
unless such curtailment is the result of an event of force
majeure as defined in Article IX below. Any curtailment of
Committed Gas after such gas has been designated as available
in the absence of an event of force majeure may subject CUSA
to Deficiency Keep Whole Payments pursuant to Section 4.6
below. CUSA shall be entitled to reduce the period of
curtailment by submitting a revised Availability Report in
accordance with Section 2.2.1 above.
2.4 DEDICATED CONTRACTS. Notwithstanding anything in Section 2.3
above to the contrary, CUSA shall not be entitled to curtail
production of Committed Gas as a result of prevailing market
prices to the extent Committed Gas has been dedicated for
delivery to a customer of NGC under a gas purchase and sale
agreement designated a "Dedicated Contract" by NGC and CUSA
unless CUSA and NGC agree on an alternate source of Committed
Gas to meet the requirements of the Dedicated Contract during
the period of curtailment. Contracts eligible for designation
as a Dedicated Contract will be gas purchase and sale
agreements that NGC proposes to execute as seller after the
Effective Date and which will require the dedication of
Committed Gas produced from a specific Source(s) of Supply to
that contract. NGC shall give CUSA written notice of NGC's
desire to designate a Dedicated Contract, which notice shall
set forth the quantity of Committed Gas dedicated, the Source
of Supply and Delivery Point affected and the duration of the
dedication. CUSA's agreement to the designation of a contract
as a Dedicated Contract shall not be construed to be a
warranty or guaranty by CUSA that a given Source of Supply
will produce Committed Gas in quantities sufficient to meet
the requirements of a Dedicated Contract.
-8-
2.5 RIGHT TO PROCESS. CUSA hereby reserves the right to process
all or any portion of the Committed Gas deliverable to NGC
under this Agreement for the removal of all or any
constituents other than methane. Such processing rights may be
exercised either before or, if the Transporter allows, after
delivery of the Committed Gas to NGC. When CUSA is exercising
its right to process the Committed Gas (and such right may be
exercised at any time and from time to time during the term of
this Agreement), title to the liquefiable hydrocarbons and
other constituents removed or consumed during processing shall
not pass to NGC, but shall remain at all times in CUSA. NGC
and CUSA agree that they will cooperate in good faith to
facilitate the exercise of Seller's processing right,
including, without limitation, taking the actions described in
the remainder of this Section 2.5.
2.5.1 ACCOUNTING AND BILLING PROCEDURES. When and if CUSA
elects to exercise its processing rights, NGC and
CUSA will establish reasonable accounting and billing
procedures so that (i) NGC will pay only for the
quantities of residue Committed Gas remaining after
processing and (ii) all charges of the Transporter
will be equitably allocated between NGC and CUSA,
with CUSA paying all costs attributable to the
exercise of its processing rights and NGC paying all
costs attributable to the Committed Gas purchased by
it.
2.5.2 OFFSHORE CONDENSATE. It is understood that CUSA's gas
wells may produce liquid hydrocarbons (condensate)
along with the gas well Committed Gas to be delivered
under this Agreement. To the extent that any Delivery
Point provided for in this Agreement is located on an
offshore platform, and if Transporter allows, NGC
agrees that CUSA may inject condensate into the gas
stream delivered hereunder for transportation and
redelivery to CUSA at a separation facility located
onshore. CUSA agrees to bear, or reimburse NGC for,
all charges of the Transporter attributable to the
injection, transportation, and redelivery of CUSA's
condensate.
2.5.3 DOCUMENTATION OF CHARGES. NGC shall furnish CUSA with
documentation establishing the actual charges
incurred by NGC and borne by CUSA under Sections
2.5.1 and 2.5.2. Such documentation shall reflect the
method of allocation of such charges between NGC and
CUSA. Upon agreement of the Parties, amounts paid by
NGC and borne by CUSA under Sections 2.5.1 and 2.5.2
may be netted against amounts NGC is obligated to pay
CUSA for Committed Gas delivered under this
Agreement.
III. TRANSPORTATION AND PENALTIES
-9-
3.1 UPSTREAM GATHERING AND TRANSPORTATION AGREEMENTS. Exhibit C to
this Agreement contains a list of all upstream gathering and
transportation service agreements associated with the delivery
of Committed Gas to the Delivery Points. The Parties shall
revise the list during the term of this Agreement to reflect
the addition or deletion of gathering and transportation
service agreements. CUSA shall be responsible for arranging,
nominating and paying for, all upstream transportation and
gathering services (and associated charges) necessary for CUSA
to deliver Committed Gas to the Delivery Point(s), with the
following exception. In respect to any upstream gathering or
transportation service agreement managed by CUSA's Natural Gas
Business Unit as of the Effective Date, CUSA shall have the
option to shift responsibility for the management and
operation of such service agreements to NGC as of the
Effective Date (or effective as of a later date if CUSA does
not exercise its option on or before the Effective Date). CUSA
will use reasonable efforts to exercise its option on or
before the Effective Date, however the Parties recognize that
time constraints may preclude the completion of such action by
such date. The Parties agree to execute any agreements they
deem necessary to implement the shifting of such
responsibility to NGC. Management and operation of such
service agreements will include, without limitation,
nominations, confirmations and the payment of invoices.
Amounts paid by NGC to an upstream gatherer or transporter
will be netted against amounts NGC is obligated to pay CUSA
for Committed Gas delivered under this Agreement.
Notwithstanding the foregoing, upon agreement of the Parties,
in respect to any payments to an upstream gatherer or
transporter, CUSA shall reimburse NGC for one hundred percent
(100%) of all payments made by NGC to such upstream gatherer
or transporter prior to the date NGC is required to make such
payments to the gatherer or transporter provided that NGC
furnishes CUSA a copy of the invoice no later than ten Days
prior to the payment due date. If NGC furnishes a copy of the
invoice later than the tenth Day before the payment due date,
CUSA shall exercise reasonable efforts to reimburse NGC prior
to the payment due date, but shall in any event reimburse NGC
no later than the close of business on the tenth Day following
CUSA's receipt of the invoice. In the event CUSA requests
NGC's assistance in obtaining a new upstream gathering or
transportation rate during the term of this Agreement, such
assistance will be furnished pursuant to an agreement
addressing, among other items, the allocation between CUSA and
NGC of any cost saving associated with new rates.
3.2 TRANSPORTER'S TARIFF. The rules, guidelines, and policies of
the pipeline immediately downstream of the Delivery Point
("Transporter") shall define and set forth the manner in which
the Committed Gas purchased and sold under this Agreement is
measured and transported. CUSA and NGC recognize that the
receipt and delivery into Transporter's pipeline facilities of
Committed Gas purchased and sold under this Agreement shall be
subject to the operational
-10-
procedures of Transporter as well as the terms of
Transporter's transportation service agreement(s) with NGC, if
any, addressing operational procedures.
3.3 IMBALANCE CHARGES. The terms and conditions of Transporter's
FERC Gas Tariff (or equivalent state-approved tariff)
addressing penalties, scheduling fees, cash-out costs or
similar charges attributable to underdeliveries or
overdeliveries of gas into the pipeline (collectively
"Imbalance Charges") shall be used for purposes of calculating
Imbalance Charges under this Agreement. Imbalance Charges
under this Agreement will be assessed on a
transporter-by-transporter basis using the applicable terms of
Transporter's FERC Gas Tariff and as if CUSA is the shipper
and NGC is the transporter. If an Imbalance Charge is assessed
under this Agreement, then CUSA shall pay to NGC an amount
calculated in accordance with the applicable terms of
Transporter's FERC Gas Tariff. For purposes of this Agreement,
an underdelivery is defined as an instance where the monthly
quantity of Committed Gas delivered to a given Delivery Point
is less than the monthly quantity of Committed Gas designated
for delivery at that Delivery Point in CUSA's Availability
Report as changed throughout the Month by timely revisions of
the Availability Report in accordance with Section 2.2.1
above. An overdelivery is defined as an instance where the
monthly quantity of Committed Gas delivered to a given
Delivery Point is greater than the monthly quantity of
Committed Gas designated for delivery at that Delivery Point
in CUSA's Availability Report as changed throughout the Month
by timely revisions of the Availability Report in accordance
with Section 2.2.1 above. In the event the applicable
Transporter requires balancing on a daily basis, the
definitions of underdelivery and overdelivery shall be
modified to reflect daily balancing as opposed to monthly
balancing. Overdeliveries by CUSA into a transporter at one
Delivery Point will be netted against underdeliveries into
that transporter at a different Delivery Point to the extent
permitted under that transporter's FERC Gas Tariff.
Underdeliveries by CUSA on one transporter will not be netted
against overdeliveries by CUSA to a different transporter
absent the Parties' consent and underdeliveries or
overdeliveries by CUSA will not be netted against
overdeliveries or underdeliveries by other NGC suppliers of
gas.
3.3.1 UNDERDELIVERIES - CASH-OUT COSTS. In the event (i) of
net underdeliveries by CUSA in any Month in respect
to a given Transporter; (ii) that Transporter's per
MMBtu cash-out prices (in the case of tiered cash-out
prices the cash-out price associated with the level
of CUSA's net underdeliveries in each tier) is higher
than the appropriate Published Index Price; and (iii)
CUSA would be required to pay cash-out costs to
Transporter under Transporter's FERC Gas Tariff if
CUSA was the shipper and NGC was the transporter,
CUSA shall pay NGC an amount equal to the quantity of
the underdelivery, expressed in MMBtu, multiplied by
the
-11-
difference between the per MMBtu cash-out price and
the Published Index Price.
3.3.2 OVERDELIVERIES - CASH-OUT COSTS. In the event (i) of
net overdeliveries by CUSA in any Month in respect to
a given Transporter; and (ii) that Transporter would
be required to purchase the overdelivered quantity of
gas at the cash-out prices (in the case of tiered
cash-out prices the cash-out price associated with
the level of CUSA's net overdeliveries in each tier)
under Transporter's FERC Gas Tariff if CUSA was the
shipper and NGC was the transporter, the First of the
Month Commodity Price of the overdelivered quantity
of Gas shall be calculated using the lesser of the
Published Index Price or the cash-out price.
3.3.3 IMBALANCE TRADING. In the event of net
underdeliveries or overdeliveries by CUSA in any
Month and notwithstanding the absence of an actual
net underdelivery or overdelivery assessed by
Transporter, NGC will exercise best efforts to
mitigate the adverse consequences of the net
underdeliveries or overdeliveries through imbalance
trading, or the equivalent, opportunities set forth
in the FERC Gas Tariff of the applicable Transporter.
NGC and CUSA acknowledge that net underdeliveries or
overdeliveries by CUSA calculated in accordance with
this Agreement may or may not result in a
corresponding actual net underdelivery or
overdelivery assessed by Transporter pursuant to its
FERC Gas Tariff.
3.4 OPERATIONAL FLOW ORDERS. CUSA and NGC recognize that
Transporter may be authorized to issue Operational Flow Orders
("OFOs"), or the equivalent, under the General Terms and
Conditions of Transporter's FERC Gas Tariff, or any successor
provision. CUSA and NGC also recognize that Transporter may
issue an OFO that obligates CUSA or NGC to take action that
may be contrary to the terms of this Agreement, including,
without limitation, the delivery and taking of gas in
quantities contrary to those set forth in Availability Reports
and prior nominations. CUSA and NGC agree to use their best
efforts to prevent the issuance of such an OFO. In the event
an OFO is issued, CUSA and NGC agree that compliance with any
duly authorized OFO will not constitute a violation of this
Agreement, provided that: (i) the Party receiving an OFO
notify the other Party as soon as possible, and (ii) the
Parties use their best efforts to minimize the operational and
economic consequences of compliance with the OFO by all means
at their disposal. In the event an OFO can be construed as
calling for the shutting-in of CUSA production, the Parties
will cooperate to take steps alternative to a shut-in to the
extent such alternative steps may be taken without causing a
different NGC firm supplier to bear a disproportionate share
of adverse consequences flowing from the OFO. Nothing in this
Section 3.4 shall be construed to require CUSA to bear adverse
economic consequences under an OFO issued as a result of
overdeliveries by a third party supplier of gas to NGC or
-12-
deficient takes by an NGC market, and not as a result of any
act or omission by CUSA.
3.5 OPERATIONAL BALANCING AGREEMENTS. The Parties agree to use
their best efforts to maintain an operational balancing
agreement, or the equivalent ("OBA"), at each point of
delivery into a transporting pipeline or at such other points
the Parties deem advisable. In respect to any point at which
an OBA is not in effect, upon CUSA's request, NGC will assume
the responsibility for negotiating and implementing an OBA on
terms and conditions acceptable to CUSA and NGC.
IV. COMMODITY PRICE
4.1 FIRST OF THE MONTH COMMODITY PRICE. The commodity price paid
by NGC to CUSA for each MMBtu of Committed Gas delivered to
NGC shall be based on prevailing index prices reported in
commercial publications, will change each Month, and will vary
by Source of Supply and Delivery Point. The "First of the
Month Commodity Price" of Committed Gas produced from a given
Source of Supply shall be the index price reported in the
first issue of the designated commercial publication published
in the Month of delivery in the designated table, heading and
entry in that table ("Published Index Price"), plus or minus
adjustments applicable to that Source of Supply, including,
without limitation, deduction of gathering and transportation
charges (collectively "Index Price Adjustments"), and the
premium, if any (the "Premium"). Prior to delivery of
Committed Gas under this Agreement, CUSA and NGC shall agree
on (i) the Published Index Price that will form the basis of
the First of the Month Commodity Price of the Committed Gas
delivered to the applicable Delivery Point; (ii) the Index
Price Adjustments, if any, to the published index price
necessary to arrive at the First of the Month Commodity Price;
and (iii) the Premium, if any. The substitution of a new
Published Index Price (or a change in the table, heading and
entry) or a modification of the Index Price Adjustment also
requires the agreement of CUSA and NGC. Although the Parties
will strive to reduce agreements substituting a new Published
Index Price or modifying an Index Price Adjustment to writing,
the Parties recognize that market conditions may require
prompt action. Consequently, oral agreements substituting a
new Published Index Price or modifying an Index Price
Adjustment will be effective until reduced to writing. The
Parties agree to exercise best efforts to reduce such oral
agreements to writing within thirty Days of reaching
agreement. The First of the Month Commodity Price shall be
calculated each Month during the term of this Agreement and
shall remain in effect during the entire Month unless the
Parties agree to change the First of the Month Commodity Price
during the course of the Month.
-13-
4.2 DESCRIPTION OF SOURCES OF SUPPLY. The Sources of Supply,
Delivery Points, Published Index Price, and Index Price
Adjustments effective as of the Effective Date are set forth
in Exhibit A to this Agreement. The Parties expect that
Exhibit A will be agreed upon and made a part of this
Agreement on or around the Effective Date and the absence of
Exhibit A at the time this Agreement is executed by the
Parties and thereafter shall not affect the enforceability of
this Agreement. New Sources of Supply or Delivery Point(s),
and the associated Published Index Price and Index Price
Adjustments that CUSA and NGC have agreed upon shall be set
forth in a notice prepared by NGC and furnished to CUSA. The
Parties may from time to time, but are not required to, amend
Exhibit A to reflect the information contained in such notice,
and the failure to so amend Exhibit A shall not affect CUSA's
obligation to deliver, and NGC's obligation to purchase,
Committed Gas.
4.3 SPLIT CONNECT COMMITTED GAS. In the event Committed Gas
produced from a Source of Supply is capable of being delivered
into more than one pipeline system ("split connect Committed
Gas"), CUSA shall select the Published Index Price and Index
Price Adjustments applicable to such split connect Committed
Gas. Absent agreement of the Parties to the contrary, the
selection of a Published Index Price and Index Price
Adjustments applicable to a given source of split connect
Committed Gas will remain in effect for a period of no less
than six full Months. CUSA will make its selection for a
succeeding period no later than thirty Days prior to the first
Day of the new period. The six Month periods will run from
April 1 through September 30 and from October 1 through March
31. The period in effect as of the Effective Date will be less
than six full Months and will run through September 30, 1996.
Notwithstanding the foregoing, certain Sources of Supply
producing split connect Committed Gas will not be subject to
the selection described above in this Section 4.3. The
Published Index Price(s) and Index Adjustments applicable to
such Sources of Supply have been selected by CUSA and NGC and
shall remain in place for the period designated by the Parties
and shall not be changed during the designated period absent
the consent of CUSA and NGC. Such Sources of Supply will be
designed in Exhibit A-1 as "Fixed Selection Split Connect."
4.4 SPLIT CONNECT COMMITTED GAS PRICE. Except as to (i) Fixed
Selection Split Connect Sources of Supply set forth in Exhibit
A to this Agreement, (ii) as provided in Section 4.5 below,
and (iii) split connect Committed Gas subject to a Locked
Price in accordance with Section 4.10 below, in respect to
each Source of Supply producing split connect Committed Gas,
the First of the Month Commodity Price paid by NGC to CUSA for
each MMBtu of split connect Committed Gas delivered by CUSA to
NGC during a given Month will be adjusted
-14-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
* in the following instance. [REDACTED] In the event the Highest
Commodity Price exceeds the Selected Commodity Price by more
* than [REDACTED] per MMBtu, the First of the Month Commodity
* Price shall be increased by an amount equal to [REDACTED] of
such excess above the Selected Commodity Price. In the event
the Highest Commodity Price exceeds the Selected Commodity
* Price by [REDACTED] or less, the First of the Month Commodity
Price shall not be increased.
4.4.1 EFFECT OF CAPACITY CONSTRAINTS. Notwithstanding
Section 4.4 above, the quantity of split connect
Committed Gas subject to the First of the Month
Commodity Price adjustment during any Month will take
into account capacity constraints, which will be
defined by NGC's ability to deliver the split connect
Committed Gas into the pipeline system associated
with the Highest Commodity Price. If NGC is unable to
nominate, or would have been unable to nominate had
* it attempted to nominate, [REDACTED] of the split
connect Committed Gas designated in CUSA's
Availability Report for delivery on the first Day of
the Month into the pipeline system associated with
the Highest Commodity Price, the quantity of split
connect Committed Gas subject to the First of the
Month Commodity Price adjustment will be calculated
* by [REDACTED] NGC's ability to nominate [REDACTED] of
the split connect Committed Gas will be determined as
of the applicable pipeline's confirmation of first
Day of the Month quantities of gas.
4.4.2 MEASUREMENT OF CAPACITY CONSTRAINTS. In all instances
covered by Section 4.4 above, NGC's ability to
nominate Committed Gas for delivery into a pipeline
system associated with the Highest Commodity Price
shall be evaluated by reference to instances where
CUSA and NGC have agreed that capacity constraints
exist, pipeline announcements of constraints or
curtailments, however characterized and communicated,
and by NGC's efforts to nominate Committed Gas for
delivery into the applicable pipeline. If NGC
exercises reasonable efforts to nominate gas on the
pipeline associated with the Highest Commodity Price,
* and is unable to nominate [REDACTED] of the split
connect Committed Gas due to a lack of available
capacity, a capacity constraint will be deemed to
exist to the extent of NGC's inability. NGC shall
exercise reasonable efforts to create and retain a
written record, such as notes of telephone
conversations, of NGC's efforts to nominate Committed
Gas for delivery into a pipeline
-15-
CONFIDENTIAL TREATMENT REQUESTED. THE
REDACTED MATERIAL HAS BEEN SEPARATELY FILED
WITH THE COMMISSION.
system associated with the Highest Commodity Price,
provided, however, that NGC's failure to create and
retain such a written record shall not preclude NGC
from claiming the existence of a capacity constraint.
4.5 FIRM MARKET SPLIT CONNECT COMMITTED GAS.
Notwithstanding Section 4.4, in the Months of
December, January and February during the period
beginning with December 1996 and continuing through
February 1998, the First of the Month Commodity Price
of split connect Committed Gas delivered to firm
market customers under certain natural gas purchase
and sale agreements, however characterized, calling
for deliveries at primary receipt points ( "Firm
Market Split Connect Committed Gas"), which firm
natural gas purchase and sale agreements,
corresponding primary receipt points and affected
quantities of gas are described in Exhibit D to this
Agreement, shall not be adjusted in accordance with
* Section 4.4 above. [REDACTED].
4.6 DOWNSTREAM RELEASED FIRM TRANSPORTATION. In the event
(i) NGC is the replacement shipper under a firm
transportation service agreement released by CUSA to
NGC and covering transportation upstream of the point
at which the applicable Published Index Price is
determined; (ii) such firm transportation service
agreement expires or is subject to termination by NGC
or CUSA during the term of this Agreement; and (iii)
an alternate Published Index Price is available at a
point upstream of the point at which the then current
Published Index Price is determined, the following
procedure shall apply. NGC shall enter into
negotiations with the Transporter for the purpose of
obtaining the rate applicable to the rollover,
extension or renewal, as the case may be, of the firm
transportation service agreement. CUSA shall have the
option to approve the new rate, in which case the
firm transportation service agreement will be
extended or renewed and the Published Index Price
shall remain the same and the Adjustment attributable
to the firm transportation service agreement will
equal the new rate, or not approve the new rate, in
which case the point at which the Published Index
Price is determined shall move upstream to the
appropriate point. In the latter case, NGC shall be
entitled to enter into the new firm transportation
service agreement at a rate equal to or higher than
the rate CUSA elected not to approve. In the event
CUSA elects not to approve the new rate, the
foregoing procedure shall not apply to subsequent
instances where a firm transportation service
agreement expires or is subject to termination.
-16-
4.7 MID-MONTH INCREASES. In the event (i) CUSA increases the
quantity of Committed Gas delivered to NGC on any Day at a
given Delivery Point to a level in excess of one hundred five
percent (105%) of the quantity of Committed Gas designated for
delivery by CUSA in the Availability Report in effect at 8:00
a.m. on the Day NGC makes its nomination ("First of the Month
Committed Gas") for delivery on the first Day of the Month of
delivery; (ii) notifies NGC of such increase no later than one
hour prior to the pipeline nomination deadline applicable to
the Day on which the increase will be implemented; and (iii)
does not in its notice specifically state that such increase
is for the purpose of offsetting underdeliveries incurred by
CUSA at the applicable Delivery Point earlier that month, the
commodity price per MMBtu for the quantity in excess of one
hundred five percent (105%) of the First of the Month
Committed Gas ("Incremental Committed Gas") shall be
determined as follows. The "Incremental Gas Commodity Price"
of Incremental Committed Gas shall be determined on a Delivery
Point by Delivery Point basis, and therefore any increases in
the quantity of Committed Gas delivered to a given Delivery
Point will not be netted against a decrease at a different
Delivery Point unless the Committed Gas delivered at different
Delivery Points is delivered into a single pool such that an
increase at one Delivery Point and a corresponding decrease at
the second Delivery Point can be netted to arrive at the
quantity of Committed Gas delivered into the pool on the
applicable Day, in which case deliveries at all such Delivery
Points will be netted for purposes of this Section 4.7. CUSA
will give notice to NGC of any increase in the delivery of
Committed Gas in a revised Availability Report as soon as
commercially possible, but in no event later than one hour
prior to the nomination deadline of the pipeline immediately
downstream of the Delivery Point. The Incremental Gas
Commodity Price shall be based on the Gas Daily Index Price.
The "Gas Daily Index Price" shall be the midpoint of the range
of prices published in the issue of GAS DAILY reporting prices
applicable to the Day on which Incremental Committed Gas is
delivered to NGC under this Agreement in the table titled
"Daily Price Survey" under the heading and entry applicable to
the downstream pipeline and the Delivery Point where CUSA
delivers the Incremental Committed Gas in the column reporting
the range of prices applicable to the Day of delivery. The Gas
Daily Index Price corresponding to each Published Index Price,
including any adjustment required to make the two prices
comparable, is set forth in Exhibit A to this Agreement. For
purposes of determining which issue of GAS DAILY reports the
range of prices applicable to the Day of delivery, the
instructions published by Gas Daily in the paragraph appearing
under the heading "Daily Price Survey" will be used. In the
event GAS DAILY does not report prices applicable to a Day on
which Incremental Committed Gas is delivered to NGC, then the
issue of GAS DAILY reporting prices applicable to the closest
subsequent Day shall be used. The same Index Price Adjustments
and Premiums used to calculate the First of the Month
Commodity Price pursuant to Section 4.1 above shall be used to
calculate the Incremental Gas Commodity Price if the Gas Daily
-17-
Index Price covers a geographical location comparable to that
covered by the Published Index Price. The Incremental Gas
Commodity Price will be based on the Gas Daily Index Price
applicable to the Day of delivery and will therefore vary
Day-by-Day. Notwithstanding the foregoing, in the event that
the parties agree that GAS DAILY does not report prices
applicable to any Delivery Point, the Parties shall select an
alternate index price, which alternate index price shall be
treated as the Gas Daily Index Price for all purposes under
this Agreement. For purposes of calculating the Incremental
Gas Commodity Price of Incremental split connect Committed Gas
subject to commodity price adjustment in accordance with
Section 4.4 above, Incremental split connect Committed Gas
will be deemed to be delivered into the pipeline system
associated with the Highest Commodity Price. Capacity
constraints, as defined and measured in Sections 4.4.1 and
4.4.2 above shall be taken into account in determining the
quantity of Incremental split connect Committed Gas that is
deemed to be delivered into the pipeline system associated
with the Highest Index Price. For example, if only fifty
percent (50%) of the split connect Committed Gas designated in
CUSA's Availability Report for delivery on the first Day of
the Month can be nominated for delivery into the pipeline
system associated with the Highest Commodity Price, it shall
be presumed that no Incremental split connect Committed Gas
can be delivered into the pipeline system associated with the
Highest Commodity Price and therefore the Incremental Gas
Commodity Price shall be based on the Selected Commodity
Price. In the event CUSA increases the quantity of Committed
Gas delivered to NGC on any Day (x) without prior notice; (y)
with notice given later than one hour before Transporter's
nomination deadline; or (z) notifies NGC that the increase is
for the purpose of offsetting underdeliveries incurred by CUSA
at the applicable Delivery Point earlier that Month, such
Committed Gas shall not be treated as Incremental Committed
Gas, but shall be treated as an overdelivery of Committed Gas
for purposes of calculating imbalance charges in accordance
with Section 3.3 above.
4.8 MID-MONTH DECREASES. In the event (i) CUSA decreases the
quantity of Committed Gas delivered to NGC on any Day at a
given Delivery Point to a level below ninety-five percent
(95%) of the quantity of Committed Gas designated for delivery
by CUSA in the Availability Report in effect at 8:00 a.m. on
the Day NGC makes its nomination ("First of the Month
Committed Gas") for delivery on the first Day of the Month of
delivery (including instances where CUSA is required to
decrease the quantity of Committed Gas in response to a
Transporter's instructions); (ii) notifies NGC of such
decrease no later than one hour prior to the pipeline
nomination deadline applicable to the Day on which the
decrease will be implemented; (iii) does not in its notice
specifically state that such decrease is for the purpose of
offsetting overdeliveries incurred by CUSA at the applicable
Delivery Point earlier that Month; (iv) the applicable Gas
Daily Index Price is higher than the corresponding First of
the Month Commodity Price (whether calculated using the
Published Index Price or the Locked Price), and (v) such
-18-
reduction is not the result of an event of force majeure or an
OFO, CUSA shall pay to NGC an amount calculated as follows
(the "Deficiency Keep Whole Payment"). If on the Day that
CUSA's deliveries of Committed Gas fall below ninety-five
percent (95%) of First of the Month Committed Gas, the Gas
Daily Index Price, as defined in Section 4.7 above, applicable
to the Delivery Point (as adjusted by the Index Price
Adjustments applicable to the Delivery Point and the Premium)
is higher than the First of the Month Commodity Price
calculated under Section 4.1 above, the difference will be the
"Deficiency Cost". The Deficiency Cost shall be multiplied by
a number equal to the difference between ninety-five percent
(95%) of the first of the month nominated quantity and the
quantity of Committed Gas actually delivered by CUSA on that
Day, and the product shall be the Deficiency Keep Whole
Payment. Notwithstanding the foregoing, in the event any
portion of the Committed Gas that is not delivered by CUSA is
subject to a Locked Price in accordance with Section 4.10
below, the Deficiency Cost and the Deficiency Keep Whole
Payment attributable to the quantities subject to the Locked
Price shall be determined by subtracting the higher of (a) the
First of the Month Commodity Price calculated using the Locked
Price, or (b) the First of Month Commodity Price calculated
using the Published Index Price that would have been used in
the absence of the Locked Price, from the Gas Daily Index
Price. No Deficiency Keep Whole Payment shall be payable in
the event the Gas Daily Index Price is lower than the First of
the Month Commodity Price. The Deficiency Keep Whole Payment
shall be determined on a Delivery Point-by-Delivery Point
basis, and therefore any decrease in the quantity of Committed
Gas delivered to a given Delivery Point will not be netted
against a increase at a different Delivery Point unless the
Committed Gas delivered at different Delivery Points is
delivered into a single pool such that an increase at one
Delivery Point and a corresponding decrease at the second
Delivery Point can be netted to arrive at the quantity of
Committed Gas delivered into the pool on the applicable Day,
in which case deliveries at all such Delivery Points will be
netted for purposes of this Section 4.8. A Deficiency Keep
Whole Payment shall be calculated in respect to each Day that
CUSA's deliveries fall below ninety-five percent (95%) of the
quantity of Committed Gas nominated for delivery on the first
Day of the Month of delivery and shall be based on the Gas
Daily Index Price applicable to that Day. In the event GAS
DAILY does not report prices applicable to a Day on which
deliveries of Committed Gas are reduced, then the issue of GAS
DAILY reporting prices applicable to the closest subsequent
Day shall be used. For purposes of calculating the total
amount of Deficiency Keep Whole Payments due in any Month, a
decrease in the quantity of Committed Gas delivered by CUSA on
any given Day shall not be netted against an increase in the
quantity of Committed Gas delivered by CUSA on a different
Day. Deficiency Keep Whole Payments shall be paid in
accordance with Article VII below. For purposes of calculating
the Deficiency Cost, if any, associated with a decrease in the
delivery of split connect Committed Gas subject to commodity
price adjustment in accordance with Section 4.4 above,
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the decrease in delivery of split connect Committed Gas will
be allocated to the pipeline system associated with the
Highest Index Price. Capacity Constraints, as defined and
measured in Sections 4.4.1 and 4.4.2 above, shall be taken
into account in determining the allocation of a decrease in
the delivery of split connect Committed Gas to the pipeline
system associated with the Highest Commodity Price. For
example, if only fifty percent (50%) of the split connect
Committed Gas designated in CUSA's Availability Report for
delivery on the first Day of the Month can be nominated for
delivery into the pipeline system associated with the Highest
Commodity Price, then fifty percent (50%) of a decrease in the
delivery of split connect Committed Gas will be allocated to
that pipeline system for purposes of calculating the
Deficiency Cost. In the event CUSA decreases the quantity of
Committed Gas delivered to NGC on any Day (x) without prior
notice; (y) with notice given later than one hour before
Transporter's nomination deadline; or (z) notifies NGC that
the decrease is for the purpose of offsetting overdeliveries
incurred by CUSA at the applicable Delivery Point earlier that
Month, such decrease shall not be treated as a mid-month
decrease for purposes of this Section 4.8, but shall be
treated as an underdelivery of Committed Gas for purposes of
calculating imbalance charges in accordance with Section 3.3
above. Notwithstanding the foregoing, no Deficiency Keep Whole
Payments under this Agreement shall be payable in respect to
decreases in deliveries of Committed Gas to Delivery Points
subject to the "Stranded Capacity Valuation Adjustment" set
forth in Section 3 of that certain "Transportation Assignment
and Valuation Agreement" effective , 1996, executed by CUSA
and NGC and decreases in the delivery of Committed Gas at
those Delivery Points shall be governed by the terms of that
agreement.
4.9 COMMODITY PRICE OF CURTAILED SOURCES OF SUPPLY.
Notwithstanding anything in this Article IV to the contrary,
in the event CUSA exercises its right under Section 2.3 above
to curtail production of Committed Gas from a Source of Supply
as a result of any mechanical, engineering, legal, title or
other field or well condition, and the period of curtailment
set forth in CUSA's Availability Report lasts less than the
entire Month, the Commodity Price of the Committed Gas subject
to CUSA's notice of curtailment that is produced and delivered
by CUSA shall be the Incremental Gas Commodity Price, as
determined under Section 4.7 above. To the extent less than
one hundred percent of Committed Gas produced from a given
Source of Supply is subject to CUSA's notice of curtailment,
the Committed Gas not affected by CUSA's notice of curtailment
shall be priced at the First of the Month Commodity Price as
determined under Section 4.1 above, or at the Incremental Gas
Commodity Price if the Incremental Gas Commodity Price is
applicable in accordance with Section 4.7.
4.10 LOCKED PRICE OPTION. For purposes of calculating the First of
the Month Commodity Price of Committed Gas produced from a
given Source of Supply, and
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in lieu of a Published Index Price designated in Exhibit A to
this Agreement, CUSA may request that a fixed price (the
"Locked Price") be substituted for the Published Index Price
for a period as short as one Month or as long as twelve
Months. In the event a Locked Price is substituted for the
Published Index Price, the First of the Month Commodity Price
of the Committed Gas subject to the Locked Price shall be
calculated as set forth in Section 4.1 above except that the
Locked Price shall be substituted for the Published Index
Price. The Index Price Adjustments and Premiums used to
calculate the First of the Month Commodity Price of Committed
Gas shall not be affected by the substitution of a Locked
Price. The Parties acknowledge that a Locked Price will be
based on New York Mercantile Exchange (or other exchange
selected by NGC) posting for the natural gas futures contract
applicable to the Month(s) selected by CUSA and prevailing at
the time of CUSA's request for a Locked Price plus a basis
differential adjustment required to equate the posted price
with an imputed price at the applicable Delivery Point.
4.10.1 REQUEST FOR A LOCKED PRICE. CUSA may request a quote
of a Locked Price by telephone on any Business Day,
between the hours of 8:30 a.m. and 2:00 p.m., local
Houston, Texas time, up to and including the seventh
Business Day prior to the beginning of a Month to
which the Locked Price shall apply. CUSA's request
shall identify the Source(s) of Supply subject to the
request for a Locked Price, the Month(s) for which
CUSA requests a Locked Price and the quantity of
Committed Gas delivered from the applicable Source of
Supply that will be subject to the Locked Price. CUSA
and NGC acknowledge and agree that all telephone
conversations between the Parties relating to a
Locked Price may be recorded by NGC or CUSA, or both,
for purposes of establishing the terms and conditions
associated with a Locked Price. CUSA and NGC also
agree that the taped conversation may be used to
establish the terms and conditions associated with a
Locked Price in the event the Parties are unable to
agree on such terms and conditions subsequent to the
conversation in question.
4.10.2 PROCEDURES. As soon as possible after CUSA's
telephonic request, but in any event within
twenty-four hours (excluding weekends and holidays),
NGC shall determine if it is able to offer a Locked
Price and, if it is able, the per MMBtu Locked Price
and shall notify CUSA of such price. NGC's notice
shall be addressed to the person(s) identified in
Section XIII below, and shall separately state the
basis differential component of the Locked Price. If
CUSA accepts the Locked Price, including the basis
differential, then NGC shall forward to CUSA a "Price
Lock Confirmation", similar to the form attached
hereto as Exhibit E, specifying the terms to which
the Parties have agreed. Such Price Lock Confirmation
shall be forwarded to CUSA as soon as possible
following
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CUSA's acceptance of the Locked Price. The terms set
forth in the Price Lock Confirmation shall be binding
upon the Parties unless CUSA notifies NGC in writing
that CUSA disputes one or more of the terms set forth
in said Price Lock Confirmation within forty-eight
hours, exclusive of weekends and CUSA holidays, of
CUSA's receipt of the Price Lock Confirmation. Any
terms which remain undisputed after expiration of
said period shall be binding on the Parties, and the
Parties shall work together in good faith to resolve
any disputes as expeditiously as possible.
4.10.3 LOCKED QUANTITIES. CUSA may request that all, or any
portion of, the Committed Gas available for delivery
from a Source of Supply during the Month(s)
designated by CUSA be subject to a Locked Price,
provided that CUSA's request shall designate a
specific quantity of Committed Gas. NGC shall be
entitled to decline to offer a Locked Price at its
sole discretion. In the event a Locked Price has been
established for a portion of the Committed Gas
available for delivery from a Source of Supply for a
given period, CUSA shall be entitled to make one or
more additional requests for a Locked Price on all or
any portion of the remaining Committed Gas available
for delivery from that Source of Supply during the
designated period.
4.10.4 IRREVOCABILITY. Unless CUSA and NGC agree otherwise,
a Locked Price shall remain effective for the entire
period designated in the Price Lock Confirmation and
shall not be increased or decreased. In the event the
Locked Price applies to split connect Committed Gas,
the periodic selection of the Published Index Price
and Index Price Adjustments forming the basis of the
First of the Month Commodity Price in accordance with
Section 4.3 shall not apply in respect to such split
connect Committed Gas until it is no longer subject
to the Locked Price.
4.10.5 AVAILABILITY OF COMMITTED GAS. CUSA shall make
available and deliver one hundred percent of
Committed Gas subject to a Locked Price. CUSA shall
not be entitled to curtail production and delivery of
Committed Gas subject to a Locked Price pursuant to
Section 2.3 above. Curtailment of Committed Gas
subject to a Locked Price is permitted under this
Agreement only in the event of an event of force
majeure declared in accordance with Article IX below.
If CUSA and NGC establish a Locked Price for less
than one hundred percent (100%) of the Committed Gas
available for delivery from a Source of Supply, or
establish more than one Locked Price for Committed
Gas available for delivery from a Source of Supply,
the first Committed Gas delivered on each Day and
during the applicable Month shall be deemed to be
subject to the first Locked Price established,
followed by quantities of Committed Gas subject to
additional
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Locked Prices in the order established, followed by
quantities of Committed Gas not subject to a Locked
Price.
4.10.6 FAILURE TO DELIVER COMMITTED GAS. If during any Month
CUSA fails to deliver quantities of Committed Gas
subject to a Locked Price, and such failure is not
the result of an event of force majeure or NGC's
failure to perform its obligations under this
Agreement, CUSA shall pay to NGC an amount calculated
as follows. The quantity of Committed Gas subject to
a Locked Price made available and delivered by CUSA
during that Month shall be subtracted from the
quantity of Committed Gas subject to a Locked Price
and the result shall be multiplied by the difference
between the Locked Price and the settlement price of
the natural gas futures contract on NYMEX (or other
applicable exchange) for the Month in which CUSA
fails to deliver Committed Gas subject to a Locked
Price plus or minus the basis differential set forth
in the Price Lock Confirmation. In addition, in the
event NGC has entered into a financial instrument,
including, without limitation, an over-the-counter
basis swap, for purposes of hedging the risk
associated with the basis differential component of
the Locked Price, CUSA shall reimburse NGC one
hundred percent (100%) of the actual losses incurred
by NGC under such financial instrument to the extent
such losses result from CUSA's failure to deliver
Committed Gas subject to a Locked Price. NGC shall
exercise its best efforts to minimize such losses
(including for example the early termination of
financial instruments if NGC reasonably believes at
the time of termination that early termination may
minimize such losses). CUSA's obligation to deliver
Committed Gas subject to a Locked Price is a monthly
obligation and not a daily obligation and therefore
for purposes of this Section 4.10.6 CUSA shall have
complied with its obligation to deliver quantities of
Committed Gas subject to a Locked Price if it
delivers such quantities during the course of the
Month. However, for purposes of calculation of
Deficiency Keep Whole Payments in accordance with
Section 4.8 above, decreases in the delivery of
Committed Gas subject to a Locked Price on any Day
shall be taken into account.
4.10.7 CESSATION OF FUTURES TRADING. If natural gas futures
contracts cease to be traded on the New York
Mercantile Exchange or on any other mercantile
exchange acceptable to NGC in its sole discretion,
then after such cessation NGC shall be relieved of
any and all obligation to establish Locked Prices
hereunder.
4.11 NGC'S FAILURE TO PURCHASE COMMITTED GAS. If NGC fails in any
Month to purchase at least ninety five percent (95%) of the
quantity of Committed Gas designated for delivery on CUSA's
Availability Report (as adjusted during the
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Month) from each Source of Supply ("Availed Quantity"), and to
the extent that such failure is not the result of force
majeure, an OFO, or CUSA's failure to make Committed Gas
available, NGC shall pay to CUSA, as liquidated damages, an
amount calculated as follows:
(a) If NGC has purchased at least ninety percent (90%),
but less than ninety five percent (95%) of the
Availed Quantity for the Source of Supply, the
liquidated damages shall be equal to ten percent
(10%) of the First of the Month Commodity Price
applicable to that Source of Supply, multiplied by
the difference between ninety five percent (95%) of
the Availed Quantity and the lesser quantity of
Committed Gas actually purchased by NGC in such Month
from the Source of Supply. For purposes of this
Section 4.11, in instances where Committed Gas from
different Sources of Supply are delivered into a
single pool, the calculation of the percentage of
Committed Gas purchased by NGC shall be based on
NGC's purchases from the entire pool and the Availed
Quantity applicable to the entire pool.
(b) If NGC has purchased less than ninety percent (90%)
of the Availed Quantity for the Source of Supply, the
liquidated Damages shall be equal to the sum of (i)
ten percent (10%) of the First of the Month Commodity
Price applicable to that Source of Supply, multiplied
by five percent (5%) of the Availed Quantity; and
(ii) twenty percent (20%) of the First of the Month
Commodity Price applicable to that Source of Supply,
multiplied by the difference between ninety percent
(90%) of the Availed Quantity and the lesser quantity
of Committed Gas actually purchased by NGC.
V. TITLE AND RESPONSIBILITY
5.1 CUSA RESPONSIBILITY. Title to Committed Gas delivered by CUSA
to NGC shall pass to NGC at the Delivery Points. The price for
Committed Gas delivered under this Agreement is inclusive of
all production, severance, ad valorem, or similar taxes levied
on the production or transportation of the Committed Gas prior
to its delivery to or for the account of NGC at the Delivery
Point(s). All charges, royalties, lease burdens, expenses,
fees, taxes, damages, injuries, and other costs incurred in or
attributable to production and transfer, transportation
(except as otherwise agreed by the Parties), and handling of
Committed Gas delivered in accordance with this Agreement
prior to delivery to NGC at the Delivery Point(s) shall be the
exclusive responsibility of CUSA, as between the Parties. CUSA
shall indemnify, defend, and hold harmless NGC from all such
charges, royalties, expenses, fees, taxes, damages, injuries,
and other costs. In the event NGC is required by law to
collect any such taxes, and CUSA claims an exemption from the
taxes, CUSA shall, upon NGC's request, furnish NGC with a copy
of CUSA's exemption certificate.
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5.2 NGC RESPONSIBILITY. All charges, expenses, fees, taxes,
damages, injuries, and other costs incurred in or attributable
to the purchase and transfer, transportation, and handling of
the Committed Gas delivered in accordance with this Agreement
from and after delivery of Committed Gas at the Delivery
Point(s) shall be the exclusive responsibility of NGC, as
between the Parties. NGC shall indemnify, defend, and hold
harmless CUSA from all such charges, expenses, fees, taxes,
damages, injuries, and other costs. In the event CUSA is
required by law to collect any such taxes, and NGC claims an
exemption from the taxes, NGC shall, upon CUSA's request,
furnish CUSA with a copy of NGC's exemption certificate.
VI. QUALITY, MEASUREMENT AND TESTS
6.1 QUALITY SPECIFICATIONS. NGC agrees to purchase Committed Gas
delivered by CUSA to the Delivery Point(s) meeting the quality
and pressure specifications set forth in the filed tariff of
the pipeline immediately downstream of the Delivery Point's
("Transporter"). If Committed Gas delivered by CUSA to the
Delivery Point(s) is rejected by Transporter for failure to
meet its quality specifications, NGC shall be relieved of the
obligation to purchase such Committed Gas. To the extent that
Transporter accepts Committed Gas tendered by CUSA for NGC's
account at the Delivery Point(s), CUSA shall be deemed to have
complied with the quality specifications of this Agreement.
6.2 VOLUME AND HEATING VALUE. NGC and CUSA agree that the volume
and heating value of Committed Gas sold and delivered under
this Agreement will be measured at or near the Delivery
Point(s) by Transporter, using equipment owned or controlled
by, and measuring procedures employed by, Transporter. The
measurements made by Transporter shall be accepted by NGC and
CUSA (subject to adjustment if prior measurements are
determined to be inaccurate or incomplete), provided, however,
the measuring equipment and procedures used must conform to
Transporter's filed tariffs and to generally recognized
industry standards.
6.3 TEST DATA AND CHARTS. CUSA and NGC shall preserve all original
test data, charts and other similar records in a Party's
possession for a period of at least three years.
VII. ACCOUNTING, BILLING AND PAYMENT
7.1 STATEMENTS. On or before the twentieth Day of the Month
following the Month of delivery, NGC will furnish CUSA the
following information concerning the Month of delivery: the
quantity of Committed Gas and Incremental Committed Gas
delivered under this Agreement at each Delivery Point; First
of the Month
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Commodity Prices; Incremental Gas Commodity Prices; Deficiency
Keep Whole Payments; Imbalance Charges; and the total amounts
payable by NGC and CUSA. If the actual total volumes of
Committed Gas delivered under this Agreement are not available
by the date of the statement, estimated volumes or prices
shall be used and adjustments shall be made on the following
Month's billing, or as soon as available. CUSA shall provide
NGC copies of pipeline allocation statements CUSA receives
from applicable pipelines as soon as such statements become
available. NGC's statement shall also show the total amount of
any Deficiency Keep Whole Payments and Imbalance Charges
payable by CUSA to NGC, which amount shall be deducted from
the amount payable by NGC to CUSA for Committed Gas delivered
during the Month. The statement furnished by NGC to CUSA shall
be exchanged via EDI to the extent possible. NGC will also
furnish a separate statement to each CUSA profit center
showing the information applicable to that profit center
alone. If the accuracy of any statement or the sufficiency of
any payment is questioned by CUSA, CUSA shall provide written
notice of its question. If it is subsequently determined that
NGC underpaid CUSA, NGC shall pay interest on such amounts
from the date of CUSA's notice computed at a rate equal to the
Base Rate in effect from time to time published by the First
National Bank of Chicago plus two percent.
7.2 PAYMENT. No later than the last Business Day of each calendar
Month, NGC shall pay CUSA, by wire transfer of funds into an
account designated by CUSA, all amounts due under this
Agreement for Committed Gas delivered during the previous
Month.
7.3 FAILURE TO PAY. In the event NGC fails to make timely payment
of amounts reflected on NGC's statement, NGC shall pay CUSA
interest on all amounts past due computed from the date the
payment was due at the rate set forth in Section 7.1 above. In
addition, if NGC fails to pay any amount due CUSA under this
Agreement within five Business Days after the due date, except
for any amount which is disputed by NGC in good faith, CUSA
shall have the right upon written notice to NGC to (i) suspend
any further deliveries of Committed Gas until all undisputed
amounts due have been paid with interest at the rate specified
in Section 7.1, and (ii) provide notice to NGC that this
Agreement shall terminate if the payment default has not been
cured within five Days after the date such written notice is
given. During the period of any such suspension of deliveries,
and until any payment default is cured as provided above, CUSA
shall have the right, but not the obligation, to sell all or
any portion of the Committed Gas to third parties, and in such
event NGC shall pay to CUSA as liquidated damages an amount
equal to the difference between a lower price received by CUSA
in the sale of such Committed Gas to third parties and the
commodity price CUSA would have received from NGC under this
Agreement multiplied by the quantity of Committed Gas sold by
CUSA to third parties.
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7.4 TWO YEAR LIMIT ON ADJUSTMENTS. No retroactive adjustments may
be made for any overcharge or undercharge after a period
ending twenty-four Months from the end of the calendar year in
which the gas forming the basis of the overcharge or
undercharge was delivered or not delivered, as the case may
be. Any payment with respect to a retroactive adjustment shall
include an amount equal to interest on all amounts past due
from the date of the initial payment at the rate set forth in
Section 7.1 above, except in instances where neither Party
knew or could have known that the overcharge or undercharge
occurred or instances of reallocations of gas by a
transporting pipeline, in which cases interest shall run from
the date of demand for payment.
7.5 AUDIT. Each Party shall have the right to audit the books and
records of the other Party at any time during reasonable
business hours during the term of this Agreement and for a
period of two years after its termination to the extent
necessary to determine compliance by the other Party with the
terms of this Agreement, but such audit rights shall be
limited to auditing such books and records for the then
current and four preceding years. The audited Party shall make
its books and records available to the auditing Party.
Notwithstanding the foregoing, in the event a governmental
body asserts a claim, or conducts an audit, against a Party
arising from the purchase or sale of Committed Gas and that
Party determines in its reasonable judgment that its response
to such claim requires or would benefit from an audit of books
and records of the other Party, such audit may be conducted
during the term of this Agreement and for a period ending on
the tenth anniversary of the event or payment forming the
basis of the third party claim. In order to accommodate such
third party audits, CUSA and NGC will maintain the appropriate
books and records for a period not less than ten years. Each
Party shall also have access to the books and records of the
other Party for purposes of responding to claims, or requests
for audits, asserted by a non-governmental third party and
arising from the purchase or sale of Committed Gas.
7.6 ACCOUNTING INFORMATION. CUSA and NGC will exercise reasonable
efforts to provide each other with data required by their
respective accounting departments to close out books for each
Month as soon as possible. CUSA and NGC will exercise
reasonable efforts to provide such data no later than the
fifth Business Day of the Month following the Month being
closed out.
7.7 SETOFF. All payments will be made without setoff or
counterclaim; provided, however, that upon a Party's (the
defaulting Party) failure to make payment of undisputed
amounts on the due date, the other Party (the non-defaulting
Party) may, at its option and in its discretion, setoff
against any amounts owed to the defaulting Party any amounts
owed by the defaulting Party under this Agreement or
otherwise. The obligations of the non-defaulting Party and the
defaulting
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Party under this Agreement in respect of such amounts shall be
deemed satisfied and discharged to the extent of any such
setoff. The non-defaulting Party will give the defaulting
Party notice of any setoff made under this Section 7.7 as soon
as practicable after the setoff is made provided that failure
to give such notice shall not offset the validity of the
setoff.
7.8 LETTER OF CREDIT. NGC shall furnish to CUSA prior to the
Effective Date an executed irrevocable standby letter of
credit issued by a bank acceptable to CUSA in an amount
calculated in accordance with Exhibit F to this Agreement. The
letter of credit shall be satisfactory in form and substance
to CUSA and the issuing bank or banks. Subsequent to the
Effective Date, NGC shall maintain, or cause to be maintained,
the letter(s) of credit in accordance with the requirements
and procedures set forth in Exhibit F. NGC's obligation to
furnish the executed standby letter of credit prior to the
Effective Date shall be a condition precedent to CUSA's
obligations to perform under this Agreement. NGC's failure to
maintain, or cause to be maintained, the letter(s) of credit
in effect at any time during the term of this Agreement in
accordance with the requirements and procedures set forth in
Exhibit F shall be deemed to be a material breach of this
Agreement. In addition to any other rights and remedies CUSA
may have under this Agreement, in the event NGC fails to
maintain, or cause to be maintained, the letter(s) of credit
in effect at any time during the term of this Agreement and
such failure continues for a period of more than five
consecutive Days, CUSA shall have the right upon written
notice to NGC to suspend any further deliveries of Committed
Gas until NGC furnishes the letter(s) of credit in accordance
with the requirements and procedures set forth in Exhibit F.
VIII. DISCLAIMER AND WARRANTY
8.1 WARRANTY. CUSA hereby warrants title to all gas sold by CUSA
under this Agreement and the right to sell the same free from
adverse claims of third parties, and except as provided in
Section 8.2, CUSA agrees to hold NGC harmless from such
claims.
8.2 DISCLAIMER. EXCEPT AS PROVIDED IN SECTION 8.1, CUSA MAKES NO
EXPRESS OR IMPLIED WARRANTY TO NGC UNDER THE UNIFORM
COMMERCIAL CODE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
IX. FORCE MAJEURE
9.1 SUSPENSION OF OBLIGATIONS. If either CUSA or NGC is rendered
unable, by reason of an event of force majeure, to perform,
wholly or in part, any obligation
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or commitment set forth in this Agreement, except for the
payment of monies owed, then upon that Party's giving notice
(the initial notice may be oral notice followed by written
notice) and full particulars of the event of force majeure,
then the obligations of both parties under this Agreement
shall be suspended, except for the payment of amounts owed
under this Agreement, to the extent and for the period of the
event.
9.2 FORCE MAJEURE DEFINED. The term "force majeure" means an event
that (i) was not within the control of the Party claiming its
occurrence; and (ii) could not have been prevented or avoided
by such Party through the exercise of due diligence. Events of
force majeure include, without limitation by enumeration, acts
of God; lightning, hurricanes or storms, hurricane or storm
warnings which in CUSA's judgment require and result in the
precautionary shut-down or evacuation of production
facilities; earthquakes, epidemics, fires, floods, landslides,
washouts, freezing of wells or lines of pipe used to supply
Committed Gas under this Agreement and other similar severe
natural calamities; acts of public enemy; wars; blockades;
insurrections; riots; civil disturbances and arrests; strikes,
lockouts or other industrial disturbances; explosions,
breakage, accidents to wells, equipment, facilities or lines
of pipe used to enable CUSA to deliver or NGC to receive
Committed Gas under this Agreement; events of force majeure
declared by transporting pipelines; imposition by a regulatory
agent, court or other governmental authority having
jurisdiction of binding laws, conditions, limitations, orders,
rules or regulations that prevent or prohibit either Party
from performing, provided such governmental action has been
resisted in good faith by all reasonable legal means; or any
other cause of a similar type. The Parties recognize that NGC
is not required by this Agreement to utilize firm
transportation to receive Committed Gas from CUSA at each
Delivery Point, but it is the intent of both Parties that
transportation or sales arrangements downstream of the
Delivery Points be made by NGC in such a manner that the
possibility of a curtailment of Committed Gas due to
curtailment of interruptible transportation or recall of
acquired transportation be minimized. In addition to the
foregoing events of force majeure, the loss, interruption or
curtailment (collectively "curtailment") of transportation
downstream of a Delivery Point shall constitute an event of
force majeure provided that NGC exercises reasonable efforts
to arrange alternative transportation, or the resumption of
the curtailed transportation arrangements, as soon as possible
following its discovery of the curtailment of downstream
transportation. In that event, NGC will consult with CUSA and
endeavor to agree upon a plan of action to avoid further
curtailment of Committed Gas from that Delivery Point.
X. TERM
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10.1 TERM. This Agreement shall remain in full force and effect for
an initial term of ten years from the Effective Date, and for
additional five year terms thereafter unless terminated by
either Party by giving written notice of termination no later
than sixty Days prior to the last Day in the then-effective
term.
10.2 EARLY TERMINATION. Notwithstanding Section 10.1, either Party
may terminate this Agreement as follows:
(a) In the event of a material breach of this Agreement by either
Party, the non-breaching Party may terminate this Agreement
upon sixty days' prior written notice to the breaching Party
(which notice shall specify in detail the nature of the breach
and the steps necessary to cure the breach), unless the
breaching Party, within thirty days after receipt of the
non-breaching Party's notice, cures the breach and agrees in
writing to indemnify the non-breaching Party against all
direct damages arising from the breach (such damages to be
determined by agreement of the Parties, or in the event the
Parties are unable to agree, by arbitration in accordance with
Section XII below). For purposes of this Section, a material
breach shall be any failure to perform under this Agreement
which is not excused by force majeure and which exposes the
non-breaching Party to economic loss in an amount which the
breaching Party cannot reasonably be expected to pay in money
damages. Notwithstanding the foregoing, NGC's unexcused
failure to receive and purchase CUSA's available Committed Gas
produced from a specific Source of Supply, which failure
results in the shut-in of a CUSA-operated well(s) for a period
of five or more consecutive days, or which failure results in
the shut-in of one or more CUSA-operated well(s) for a
cumulative period of at least twenty days (which need not be
consecutive) in any calendar year shall be conclusively deemed
to be a material breach of this Agreement. For purposes of the
preceding sentence a shut-in of a well shall be deemed to
begin on the first Business Day following NGC's receipt of
CUSA's notice of a shut-in, which notice shall be effective if
delivered orally, followed by written confirmation, and shall
be deemed to end on the earlier of (i) the resumption of
production or (ii) 5:00 p.m. on the Day CUSA receives NGC's
notice of the resumption of purchases if such notice is
received prior to 1:00 p.m. or 8:00 a.m. on the next Day if
CUSA receives NGC's notice after 1:00 p.m. For purposes of
quantifying NGC's right to cure in the event of a material
breach due to a shut-in, CUSA's direct damages on each Day of
the shut-in are deemed to be an amount calculated by
multiplying the (x) the quantity of Committed Gas shut-in
times (y) the First of the Month Commodity Price applicable to
such Committed Gas. In the event NGC pays such amount to CUSA,
the quantity of Committed Gas shut-in and forming the basis of
such amount shall be deemed to be purchased for purposes of
Section 4.11 above, and in
-30-
instances where NGC pays amounts to CUSA pursuant to Section
4.11 prior to the payment of amounts pursuant to this Section
10.2, the payment pursuant to Section 4.11 shall be reduced to
the extent required by this Section 10.2. If one Party alleges
a material breach under this Section and the other Party
disputes that allegation, the matter shall be submitted to
arbitration in accordance with Section XII below and the
non-breaching Party's termination notice shall be suspended
pending the decision of the arbitrators. If the arbitrators
conclude that a material breach has occurred, the termination
notice shall become effective thirty days after issuance of
the arbitrators' written decision.
(b) A Party may terminate this Agreement in the event the other
Party (the Affected Party) is: (i) dissolved (other than
pursuant to a consolidation, acquisition, amalgamation,
merger, or other reorganization not arising from bankruptcy or
insolvency proceedings); or (ii) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or similar law affecting creditors' rights, or
a petition is presented for its winding up a liquidation, and,
in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition results in a
judgment of insolvency or bankruptcy or the entry of an order
for its winding up or liquidation.
XI. RENEGOTIATION, PRICE REDETERMINATION AND ARBITRATION
11.1 RENEGOTIATION AND PRICE REDETERMINATION. During the term of
this Agreement, CUSA and NGC will have the right to request
that the terms and conditions of this Agreement be
renegotiated and that the various pricing mechanisms be
redetermined. This Article XI establishes the procedures
applicable to such renegotiations and redeterminations.
11.2 LIMITS ON ARBITRATION. Nothing in this Article XI shall be
construed to limit a Party's ability to present issues for
discussion under the Alliance Agreement. However, this Article
XI shall limit CUSA and NGC's rights to institute the
renegotiation or price redetermination process and invoke
arbitration under this Agreement or pursuant to the Alliance
Agreement and the Parties agree that no other provision of
this Agreement or of the Alliance Agreement shall be construed
to supersede or modify the limitations on arbitration
contained in this Article XI.
11.3 PRICE REDETERMINATION. It is the intent of CUSA and NGC that
the First of the Month Commodity Price and the Incremental Gas
Commodity Price of Committed Gas delivered at a given Delivery
Point under this Agreement reflect the prevailing fair market
value of spot gas at that Delivery Point. CUSA and NGC agree
that
-31-
the Published Index Prices designated in Exhibit A and
corresponding Gas Daily Index Prices represent an accurate
measure of the fair market value of spot gas because those
index prices reflect surveys of prices paid in actual
transactions between willing buyers and sellers under no
compulsion to buy or sell. In the event CUSA or NGC believes
in good faith that the Published Index Prices or the
corresponding Gas Daily Index Prices, or both, no longer
represent an accurate measure of the fair market value of spot
gas, that Party may seek a price redetermination in accordance
with the following procedure.
11.3.1 SCOPE OF PRICE REDETERMINATION. Price
redeterminations pursuant to this Section 11.3 are
limited to replacing one or more of the Published
Index Prices or Gas Daily Index Prices with a
different measure of the fair market value of spot
gas that is not based on prices reported in a
commercial publication. This Section 11.3 does not
apply in instances where: (i) CUSA desires to select
a different index price for purposes of calculating
the First of the Month Commodity Price for split
connect Committed Gas during the six month period
designated in accordance with Section 4.3 above; (ii)
CUSA or NGC desires to replace a Published Index
Price or a Gas Daily Index Price with a different
Published Index Price or Gas Daily Index Price; or
(iii) where CUSA or NGC desires to modify or amend
the Index Price Adjustments necessary to arrive at a
First of the Month Commodity Price or Incremental Gas
Commodity Price.
11.3.2 PRICE REDETERMINATION PROCEDURE. In the event CUSA or
NGC seeks a price redetermination pursuant to this
Section 11.3, such Party (the "initiating Party") may
notify the other Party (the "non-initiating Party")
in writing, specifying the Published Index Price(s)
or Gas Daily Index Price(s) at issue and describing
(i) the proposed replacement measure of the fair
market value of spot gas at the location; and (ii)
the proposed effective date of the replacement
measure of fair market value. If the non-initiating
Party agrees with the replacement measure of the fair
market value of spot gas and its effective date,
Exhibit A shall be amended to reflect the replacement
and its effective date. If the non-initiating Party
does not agree with the proposed replacement measure
of the fair market value of spot gas or its effective
date, then within thirty days after delivery of the
initiating Party's initial notice each Party shall
designate a representative with authority to
negotiate and agree upon a replacement measure of the
fair market value of spot gas. The representatives
shall then meet and attempt in good faith to reach
agreement. If the representatives have not reached
agreement within sixty days after delivery of the
initiating Party's initial notice, then the
initiating Party may elect to have the issue resolved
by binding arbitration
-23-
in accordance with Section 11.3.3 below. If a
replacement measure of the fair market value of spot
gas is established, either by agreement of the
Parties or through arbitration, such replacement
measure of the fair market value of spot gas shall be
reflected in an appropriate amendment to Exhibit "A".
A Party receiving a price redetermination request
under this Section 11.3 may respond by requesting a
replacement measure of the fair market value of spot
gas at any other applicable location(s) in accordance
with the procedure set forth in this Section 11.3.2.
To the extent feasible, both the initial request and
any responsive request shall be addressed in the same
negotiating sessions and/or arbitration so as to
minimize the administrative cost of resolving all
pricing issues. Notwithstanding anything in this
Section to the contrary, in the event a replacement
measure of the fair market value of spot gas is
determined by arbitration, the Party invoking the
arbitration (or Parties if both Parties invoked the
arbitration) shall not be entitled to invoke
arbitration pursuant to this Section 11.3.2 during a
period of twelve full Months following the date of
the arbitration award.
11.3.3 ARBITRATION OF PRICE REDETERMINATION. If any price
redetermination is presented for arbitration under
this Section 11.3, the Parties shall follow the
arbitration procedure outlined in Sections 11.7
through 11.12 below, except as follows: In any
arbitration under this Section 11.3, each Party shall
submit to the arbitration panel such Party's proposed
measure of the fair market value of spot gas at the
applicable location. The arbitrators shall select
from the two proposals the one which they feel most
closely reflects the fair market value of spot gas at
the applicable location as evidenced by prices paid
by willing buyers and sellers under no compulsion to
buy or sell and, in the case of the replacement of a
Published Index Price, pursuant to contracts
providing for a one month obligation to buy and sell
spot gas. Any Premium that may be payable under this
Agreement shall not be taken into consideration by
the arbitrators in their deliberations. The
arbitrators must select the proposal of one of the
Parties and may not average the two proposals or
otherwise craft an alternative proposal. The
arbitrators, in the absence of unusual extenuating
circumstances, shall be required to render their
decision in writing within ten Business days after
the conclusion of the arbitration proceeding. The
cost of any arbitration under this Section 11.3 shall
be borne as follows:
(i) Each Party shall bear the costs of its own
attorneys, witnesses and representatives;
and
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(ii) The remaining costs of the arbitration,
including the fees of all arbitrators, the
costs of securing a location for the
arbitration, and any similar costs, shall be
borne equally by the Parties.
11.3.4 EFFECTIVE DATE. The effective date of any
replacement measure of the fair market value of
spot gas selected by arbitration shall be the first
day of the month following the month in which the
arbitrators' decision is rendered.
11.4 SUBSTITUTION OF PUBLISHED INDEX PRICES. At any time during the
term of this Agreement, in the event (i) CUSA or NGC believes
in good faith that a Published Index Price or Gas Daily Index
Price does not reflect the fair market value of spot gas at
the applicable location; (ii) also believes in good faith that
a different index price in the same commercial publication or
in a different commercial publication does reflect such fair
market value; and (iii) the Parties have been unable to reach
agreement on an amendment to Exhibit A as contemplated in
Section 4.1 above, the Party requesting the substitution of a
new index price shall be entitled to present the issue to
arbitration in accordance with the procedure established in
Section 11.3 above. In the event a new Published Index Price
at a specific location is determined by arbitration, neither
Party shall be entitled to invoke arbitration for the purpose
of selecting a new Published Index Price at that location
during a period of twelve full Months following the date of
the arbitration award. The same limitation shall apply if a
new Gas Daily Index Price at a given location is determined by
arbitration. This Section 11.4 does not apply to instances
where CUSA desires to change the Published Index Price
selected in respect to split connect Committed Gas pursuant to
Section 4.3 above. In such instances, if the Parties are
unable to agree on a change, the selected Published Index
Price shall remain in place for the full six Month period.
11.5 UNAVAILABILITY OF PUBLISHED INDEX PRICES. If at any time
during the term of this Agreement a Published Index Price or
Gas Daily Price is no longer published and in the event CUSA
and NGC are unable to agree on a replacement index price,
either Party may submit the issue to arbitration in accordance
with the procedure established in Section 11.3 above, with the
following modifications. There shall be no limit on the number
of times a Party may invoke arbitration. The effective date of
the replacement Published Index Price or Gas Daily Index Price
shall be the Day after the previous index price became
unavailable and the arbitrators shall make their award
retroactive to such date. During the pendency of the Parties'
attempt to agree on a replacement Published Index Price or Gas
Daily Price and the subsequent arbitration proceeding, the
commodity price of the Committed Gas affected by the
unavailability of the index price shall be based on the last
available Published Index Price or Gas Daily Price. The
amounts paid by NGC to CUSA
-34-
during such period shall be adjusted to reflect the
retroactive implementation of the replacement index price.
11.6 DISPUTE RESOLUTION - OTHER PRICE ISSUES. In the event the
Parties are unable to agree on any factor required to
calculate the commodity price of Committed Gas that will be
produced from a new source of supply, or are unable to agree
on the Index Price Adjustments applicable to Committed Gas
from an existing Source of Supply, the issue shall be eligible
for arbitration in accordance with Sections 11.9 through 11.12
below.
11.7 ARBITRATION AFTER THE FIFTH ANNIVERSARY. In addition to the
arbitration of price redetermination issues under Sections
11.4 through 11.6 above, following the fifth anniversary of
this Agreement, CUSA and NGC shall have the right to request a
renegotiation of any term or condition of this Agreement and
to invoke arbitration in accordance with Sections 11.9 through
11.12 below if the Parties are unable to reach agreement in
respect to such a request. The limitation contained in this
Section 11.7 shall not apply to disputes between CUSA and NGC
relating to the construction or interpretation of this
Agreement or to the performance of the Parties under this
Agreement, which disputes may be presented to arbitration at
any time during the term of this Agreement in accordance with
Sections 11.9 through 11.12 below.
11.8 RENEGOTIATION OF THE PREMIUM. Neither CUSA nor NGC shall be
entitled to request a renegotiation of the Premium paid in
accordance with Article IV above and to invoke arbitration in
the event the Parties are unable to agree prior to the fifth
anniversary of this Agreement.
11.9 ALL DISPUTES ARBITRATION. All unresolved disputes between the
Parties (i) arising under this Agreement and relating to the
construction and interpretation of this Agreement or the
Parties' performance under this Agreement; or (ii) arising
from renegotiation or price redetermination under this Article
XI shall be submitted to binding arbitration in accordance
with this Article XI. Neither Party shall have the right to
litigate such disputes in state or federal court. Arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. '
1, et seq., and will not be governed by the arbitration acts,
statutes or rules of any other jurisdiction.
11.10 PROCEDURE. In the event the Parties are unable to resolve a
dispute arising under this Agreement after exercising good
faith efforts to resolve the dispute, either Party may request
arbitration by submitting a written notice to the other. The
notice shall name the noticing Party's arbitrator and shall
contain a statement of the issue(s) presented for arbitration.
Within fifteen (15) Days of receipt of a notice of
arbitration, the other Party shall name its arbitrator by
written notice and may designate any additional issue(s) for
arbitration. The two named arbitrators shall
-35-
select the third arbitrator within fifteen (15) Days after the
date on which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the
Senior Judge of the United States District Court of the
Southern District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience
within the natural gas industry to decide the issues presented
for arbitration. No arbitrator shall be: a current or former
director, officer or employee of either Party, or its
affiliates; an attorney (or member of a law firm) who has
rendered legal services to either Party, or its affiliates,
within the preceding three years; or an owner of any of the
common stock of either Party, its affiliates or direct
competitors.
11.11 ARBITRATION HEARINGS. The three arbitrators shall commence the
arbitration hearing within twenty-five (25) Days following the
appointment of the third arbitrator. The proceeding shall be
held at a mutually acceptable site. If the Parties are unable
to agree on a site, the arbitrators shall select a site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration hearing. Each Party shall
have the opportunity to present its evidence at the hearing.
The arbitrators may call for the submission of pre-hearing
statements of position and legal authority, but no
post-hearing briefs shall be submitted. After the presentation
of the evidence has concluded, each Party shall submit to the
arbitration panel a final offer of its proposed resolution of
the dispute. In the event the dispute presented to the
arbitration panel involves (i) a price redetermination
pursuant to Sections 11.3 through 11.6 above; (ii) a
renegotiation of the Premium pursuant to Section 11.8 above;
or (iii) a claim by one or both Parties for an award of
damages, expenses or costs of any nature, a majority of the
arbitrators shall approve the final offer of one Party without
modification, and reject the offer of the other Party. In the
event the dispute presented to the arbitration panel involves
issues other than those defined in the preceding sentence, the
arbitration panel shall be authorized to render an award that
departs from the offers of both Parties. The arbitration panel
shall not have the authority to award punitive, exemplary,
consequential or incidental damages. The arbitrators' decision
must be rendered within thirty (30) Days following the
conclusion of the hearing or submission of evidence. All
evidence submitted in an arbitration proceeding, transcripts
of such proceedings, and all documents submitted by the
Parties in an arbitration proceeding shall be deemed
confidential information subject to Section 15.4 below.
11.12 ARBITRATION DECISION. The decision of the arbitrators or a
majority of them, shall be in writing and shall be final and
binding upon the Parties as to the issue submitted. Each Party
shall bear the expense and cost of its arbitrator and one-half
of the expense and cost of the third arbitrator.
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XII. GOVERNMENTAL REGULATIONS AND AUTHORIZATIONS
12.1 APPLICATION OF LAW AND REGULATION. This Agreement shall be
subject to all valid and applicable laws of the United States
and to the applicable valid rules, regulations or orders of
any regulatory agency or governmental authority having
jurisdiction, and the Parties shall be entitled to regard all
applicable laws, rules and regulations (federal, state or
local) as valid and may act in accordance with them until such
time as they may be declared invalid by final judgment of a
court of competent jurisdiction and such judgment is not
subject to appeal.
12.2 AUTHORIZATION AND REGULATORY FILINGS. Upon execution of this
Agreement, each Party agrees to seek such government
certificates, permits, licenses and authorizations which, in
its sole discretion, it deems necessary to perform its
obligations under this Agreement. During the term of this
Agreement, each Party shall make all filings required by any
regulatory bodies having jurisdiction over the activities
covered by this Agreement and upon request of the other Party
shall promptly provide copies of such to the other Party.
Neither Party will knowingly enter into agreements nor
undertake any activities or filings that would interfere with
or frustrate the other Party's efforts to obtain the necessary
regulatory approvals to fulfill its obligations under this
Agreement.
XIII. NOTICES
13.1 PROCEDURE. Except as provided in this Agreement, all notices,
requests, demands, statements, and other communications under
this Agreement shall be in writing and shall be deemed given
on the date thereof if delivered personally, or by telecopy.
If mailed by certified or registered mail, postage prepaid,
return receipt requested, such notice shall be deemed given
three Days after the date of mailing. All notices shall be
delivered or transmitted to the Parties, their successors in
interest or their assignees at the following addresses, or at
such other addresses as the Parties may designate by written
notice in the manner aforesaid:
CUSA: Chevron U.S.A. Inc.
[FURNISH ROUTINE NOTICE INFORMATION AND LOCKED PRICE NOTICE INFORMATION]
NGC: Natural Gas Clearinghouse
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
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Attention:
XIV. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY CUSA
14.1 NON-ASSIGNABILITY. Except as provided in Section 14.2 below,
neither this Agreement nor any obligation of a Party under
this Agreement are assignable without the express written
consent of the other, which consent may be withheld in its
sole discretion for any reason, except to wholly owned
subsidiaries and affiliates, in which case the assigning
entity shall not be relieved of responsibility for any of its
obligations under this Agreement.
14.2 TRANSFER OF INTEREST. CUSA shall have the right to convey a
Source of Supply to a non-affiliated entity. In the event of
such a conveyance, and at CUSA's option, the affected Source
of Supply shall either remain subject to this Agreement and
gas produced from that Source of Supply shall be Committed Gas
for all purposes under this Agreement or shall remain
Committed Gas pursuant to a separate agreement executed by NGC
and CUSA's successor in interest and containing terms and
conditions substantially identical to this Agreement. In the
event CUSA elects to convey the Source of Supply subject to
this Agreement, the documents evidencing the conveyance of the
Source of Supply shall specifically identify this Agreement
and obligate CUSA's successor in interest to ratify and adopt
this Agreement insofar as it applies to the Source of Supply
acquired by CUSA's successor in interest. In the event CUSA
elects to require its successor in interest to execute an
agreement substantially identical to this Agreement, such
agreement shall be executed contemporaneously with the
documents evidencing the conveyance of the Source of Supply.
Notwithstanding the foregoing, CUSA shall have the right to
convey a Source of Supply to a non-affiliated entity free and
clear of this Agreement if the Source of Supply, when combined
with any other Source of Supply contemporaneously conveyed to
the non-affiliated entity, produced an average of 200 MMBtu
per Day, or less, over the six month period ending ninety Days
prior to the Effective Date of the conveyance.
XV. MISCELLANEOUS
15.1 WAIVER. No waiver by either CUSA or NGC of any default of the
other under this Agreement shall operate as a waiver of any
future default, whether of like or different character or
nature.
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15.2 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the Parties, and is intended to be a final,
complete, integrated and exclusive expression of their
agreement and its terms. Except as otherwise provided in this
Agreement, this Agreement shall not be modified or amended
except by a written instrument executed by the Parties.
15.3 CHOICE OF LAW. THIS AGREEMENT SHALL BE SUBJECT TO, AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS, BUT NOT THE
LAWS REGARDING CHOICE OF LAW, OF THE STATE OF TEXAS.
15.4 CONFIDENTIALITY. Each Party agrees that the terms of this
Agreement and any information provided under this Agreement
shall be kept confidential by it and shall not be disclosed to
any third Party without first obtaining the written consent of
the other, which consent shall not be unreasonably withheld.
In addition, any information designated as confidential by one
Party and provided to the other during the term of any
agreement shall be kept confidential by the receiving Party
and shall not be disclosed to any third party for a period of
three years from the date of receipt without first obtaining
the written consent of the other, which consent shall not be
unreasonably withheld. This Section shall not prevent a Party
from making any disclosure required by law, regulation or SEC
disclosure rules (in such case, the disclosing Party shall
notify the non-disclosing Party as soon as practicable of the
pendency, nature and content of the planned disclosure) or
from disclosing any information which is already in the public
domain.
15.5 LIMITATION OF DAMAGES. In no event shall either Party be
liable for punitive, exemplary, consequential or incidental
damages arising from any breach or default under this
Agreement, indemnification under this Agreement or from any
act or omission under or in connection with this Agreement.
15.6 SEVERABILITY. If any provision of this Agreement is determined
to be invalid, illegal or otherwise unenforceable for any
reason by a court of competent jurisdiction, the remaining
terms and conditions of this Agreement shall remain in full
force and effect to the fullest extent permitted by law. In
such an event, the Parties agree to make a good faith effort
to replace the affected provisions.
IN WITNESS WHEREOF, this Agreement is executed on the _____ day of
__________, 199__.
CHEVRON U.S.A. INC. NATURAL GAS CLEARINGHOUSE
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- --------------------------------- ------------------------------------
By: By:
Title: Title:
EXHIBIT "E"
[Date]
Price Lock Confirmation
Natural Gas Purchase and Sale Agreement
NGC Contract No. ______________
Chevron U.S.A. Inc.
[Address]
Gentlemen:
In accordance with that certain Natural Gas Purchase and Sale Agreement dated
effective ______________ by and between Chevron U.S.A. Inc., as Seller, and
Natural Gas Clearinghouse, as Buyer, which agreement is incorporated herein and
made a part hereof, Buyer hereby confirms establishment of the following "Locked
Price" and "Locked Quantities" as previously discussed and agreed orally:
Date of Parties' Oral Agreement:
Month of Delivery:
Source of Supply:
Delivery Point:
Locked Quantities (MMBtus/day):
Locked Price ($/MMBtu):
Basis Differential Adjustment ($/MMBtu):
This Price Lock Confirmation is binding upon the Parties unless Seller notifies
Buyer of a dispute with all or a portion hereof 48 hours (exclusive of weekends
and Chevron holidays) after Seller's receipt hereof.
Very truly yours,
NATURAL GAS CLEARINGHOUSE
By:_________________________________________
Trading Representative
Date:______________________________________
<PAGE>
EXHIBIT A
SOURCES OF SUPPLY, DELIVERY POINTS, PUBLISHED INDEX
PRICES, AND INDEX PRICE ADJUSTMENTS
<PAGE>
EXHIBIT B
POST-EFFECTIVE DATE COMMITMENTS
<PAGE>
EXHIBIT C
UPSTREAM GATHERING AND TRANSPORTATION AGREEMENTS
<PAGE>
EXHIBIT D
FIRM MARKET SPLIT CONNECT COMMITTED GAS
<PAGE>
EXHIBIT "F"
LETTER OF CREDIT
1. CALCULATION OF FACE AMOUNT
After CUSA submits its Availability Report applicable to the first
Month of deliveries of Committed Gas under this Agreement and prior to the
Effective Date, NGC shall furnish to CUSA one or more irrevocable standby
letters of credit (referred to in this Exhibit F as "LC" regardless of whether
one or more LCs are posted), and shall subsequently maintain the LC in effect,
in a form similar to the form attached hereto as Exhibit "F-1" and acceptable to
CUSA and the issuing bank or banks, from a bank or banks acceptable to CUSA and
in an aggregate amount calculated as follows:
The face amount of the LC furnished prior to the Effective Date shall
equal ([65 x EV x ERP] minus $80,000,000) x 25%. Thereafter, and until
the twentieth Day of the second Month of deliveries of Committed Gas
under the Agreement, the face amount of the LC shall be increased to
the following face amounts according to the following schedule:
(i) no later than the fifteenth Day after the Effective Date -
([65 x EV x ERP] minus $80,000,000) x 50%;
(ii) no later than the thirtieth Day after the Effective Date
- ([65 x EV x ERP] minus $80,000,000) x 75%; and
(iii) no later than the forty-fifth Day after the Effective
Date - ([65 x EV x ERP] minus $80,000,000) x 100%.
The LC posted by NGC no later than the forty-fifth Day following the
Effective Date in the face amount of ([65 x EV x ERP] minus
$80,000,000) x 100% is hereafter referred to as the "INITIAL LC".
Following the twentieth Day of the second Month of deliveries of
Committed Gas and in subsequent Months the face amount of the LC to be
posted by NGC shall equal the aggregate face amount of the INITIAL LC
plus or minus A.
Where:
V shall equal the average daily volume of Committed Gas designated for
delivery by CUSA to NGC in CUSA's initial Availability Report submitted
in accordance with Section 2.2 of the Agreement and applicable to the
Month in which the aggregate face amount of the LC is calculated.
EV shall equal the average daily volume of Committed Gas designated for
delivery by CUSA to NGC in CUSA's initial Availability Report
applicable to the first Month of deliveries of Committed Gas under this
Agreement. RP shall mean the Reference Price
ERP shall mean the estimated Reference Price
REFERENCE PRICE shall equal the volume weighted average First of the
Month Commodity Price of Committed Gas to be delivered by CUSA to NGC
at the Delivery Points designated in the applicable initial
Availability Report during the Month in which the aggregate face amount
of the LC is calculated. For purposes of calculating the volume
weighted average First of the Month Commodity Price, the average daily
volume of Committed Gas designated for delivery at each Delivery Point
by CUSA to NGC in CUSA's initial Availability Report applicable to the
Month in which the aggregate face amount of the LC is calculated will
be used for weighing purposes.
ESTIMATED REFERENCE PRICE shall equal the volume weighted average
imputed First of the Month Commodity Price of Committed Gas that will
be delivered by CUSA to NGC during the first Month of deliveries of
Committed Gas under this Agreement at the Delivery Points designated in
the applicable initial Availability Report. For purposes of calculating
the volume weighted average imputed First of the Month Commodity Price:
(i) the average daily volume of Committed Gas designated for delivery
at each Delivery Point by CUSA to NGC in CUSA's initial Availability
Report applicable to the first Month of deliveries of Committed Gas
under this Agreement will be used for weighing purposes; and (ii) the
Published Index Prices applicable to the Month preceding the first
Month of deliveries under this Agreement and the applicable Index Price
Adjustments and Premiums, if any, set forth in Exhibit A to the
Agreement will be used to arrive at the imputed First of the Month
Commodity Price
X shall equal the total net dollar amount NGC is obligated to pay CUSA
in accordance with the terms of the Agreement as reflected in the
applicable statement furnished by NGC to CUSA in accordance with
Section 7.1 of the Agreement.
A shall equal (i) the result of subtracting the aggregate face amount
of the INITIAL LC from [X plus (35 x V x RP) minus $80,000,000] if [X
plus (35 x V x RP) minus $80,000,000] is greater than the aggregate
face amount of the INITIAL LC or (ii) the result of subtracting [X plus
(35 x V x RP) minus $80,000,000] from the aggregate face amount of the
INITIAL LC if the aggregate face amount of the INITIAL LC is greater
than [X plus (35 x V x RP) minus $80,000,000]. Notwithstanding the
foregoing, A shall equal zero if the result of the calculation set
forth in (i) or (ii), as the case may be, is not greater than
$30,000,000. If the difference resulting from the calculation set forth
in (i) is greater than $30,000,000, the difference shall be added to
the aggregate face amount of the INITIAL LC to arrive at the aggregate
face amount of the LC to be posted in accordance with the procedures
set forth below. If the difference resulting from the calculation set
forth in (ii) is greater than $30,000,000, the difference shall be
subtracted from the aggregate face amount of the INITIAL LC to arrive
at the adjusted aggregate face amount of the LC to be posted in
accordance with the procedures set forth below.
2. PROCEDURES
The aggregate face amount of the INITIAL LC shall not be subject to
adjustment until the twentieth Day of the second Month of deliveries of
Committed Gas under this Agreement. Beginning on the twentieth Day of
the second Month and on the twentieth Day of each succeeding Month
during the term of this Agreement, the aggregate face amount of the LC
shall be calculated in accordance with the formula set forth above. If
an adjustment in the aggregate face amount of the LC is required,
within five Business Days following the twentieth Day of the Month NGC
shall at its sole option either: (a) authorize the issuing bank or
banks to amend the aggregate face amount of the LC to reflect the
proper adjustment; (b) deliver a replacement standby LC in an aggregate
face amount determined in accordance with the formula set forth above;
or (c) deliver an additional LC in a face amount that, when added to
the aggregate face amount of any LC(s) in effect at that time, equals
the face amount determined in accordance with the formula set forth
above. Upon receipt of a replacement LC complying with the requirements
of this Exhibit F, CUSA shall return any superseded LC(s) to the
issuing bank(s) for cancellation.
<PAGE>
EXHIBIT "F-1"
DRAFT OF ACCEPTABLE LETTER OF CREDIT FORMAT
CHEVRON U.S.A. INC.
2005 DIAMOND BLVD., ROOM _________
CONCORD, CA 94520-5738
ATTENTION:_________________________
WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER _______________
IN FAVOR OF YOURSELVES BY ORDER AND FOR ACCOUNT OF _______________ AVAILABLE AT
RIGHT FOR AN APPROXIMATE AMOUNT OF _______________ USDLRS AGAINST:
o A STATEMENT SIGNED BY AN AUTHORIZED REPRESENTATIVE OF CHEVRON U.S.A.,
INC. CERTIFYING THAT THE AMOUNT DRAWN REPRESENTS THE AMOUNT INVOICED TO
__________________ WHICH WAS NOT PAID WHEN DUE AND REMAINS UNPAID.
SPECIAL CONDITIONS:
o PARTIAL SHIPMENTS ARE PERMITTED.
o MULTIPLE/PARTIAL DRAWINGS ARE PERMITTED.
o TEN PERCENT MORE OR LESS IN BOTH QUANTITY AND AMOUNT IS ACCEPTABLE.
DOCUMENTS MUST BE PRESENTED AT OUR COUNTERS NOT LATER THAN ___________________.
WE HEREBY ENGAGE WITH THE BENEFICIARY THAT DOCUMENTS DRAWN UNDER AND IN
COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION
AS SPECIFIED.
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISIONS) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER
500.
EXHIBIT 10.48
May 17, 1996
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSIONPURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
MASTER NATURAL GAS PROCESSING AGREEMENT
This Master Natural Gas Processing Agreement ("Master Processing
Agreement") is entered into as of the ______ day of _____________, 1996, between
Chevron U.S.A. Production Company, a division of Chevron U.S.A. Inc., a
Pennsylvania corporation ("Chevron") and Warren Petroleum Company, Limited
Partnership, a Delaware limited partnership ("WPC").
Whereas, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and CUSA's Natural Gas Business Unit to a newly formed corporation into which
NGC would then be merged; and
Whereas, immediately subsequent to the Merger, the gas gathering,
processing, and other midstream assets of Warren will be transferred to WPC; and
Whereas, WPC will own and operate natural gas processing plants and
will be a major marketer of natural gas liquids; and
Whereas, a significant proportion of Chevron's natural gas production
has historically been processed in, and is currently connected to, Warren
Plants; and
Whereas, Chevron and WPC desire to establish a long term, cooperative,
commercial relationship whereby substantially all of Chevron's Processable U.S.
natural gas production will be processed by WPC in those geographic areas where
WPC currently has processing facilities and in other areas where it is
economically practical for WPC to acquire or install facilities to process
Chevron's gas, along with other, third party gas that may be available for
processing in any such facilities;
Now, therefore, the parties agree as follows:
A. DEFINITIONS
1. "Affiliate" when referring to any party means a corporation or
other entity which controls such party, is controlled by such party, or is under
common control with such party. An
<PAGE>
entity shall be deemed to be "controlled" by another for purposes of this
provision if the controlling entity owns at least fifty-one percent of the
voting stock of the controlled entity.
2. "Ancillary Services" means gathering, field compression,
dehydration, treating, and plant compression, as needed to receive, process, and
redeliver natural gas and natural gas liquid products which, after processing,
will meet the quality specifications of the pipeline or other transporter
receiving the gas or products at the tailgate of the processing plant.
3. "Chevron Interest" means any mineral fee or oil and gas leasehold
interest owned or controlled by Chevron, including any rights Chevron may have
to process gas owned by third parties, but only to the extent and for the period
authorized in the instrument creating such rights.
4. "Chevron Plant" means a processing plant owned (entirely or in part)
by Chevron as of the Effective Date and not included in the Merger, including
any such plants in which Chevron is a joint owner with others.
5. "Committed Area" means the geographic area defined as such in each
individual Processing Agreement between Chevron and WPC covering processing at a
particular WPC Field Plant.
6. "Effective Date" means ___________________________, 1996.
7. "Merger" means the combination of certain businesses and assets of
Chevron with similar businesses and assets of NGC Corporation, as set forth in
the Combination Agreement and Plan of Merger dated __________________________,
1996.
8. "Pre-Merger Warren Plant" means a natural gas processing plant owned
(in whole or in part) by Warren Petroleum Company, a division of Chevron, prior
to the Merger.
9. "Processable Gas" means natural gas which (a) must be processed to
meet pipeline quality specifications, or (b) contains liquid or liquefiable
hydrocarbons in sufficient concentrations to make processing economically
practical to both parties. Notwithstanding the foregoing, Chevron shall not seek
to exclude any gas from the category of "Processable Gas" on the grounds that
processing such gas is not economically practical in order to have such gas
processed in a Third Party Plant.
10. "Processing" means removal of liquid and liquefiable hydrocarbons
from a stream of natural gas flowing through a natural gas processing plant.
11. "Third Party Plant" means a natural gas processing plant which is
not a Chevron Plant and in which neither WPC nor any Affiliate of WPC owns an
interest.
12. "WPC Field Plant" means a natural gas processing plant currently,
or in the future, owned (entirely or in part) by WPC or any of its Affiliates,
which is located in or near a field where natural gas is produced, and which is
connected to a gathering system which delivers the
2
gas to the processing plant. Notwithstanding the fact that it might otherwise
fall within the foregoing definition, a processing plant which was constructed
primarily to receive and process gas produced from wells situated in the Gulf of
Mexico shall not be deemed to be a WPC Field Plant.
13. "WPC Straddle Plant" means a Straddle Plant currently, or in the
future, owned entirely by WPC or any of its Affiliates.
14. "Joint Venture Straddle Plant" means a Straddle Plant which is
either (a) owned by WPC and others, or (b) owned by Chevron and operated and/or
managed by WPC or any of its Affiliates, and which is, in either case, subject
to the terms of a plant construction and operating agreement or similar
document.
15. "Straddle Plant" means a natural gas processing plant which is
located on an interstate or intrastate natural gas pipeline, and which processes
all or a portion of the gas flowing through the pipeline on which the processing
plant is located. Notwithstanding the fact that it might not otherwise fall
precisely within the foregoing definition, a processing plant which was
constructed primarily to receive and process gas produced from wells situated in
the Gulf of Mexico shall be deemed to be a Straddle Plant.
B. EXECUTION OF CONTRACTS AND GENERAL INTENT
1. CHEVRON'S OBLIGATIONS.
(a) EXISTING FIELD PLANTS. Effective on the Effective Date,
Chevron shall cause its individual business units to enter into Natural Gas
Processing Agreements with WPC, under which Chevron Interests connected to
Pre-Merger Warren Field Plants as of the Effective Date shall be committed to
WPC for processing for the life of the Chevron Interests. Each of the Pre-Merger
Warren Field Plants and the commercial terms applicable to the Chevron Interests
committed to each plant for processing are listed on Exhibit "A" hereto.
Notwithstanding the foregoing, if any part of a Chevron Interest is, as of the
Effective Date, subject to a prior commitment which prevents the gas
attributable to such Chevron Interest from being processed in a WPC Field Plant,
then such part of the Chevron Interest shall not be deemed to be included in the
Committed Area until such prior commitment expires or is terminated.
(b) EXISTING STRADDLE PLANTS. In the case of gas produced from
Chevron Interests in the Gulf of Mexico area and not processed in a Chevron
Plant, Chevron shall cause its individual business units to enter into one or
more Natural Gas Processing Agreements with WPC, under which gas from those
Chevron Interests shall be committed to WPC for processing. The commercial terms
applicable to each Straddle Plant in which gas from the Chevron Interests in the
Gulf of Mexico area will be processed are listed on Exhibit "A" hereto. Such
Natural Gas Processing Agreement(s) shall remain in effect for a term
co-extensive with the term of that certain Natural Gas Purchase and Sale
Agreement dated _________________ between Chevron and Natural Gas Clearinghouse
(the "Master Gas Sale Agreement"); provided, however, that to the
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extent that WPC's ownership in a Joint Venture Straddle Plant is dependent upon
the continued commitment to that plant of the gas and/or processing rights
associated with specific Chevron Interests, such Chevron Interests shall remain
committed to the applicable Joint Venture Straddle Plant, and the Natural Gas
Processing Agreement applicable to such Chevron Interests shall remain in effect
for the life of those Chevron Interests, whether processed in such Joint Venture
Straddle Plant or a Third Party Straddle Plant. All Chevron Interests not
directly required to maintain WPC's Straddle Plant ownership shall be released
from the Natural Gas Processing Agreement between Chevron and WPC if requested
in writing by Chevron after termination of this Master Processing Agreement.
Notwithstanding the foregoing, nothing herein shall be construed as a release of
any Chevron Interest from any dedication to a particular Joint Venture Straddle
Plant which may exist pursuant to a construction and operating agreement or
other applicable contract.
(c) FUTURE ARRANGEMENTS. In addition to the foregoing, the
parties intend that substantially all of Chevron's Processable Gas in the lower
48 continental United States be processed or caused to be processed by WPC,
except for those situations where (1) contractual commitments existing as of the
date of this Master Processing Agreement require that the gas be processed
elsewhere (in which case the gas will become subject to this Master Processing
Agreement, without further action by either party, upon expiration of the
existing contractual commitments), (2) the gas is currently or can hereafter be
processed in a Chevron Plant, (3) WPC has no suitable processing facilities in
the vicinity and either does not desire to install facilities or is not able to
do so in a manner that delivers to Chevron economic benefits comparable to
Chevron's other processing options, or (4) WPC, after full disclosure by Chevron
of the circumstances and consultation between Chevron and WPC, is unable to
offer Chevron terms that are as favorable as those available to Chevron from a
Third Party Plant and Chevron elects to have its gas processed in the Third
Party Plant.
2. WPC'S OBLIGATIONS. WPC shall enter into Natural Gas Processing
Agreements with Chevron, as described above, and will provide such Ancillary
Services as Chevron may reasonably request; provided, however that WPC will not
be required, without additional mutually agreeable compensation, to install
equipment to provide Ancillary Services at plants where such services are not
currently being provided. In those cases where Chevron's Processable gas is not
committed to a WPC Plant and cannot efficiently be processed in a WPC Plant, WPC
shall, if requested by Chevron, provide Chevron consultation and assistance in
arranging for the connection of such gas to a Third Party Plant; provided that
in doing so WPC shall incur no liability to Chevron. WPC shall perform all of
its obligations in a manner which is consistent with the intent of this Master
Processing Agreement and which will support Chevron's production activities to
the maximum extent that is commercially reasonable and practical.
3. INTENT OF PARTIES. Both parties acknowledge that the purpose of this
Master Processing Agreement is to provide for the processing of Chevron's gas in
WPC's plants under terms that are fair and equitable for both parties. By
entering into this Master Processing Agreement and the related individual
Natural Gas Processing Agreements, the parties expect to improve the process of
connecting new wells to gathering systems and plants, to obtain mutual benefits
and efficiency through cooperative sharing of measurement data, and to improve
their financial results by
4
reducing downtime and unproductive activities while maximizing cooperation and
sharing of essential information. To the extent that the parties have the
current capability to transfer data via electronic means, or can agree on an
allocation of any costs of installing such capability that the parties agree
will be mutually beneficial, the parties shall endeavor to establish the
necessary systems and procedures to facilitate such electronic transfers of
data.
4. ANCILLARY SERVICES PROVIDED BY CHEVRON. Nothing in this Master
Processing Agreement shall prevent Chevron from installing and operating, or
causing third parties to do so, any facilities needed to provide Ancillary
Services in support of Chevron's production operations when WPC is not obligated
to provide such services to Chevron under this Master Processing Agreement or
another agreement, and Chevron has elected not to request WPC to provide those
services or, having made such a request, Chevron declines to pay the
compensation required by WPC.
C. PROCEDURES
1. SHARING OF DEVELOPMENT AND OTHER PLANS. Chevron's local operating
units shall keep the appropriate WPC personnel apprised of Chevron's future
exploration and development plans, and shall share such information as may
reasonably be required to assist WPC in expediting the connection of any new
wells drilled by Chevron in the vicinity of WPC Plants. WPC shall advise
Chevron, as early as possible, of any plans for its processing plants (such as
dispositions, expansions, contractions, shut-downs, major overhauls, or other
projects) which may significantly affect Chevron's production operations. Each
party shall keep all such information strictly confidential and shall make no
use of such information except for the purposes of this Master Processing
Agreement. In connection with the foregoing, Chevron and WPC agree to cause
their local representatives to establish exploration, production and processing
alliance improvement teams (the "EPP Alliance Teams") to perform the duties
outlined below. The EPP Alliance Teams shall be comprised of members from both
Chevron and WPC. Chevron and WPC each shall bear their own costs and expenses
associated with the EPP Alliance Teams and their activities. The duties of the
EPP Alliance Teams will include, but will not be limited to, the following:
(a) administering and coordinating the routine business
of the EPP Alliance Team;
(b) determining and developing strategies with respect to
EPP Alliance Team activities;
(c) establishing and periodically reviewing standards of
performance for the contractual relationship between
Chevron and WPC;
(d) participating in periodic exploration and production
meetings to discuss and coordinate the exploration
and production activities of Chevron with the well
connection and processing activities of WPC;
5
(e) reviewing all significant drilling, development and
exploration plans in order to develop reasonable and
cost effective plans for well connections and
processing the gas that may result from such
drilling, development and exploration activities;
(f) conducting regularly scheduled planning, problem
solving, and performance review meetings;
(g) reviewing all significant equipment, design and
process changes affecting the contractual
relationship(s) between Chevron and WPC; and
(h) developing recommendations and procedures for making
the parties' performance hereunder more efficient and
cost-effective.
2. CONNECTION OF NEW WELLS IN COMMITTED AREAS -- WPC FIELD PLANTS.
Whenever Chevron has within the Committed Area associated with a WPC Field Plant
a new well capable of producing Processable gas, Chevron shall notify WPC of the
location, estimated volume and quality of production, and Chevron's desired
connection date for such well, and other information reasonably requested by WPC
to evaluate the proposed connection. If, based on that information, WPC believes
it can economically connect the well to its gathering system at WPC's expense
and process the gas from such well in accordance with the terms of the existing
Natural Gas Processing Agreement, WPC shall use every reasonable effort to do so
by Chevron's desired connection date. If WPC concludes it cannot economically
connect the well under the existing terms of the applicable Natural Gas
Processing Agreement and the parties cannot agree upon terms under which the
well can be connected, then WPC shall, upon request by Chevron, (a) provide
Chevron consultation and assistance in arranging for the connection of such gas
to a Third Party Plant, and (b) release from dedication the well and such
acreage around the well as Chevron may reasonably require in order to obtain a
third party connection. In doing so, Chevron will attempt to limit the extent of
any dedication to the Third Party Plant to the minimum term and acreage
consistent with the reasonable requirements of the third party processor. If a
previous third party processing commitment of an existing well within the
Committed Area expires or can be terminated by Chevron, Chevron shall notify WPC
and the above connection procedure shall apply, except that Chevron shall not be
obligated to agree to the connection of such a well to WPC's Plant if doing so
would result in an economic disadvantage to Chevron.
3. CONNECTION OF OTHER NEW WELLS -- WPC FIELD PLANTS. Whenever Chevron
has in the vicinity of a WPC Field Plant, but outside of the Committed Area
associated with that plant, a well capable of producing Processable Gas which
could be connected to the WPC Field Plant, Chevron shall notify WPC of the
location, estimated volume and quality of production, Chevron's desired
connection date for such well, and other information reasonably requested by WPC
to evaluate the proposed connection. The parties shall then cooperate in good
faith to determine the terms, reflective of fair market value, under which such
well would be dedicated to WPC for processing. If the parties are unable to
agree on such terms, or if they conclude that processing the gas from the new
well in a Third Party Plant would be advisable, then WPC shall, upon request by
Chevron, provide Chevron consultation and assistance in arranging for the
connection
6
of such gas to a Third Party Plant. In that case, Chevron will attempt to limit
the extent of any dedication to the Third Party Plant to the minimum term and
acreage consistent with the reasonable requirements of the third party
processor.
4. DELIVERY OF CHEVRON GAS TO WPC STRADDLE PLANTS OR JOINT VENTURE
STRADDLE PLANTS. Except to the extent required by existing contracts, such as
the applicable Plant Construction and Operating Agreements, Chevron will not be
required by this Master Processing Agreement to commit Chevron Interests for
processing in WPC Straddle Plants or Joint Venture Straddle Plants, it being
recognized that changing marketing arrangements for the gas may result in the
gas being processed from time to time in different plants on different
pipelines. Nevertheless, it is the intent of the parties that Chevron enter into
one or more Natural Gas Processing Agreements with WPC for the processing of
Chevron's Processable Gas in the WPC Straddle Plants or Joint Venture Straddle
Plants to which the Chevron gas can flow and that such gas be processed in the
WPC Straddle Plants or Joint Venture Straddle Plants whenever the then current
gas marketing arrangements, plant economics, and the applicable Plant
Construction and Operating Agreement(s) so permit. Chevron recognizes that
processing in some Joint Venture Straddle Plants may require long term
commitment of specific acreage or leases (as required by applicable Plant
Construction and Operating Agreements or other agreements) in order to obtain
the most favorable processing terms. In those cases, Chevron will make such long
term commitments; provided that, in the absence of mutual agreement to the
contrary, such commitments shall be limited to periods when the gas is being
marketed on the pipeline on which the applicable straddle plant is located.
5. NOTIFICATION OF NEW OPPORTUNITIES. Whenever Chevron has or expects
to have Processable Gas available for processing in an area not currently served
by a WPC Plant, Chevron shall notify WPC and provide all necessary information
to permit WPC to evaluate whether it desires to construct a new plant to process
such gas. If WPC desires to submit a proposal, it shall do so in an expeditious
manner that will not unduly delay the development and connection of Chevron's
gas. If WPC elects not to submit a proposal, or if Chevron and WPC are unable to
reach agreement on all relevant terms, Chevron may proceed to commit the gas to
a Third Party Plant, so long as Chevron does not offer such third party terms
more favorable than those offered WPC.
6. ACCOUNTING AND ALLOCATION PROCEDURES; RESIDUE AVAILS REPORTS;
ELECTRONIC DATA INTERCHANGE. All processed gas will be accounted for and
allocated by WPC in accordance with the accounting and allocation procedures
applicable at each plant, as such procedures may be revised from time to time in
accordance with industry practice. WPC shall provide monthly gas availability
reports and periodic gas availability updates to Chevron's residue purchaser in
accordance with reasonable instructions from Chevron and as needed to comply
with Chevron's Natural Gas Purchase and Sale Agreement. The parties shall also
make a good faith effort to exchange measurement and accounting data
electronically, on a real-time basis where practical, in order to reduce
paperwork, more efficiently monitor field operations, and speed the flow of
essential information between them; provided that neither party shall be
required to make capital investments or modify its existing systems or software
in the absence of mutual agreement on systems and cost sharing.
7
7. SETTLEMENT TERMS. Each individual Natural Gas Processing Agreement
shall contain settlement terms and other relevant terms applicable to that
agreement, which terms shall be reflective of market conditions in the
applicable geographic area as of the date of such agreements. If the term of the
Natural Gas Processing Agreement is greater than ten years, then either party
shall have the right, at ten year intervals, to require a renegotiation of such
settlement terms. Such a renegotiation shall be requested in writing by the
party desiring renegotiation at least 180 days before the end of the most recent
ten year period, to be effective on the first day of
the ensuing ten year period. In any such renegotiation, the parties will seek to
arrive at settlement terms which are similar, as of the date of the
renegotiation, to the terms that each party could expect to obtain in a freely
negotiated processing agreement providing for a commitment of significant
quantities of gas for a term of at least ten years. If the parties are unable to
reach agreement on such terms, the matter will be resolved by arbitration in
accordance with the procedures set forth in the applicable Natural Gas
Processing Agreement.
8. ESTABLISHMENT OF GOALS AND STANDARDS OF PERFORMANCE. The parties
agree that there are common standards of performance (e.g., meter accuracy, line
pressure, runtime, unaccounted for Btu's, fuel consumption, etc.) that are
important to their respective operations. In furtherance of the intent of this
Master Processing Agreement, the parties agree to jointly establish, and
periodically review and revise as needed, appropriate standards and a process to
monitor and optimize performance against those standards for the mutual benefit
of the parties. Unless otherwise agreed with respect to individual WPC Plants,
each WPC Plant shall provide Chevron each month an allocation statement showing
total gas processed, total gas processed by component, total liquids recovered
by component, plant and gathering system fuel consumption on a Btu basis, lost
and unaccounted for gas, and total residue deliveries in Mcf and MMBtu.
D. TERM
1. This Master Processing Agreement shall be effective for a primary
term of ten years, commencing _____________________, 1996, and year to year
thereafter until and unless terminated by either party at the end of the primary
term, or at the end of any annual period after the primary term, by giving the
other party not less than twelve months' prior written notice of termination.
Notwithstanding the foregoing, if the Master Gas Sale Agreement terminates prior
to this Master Processing Agreement, this Master Gas Processing Agreement shall
cease to apply to gas from Chevron Interests in the Gulf of Mexico area on the
date the Master Gas Sale Agreement terminates.
2. This Master Processing Agreement may be terminated by either party,
upon thirty (30) Days written notice to the other party, after it has been
determined through the alternative dispute resolution procedures referenced in
paragraph F below that such other party has materially defaulted on its
obligations hereunder (it being understood that, for purposes of the foregoing,
8
"materially defaulted" shall mean that the arbitrators have determined that (i)
as a result of such default the objectives of this Agreement (as expressed
herein and in the Master Alliance Agreement of even date herewith by and among
Chevron, WPC and others) are not being met and (ii) the defaulting party, after
notice and a reasonable opportunity to cure, failed to take the steps necessary
to accomplish such objectives.
E. ASSIGNMENTS PROHIBITED
1. This Master Processing Agreement may not be assigned by either party
without the prior written consent of the other; provided that either party may
assign this Master Processing Agreement to an Affiliate (in which case the
assigning party shall remain ultimately responsible for performance hereof by
its Affiliate).
2. Assignment of any individual Natural Gas Processing Agreement
entered into pursuant to this Master Processing Agreement shall be governed by
the applicable terms of such individual agreement.
3. It is understood and agreed that Chevron's commitment of gas to WPC
for processing pursuant to any individual Natural Gas Processing Agreement shall
not be limited to a specific WPC Plant, even though the Plant in which the gas
will initially be processed may be specified in such agreement, and WPC shall
have the right to cause such gas to be processed in any Plant, whether or not
owned by WPC or its Affiliates, but in a manner consistent with the terms of the
applicable Natural Gas Processing Agreement. WPC, in its sole discretion, shall
have the right to consolidate plants and facilities, shut down plants and
facilities, and process Chevron's gas in any plant that it desires, so long as
Chevron is not disadvantaged, economically or by materially increased
administrative burdens, as a result of such decisions by WPC.
F. MASTER ALLIANCE AGREEMENT
This Master Processing Agreement is subject to, and shall be construed
in accordance with, the Master Alliance Agreement dated _______________ between
Chevron, WPC, and certain of their Affiliates. Any disputes arising under this
Master Processing Agreement shall be resolved exclusively as provided in the
Master Alliance Agreement.
WHEREFORE, the parties have caused this Master Processing Agreement to
be executed by their authorized representatives as of the date written above.
CHEVRON U.S.A. PRODUCTION COMPANY,
a division of CHEVRON U.S.A. INC.
By: __________________________________
Title: _______________________________
9
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP,
a Delaware limited partnership
By Warren Petroleum G.P., Inc., its General Partner
By: __________________________________
Title: _______________________________
10
GAS PROCESSING AGREEMENTS
SETTLEMENT TERMS
[EXHIBIT REDACTED] *
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
1
WICKETT GROUP
[REDACTED] *
CONFIDENTIAL TREATMENT
REQUESTED. THE REDACTED
MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION.
METER LEASE FIELD
- ----- ----- -----
448 ESTES, W A 12 TB WARD-ESTES, NORTH
36 ESTES, W A 44 TB H. S. A.
324 ESTES, W A 58 H. S. A.
70 ESTES, W A 61 H. S. A.
65 ESTES, W A 75 & 76 H. S. A.
325 ESTES, W A 78 H. S. A.
151 ESTES, W A 98 H. S. A.
11 HSA 5 SAT TO 23 TB WARD-ESTES, NORTH
28 HSA 9 TB WARD-ESTES, NORTH
14 HSA 23 TB WARD-ESTES, NORTH
17 HSA 51 TB WARD-ESTES, NORTH
193 HSA 156 BTY WARD-ESTES, NORTH
34 HSA 515 TB H. S. A.
123 HSA 529 H. S. A.
95 HSA 541 H. S. A.
38 HSA 545 TB WARD-ESTES, NORTH
71 HSA 617 H. S. A.
126 HSA 866 WARD-ESTES, NORTH
471 HSA 1035 TB
472 HSA 1035 TB VRU
469 HSA 1042 TB WAGON WHEEL
470 HSA 1042 TB VRU
474 HSA 1071
433 HSA 1077 WARD-ESTES, NORTH
171 HSA 1120 BTY WAGON WHEEL
506 HSA 1545 H. S. A.
476 HSA 268 TB
35 HSA 272 (560&596) MASTER H. S. A.
473 HSA 274
486 HSA 276 TB
477 HSA 283 & 450 AUX
478 HSA 298 TB
468 HSA 370 TB
475 HSA 544 SAT 268
215 MARSTON, E J D #1 H. S. A.
184 O'BRIEN, G W #10 TB WARD-ESTES, NORTH
489 O'BRIEN, G W #1105 H. S. A.
4 OBrien, G W Master meter
<PAGE>
QUITO GROUP
[REDACTED] *
Confidential Treatment
Requested. The redacted
material has been separately
filed with the Commission.
METER LEASE FIELD
- ----- ----- -----
404 BARBER, W T #1 TB WAHA, NORTH
411 CLEVELAND, R #1 WAHA
480 ESTES, E W 112 AUX
479 ESTES, E W 133 AUX
483 ESTES, E W 16 TB
484 ESTES, E W 166 TB
482 ESTES, E W 3 TB
481 ESTES, E W 45 TB
408 FROST, J #5 TB WAHA, WEST
405 LIGON, S E #1 TB WAHA
409 MCCALL, JACK O #1 TB WAHA, WEST
431 MCDANIEL, LOIS #1 QUITO, EAST
160 STATE XV #1 BTY BLOCK 17, SOUTHEAST
403 TREES, J C ESTATE A #1 TB WAHA, NORTH
407 TREES, J C ESTATE B #2 TB WAHA, WEST
450 TREES, J C ESTATE #4 WAHA, WEST
455 TREES, J C ESTATE ETAL #2 WAHA, WEST
457 TREES, J C ESTATE ETAL #5 WAHA, WEST
456 TREES, J C ETAL #8 WAHA, WEST
449 UNIVERSITY 18-29 #1 QUITO, EAST
425 UNIVERSITY 18-29 #10 QUITO, EAST
165 UNIVERSITY 18-29 #2 TB WAR-WINK, SOUTH
237 UNIVERSITY 18-29 #2 TB WAR-WINK, SOUTH
423 UNIVERSITY 18-29 #4 QUITO, EAST
417 UNIVERSITY 18-29 #6 QUITO, EAST
426 UNIVERSITY 18-29 #8 QUITO, EAST
428 UNIVERSITY 18-30 #2 QUITO, EAST
424 UNIVERSITY 18-30 #3 QUITO, EAST
420 UNIVERSITY 18-31 #1 WAR-WINK, SOUTH
421 UNIVERSITY 18-31 #3 QUITO, EAST
422 UNIVERSITY 18-31 #4 QUITO, EAST
418 UNIVERSITY 18-31 #6 QUITO, EAST
419 UNIVERSITY 18-31 #7 QUITO, EAST
439 WALKER, P ETAL #2L QUITO, EAST
427 WALKER, P ETAL #4 QUITO, EAST
429 WALKER, P ETAL #5 QUITO, EAST
430 WALKER, P ETAL #6 QUITO, EAST
213 WRISTEN BROS 76 BAT SAND HILLS, WEST
<PAGE>
SHALLOW-WORSHAM GROUP
[REDACTED] *
CONFIDENTIAL TREATMENT
REQUESTED. THE REDACTED
MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION.
METER LEASE FIELD
- ----- ----- -----
491 Anthony, H F #1 TB WORSHAM-BAYER
494 BARCLAY DEAN #3 WORSHAM
493 CLEVELAND, R TR B #2&6 WORSHAM
496 CLEVELAND, R TR B #3 & 4 WORSHAM
495 CLEVELAND, R TR B #8 WORSHAM-BAYER
497 CLEVELAND, R TR B #9 WORSHAM-BAYER
492 HORRY CDP WORSHAM
504 LIGON, S E STATE #3 WORSHAM-BAYER
503 LIGON, S E STATE #7 WORSHAM-BAYER
501 LIGON, S E STATE #8 WORSHAM, EAST
502 LIGON, S E STATE #9 WORSHAM, EAST
500 STATE SCHOOL BD ZZ #1 & 5 WORSHAM
499 STATE SCHOOL BD ZZ #2 & #4 WORSHAM
498 ZEEK, L W ETAL #1 WORSHAM
<PAGE>
GULF OF MEXICO NGL PRICING FORMULA
[EXHIBIT REDACTED] *
CONFIDENTIAL TREATMENT
REQUESTED. THE REDACTED
MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION.
Page 1
Exhibit 10.49
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
MASTER NATURAL GAS LIQUIDS
PURCHASE AGREEMENT
THIS MASTER NATURAL GAS LIQUIDS PURCHASE AGREEMENT (the "Agreement") is
made and entered into this day of , 1996, by and between WARREN PETROLEUM
COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership with offices at
13430 Northwest Freeway, Suite 1200, Houston, TX 77040-6095 (hereinafter
referred to as "WPC"), and CHEVRON U.S.A. INC., a Pennsylvania corporation with
offices at 1301 McKinney Street, Houston, TX 77010.
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA"), and NGC Corporation ("NGC"),
have entered into certain agreements ( the "Merger Agreements") pursuant to
which CUSA would contribute certain gas gathering, processing and other
midstream assets and related liabilities of CUSA's Warren Petroleum Company
division ("Warren") and natural gas business unit division to a corporation to
be formed which NGC would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously purchased from CUSA all of the NGL's and
certain Offspec NGL's (as such terms are defined in Article I below) produced at
certain gas processing plants in which CUSA owns an interest and both CUSA and
WPC desire that such relationship continue;
WHEREAS, CUSA has quantities of NGL's available for sale from certain
Processing Plants (as defined in Article I, below) that it desires to sell to
WPC, and WPC desires to purchase such NGL's from CUSA;
WHEREAS, CUSA and WPC acknowledge that the purpose of this Agreement is
to provide for the marketing of CUSA's NGLs processed and/or fractionated in
CUSA's plants, in
1
third-party plants and WPC's plants (excluding such NGLs produced in WPC's Gulf
Coast area straddle plants which are covered by a separate agreement between
CUSA and WPC dated of even date herewith) under terms that are fair and
equitable for both parties. By entering into this Agreement, the parties expect
to improve the process of selling and marketing NGLs to obtain benefits and
efficiency through cooperative sharing of production, plant, and other relevant
information that can be shared between the parties, and to improve their
financial results by reducing demurrage and unproductive activities while
maximizing cooperation and sharing of essential information; and
NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the parties as well as for other good and valuable consideration, WPC
and CUSA agree as follows:
ARTICLE I
DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
following meanings:
ACCOUNTING PERIOD shall mean a period of one (1) Month commencing at
12:01 a.m. local time on the first Day of a calendar Month and ending
at 12:01 a.m. local time on the first Day of the next succeeding Month.
AFFILIATE shall mean any Person that directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term Acontrol@ (including the
terms Acontrolled by@ or Aunder common control with@) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise. Any Person shall be deemed to be
an Affiliate of any specified Person if such Person owns 50% or more of
the voting securities of the specified Person, if the specified Person
owns 50% or more of the voting securities of such Person, or if 50% or
more of the voting securities of the specified Person and such Person
are under common control.
ALTERNATE INDEX shall have the meaning specified in Section 5.3
hereinafter.
ARBITRATION NOTICE shall have the meaning specified in Section 13.1(d)
hereinafter.
BANKRUPTCY EVENT shall mean the occurrence of one or more of the
following events with respect to a Party: (A) the entry of a decree or
order for relief against a Party by a court of competent jurisdiction
in any involuntary case brought against a Party under any bankruptcy
insolvency or other similar law (collectively, "Debtor Relief Laws")
generally affecting the rights of creditors and relief of debtors now
or hereafter in effect, (B) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator, or other similar agent
under applicable Debtor Relief Laws for a Party or for any substantial
part of
2
its assets or property, (C) the ordering of the winding up or
liquidation of a Party's affairs, (D) the filing of a petition in any
such involuntary bankruptcy case, which petition remains undismissed
for a period of 180 Days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy law),
(E) the commencement by a Party of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable
Debtor Relief Laws for a Party or for any substantial part of its
assets or property, or (G) the making by a Party of any general
assignment for the benefit of its creditors.
BARREL shall mean forty-two (42) U. S. Gallons.
BASE RATE shall mean the lesser of (i) two percent (2%) above the per
annum rate of interest announced from time to time as the "prime rate"
for commercial loans by First National Bank of Chicago, as such "prime
rate" may change from time to time, or (ii) the maximum applicable
non-usurious rate of interest.
BUSINESS DAY shall mean a Day on which Federal Reserve member banks in
New York City are open for business.
COMPONENT(S) shall mean the individual hydrocarbon constituents of Raw
NGL Mix, including, but not limited to, Propane, Normal Butane,
Isobutane, Natural Gasoline and Ethane.
CONWAY T&F COSTS shall mean the Transportation Costs or Pipeline
Transportation Costs, as applicable depending on the most economical
mode of transportation used or that would be used at and from the
Delivery Point to Conway, Kansas, and the fractionation fee incurred or
that would be incurred at Conway, Kansas, including any loss allowance
imposed at the fractionator.
DAY OR DAILY shall mean a twenty-four (24) hour period commencing 12:01
a.m. local time and extending until 12:01 a.m. local time on the
following Day.
DELIVERY POINT(S) shall have the meaning specified in Section 6.2
hereinafter.
EFFECTIVE DATE shall mean __________________, 1996.
ETHANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
3
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
FRACTIONATED NGLS shall mean liquid hydrocarbons fractionated from Raw
NGL Mix, including, but not limited to, Propane, Normal Butane,
Isobutane, Natural Gasoline and Ethane.
GALLON shall mean the unit of volume used for the purpose of
measurement of liquid. One (1) U.S. liquid Gallon contains two hundred
thirty-one (231) cubic inches when the liquid is at a temperature of
sixty degrees Fahrenheit (60/ F) and at the vapor pressure of the
liquid being measured.
ISOBUTANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
MONTH OR MONTHLY shall mean a period commencing at 12:01 a.m. local
time on the first Day of a calendar Month and extending until 12:01
a.m. local time on the first Day of the next succeeding calendar Month.
MIXED BUTANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
MONT BELVIEU T&F COSTS shall mean Pipeline Transportation Costs to Mont
Belvieu, a loss allowance no greater than that charged to an
unaffiliated third Person (currently, 0.25%), and a per Gallon
fractionation fee calculated as follows:
* (i) [[REDACTEED] X (Prior Calendar Quarter
Average Inside FERC Houston Ship
Channel/Beaumont Texas Index for Large
* Packages only - [REDACTED] / [REDACTED] +
* [REDACTED]7
or
* (ii) [REDACTED] per Gallon, whichever is greater
NATURAL GASOLINE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
4
NETBACK PRICE shall mean the price obtained by WPC in an arm's length
sale of NGLs to a third Person who is not an Affiliate of WPC less
Transportation Costs and/or T&F Costs that are reasonably incurred in
connection therewith.
WPC DEFICIENCY QUANTITY shall have the meaning specified in Section
14.1 hereinafter.
NEW TAXES shall mean any Taxes enacted and effective after the
Effective Date, including that portion of any Taxes or New Taxes that
constitutes an increase either in rate or breadth of coverage.
NGL shall mean Raw NGL Mix, if delivered to WPC from a gas processing
plant, or Fractionated NGLs, if delivered to WPC from a fractionator.
NORMAL BUTANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A". OFFSPEC NGLS shall have the
meaning specified in Section 7.1 hereinafter.
PARTY shall mean individually either CUSA or WPC (including their
respective successors and permitted assigns); collectively, the
"PARTIES."
PERSON shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other
organization of any nature or kind.
PIPELINE TRANSPORTATION COSTS shall mean all costs and expenses
reasonably incurred by WPC in connection with the transportation of
NGLs by pipeline or the costs and expenses that would have been
incurred if such NGL's were actually transported by pipeline to the
applicable location specified in Section 5.1. In those situations when
it is necessary to transport NGLs by truck or rail cars to a pipeline
receipt point, such costs shall be included as part of the applicable
Pipeline Transportation Costs. It is understood and agreed that
Pipeline Transportation Costs shall not include any portion of WPC's
general and administrative costs and expenses.
PROPANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
RAW NGL MIX shall mean the mixed liquid hydrocarbon stream produced at
a gas processing plant and delivered to WPC at the Delivery Point at
the tailgate of said plant.
TAXES shall mean any and all ad valorem, property, occupation,
severance, production, extraction, first use, conservation, Btu or
energy, gathering, transport, pipeline, utility, gross receipts, gas or
oil revenue, gas or oil import, privilege, sales, use, consumption,
excise, lease, transaction, environmental, and other taxes,
governmental charges, duties, licenses, fees, permits, and assessments.
5
T&F COSTS shall mean all Transportation Costs and the costs and
expenses incurred in connection with the receipt and fractionation of
NGLs received by WPC from CUSA or that would have been incurred if
fractionated, including any loss allowance imposed at the applicable
fractionator.
TRANSPORTATION COSTS shall mean all costs and expenses reasonably
incurred in connection with the transportation of NGL(s) hereunder,
including, without limitation, rail car, barges, and truck costs, NGL
losses that occur during transportation for reasons other than the
negligence or willful misconduct of WPC and all costs and expenses
reasonably incurred in loading, unloading, transporting, terminaling,
storing (if required), and handling such NGLs. With respect to barges,
trucks and any other modes of transportation owned by WPC or its
Affiliates, the applicable Transportation Costs shall not exceed the
fair market value of the use of such modes of transportation in
transporting NGLs hereunder. It is understood and agreed that
Transportation Costs shall not include any portion of WPC's general and
administrative costs and expenses.
YEAR shall mean a period of twelve (12) consecutive Months commencing
from the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meanings indicated throughout this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 CUSA hereby represents and warrants to WPC that on and as of the
date hereof:
(a) It has all requisite corporate power and authority to
carry on the business in which it is engaged and to
perform its respective obligations under this
Agreement;
(b) The execution and delivery of this Agreement have
been duly authorized and approved by all requisite
corporate action;
(c) It has all the requisite corporate power and
authority to enter into this Agreement and perform
its obligations hereunder;
(d) The execution and delivery of this Agreement does
not, and consummation of the transactions
contemplated herein will not, violate any of the
material provisions of its organizational documents,
any material agreement pursuant to which CUSA or its
properties are bound or, to its knowledge, any
material laws applicable to CUSA; and
6
(e) This Agreement is valid, binding, and enforceable
against it in accordance with its terms, subject to
bankruptcy, moratorium, insolvency, and other laws
generally affecting creditor's rights and general
principles of equity (whether applied in a proceeding
in a court of law or equity).
2.2 WPC hereby represents and warrants to CUSA that on and as of the
date hereof:
(a) It has all requisite power and authority to carry on
the business in which it is engaged and to perform
its respective obligations under this Agreement;
(b) The execution and delivery of this Agreement have
been duly authorized and approved by all requisite
partnership action;
(c) It has all the requisite power and authority to enter
into this Agreement and perform its obligations
hereunder;
(d) The execution and delivery of this Agreement does
not, and consummation of the transactions
contemplated herein will not, violate any of the
material provisions of its organizational documents,
any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any
material laws applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable
against it in accordance with its terms, subject to
bankruptcy, moratorium, insolvency, and other laws
generally affecting creditor's rights and general
principles of equity (whether applied in a proceeding
in a court of law or equity).
ARTICLE III
TERM
3.1 Unless otherwise provided herein, this Agreement shall remain in
full force and effect for a period of ten (10) Years from the Effective Date
hereof and shall continue from Year to Year thereafter unless terminated by
either Party hereto at the end of such ten (10) Years period or any Yearly
anniversary thereafter by giving the other Party at least ninety (90) Days, but
not more than one hundred twenty (120) Days, advance written notice of its
intention to so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be terminated
as follows:
7
(a) By the non-defaulting Party, upon thirty (30) Days
written notice to the other Party, after it has been
determined through the alternative dispute resolution
procedures of Article XIII that a Material Default
has occurred in the performance of a Party's
obligations hereunder (it being understood that, for
purposes of the foregoing, "Material Default" shall
mean that the arbitrators have determined that (i) in
consequence of such default, the objectives of this
Agreement (as expressed in the Master Alliance
Agreement of even date herewith by and among CUSA,
WPC and others) are not being met and (ii) the
defaulting Party failed to take the steps necessary
to accomplish such objectives);
(b) In the event either Party is dissolved (unless the
successor to such dissolved Party or its assets is an
Affiliate of CUSA or WPC Parent.);
(c) If a Bankruptcy Event occurs with respect to either
Party; or
(d) By CUSA as provided in Section 11.2 hereinafter.
3.3 Upon the termination of this Agreement, any monies due and owing
either Party shall be paid to the other Party pursuant to the terms hereof and
any refunds due either Party shall be made at the earliest possible time, and in
any event no later than sixty (60) Days after the expiration or termination of
this Agreement. All audit rights shall survive for the period prescribed by
Section 11.6.
3.4 Termination of this Agreement hereunder shall be cumulative of any
other rights or remedies that the terminating Party may have in connection with
such termination, including, but not limited to, damages and injunctive relief.
ARTICLE IV
QUANTITY
4.1 During the term of this Agreement, unless WPC is excused from
purchasing NGLs, or CUSA is excused from selling NGLs pursuant to the terms and
provisions hereof, CUSA agrees to sell to WPC, and WPC agrees to purchase from
CUSA, all of CUSA's right title and interest in the NGL's produced at the
processing or fractionation plants (the "Plants") listed in Exhibits "B", "C",
"D", "E" and "F" which are attached hereto and made a part hereof, subject to
contractual obligations existing as of the Effective Date which may prevent CUSA
from providing such NGLs. However, when such contractual obligations terminate,
such NGLs shall
8
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
automatically be covered hereunder. CUSA agrees to notify WPC at least thirty
(30) Days prior to the Day on which such contractual obligations terminate.
4.2 The Parties shall use every reasonable effort to deliver and
receive, as applicable, NGLs on a ratable Daily basis.
ARTICLE V
PRICE
*
5.1 Except as otherwise provided herein, WPC shall pay CUSA for the
NGLs purchased hereunder (i) a price equal [REDACTED] as quoted by the Oil Price
Information Service ("OPIS") for Mont Belvieu, Texas (Non-TET) for the Month in
which NGLs are delivered to WPC, less Mont Belvieu T&F Costs, for the volumes of
NGLs delivered to WPC at the applicable Delivery Point at the tailgate of the
Plants listed in Exhibit "B" which is attached hereto and made a part hereof,
(ii) a price equal [REDACTED] as quoted by OPIS for Group 140 (Conway, Kansas)
for the Month in which NGLs are delivered to WPC, less Conway T&F Costs, for the
volumes of NGLs delivered to WPC at the applicable Delivery Point at the
tailgate of the Plants listed in Exhibit "C" which is attached hereto and made a
part hereof (iii) a price equal to [REDACTED] as quoted by OPIS for Mont
Belvieu, Texas (Non-TET) for the Month in which NGLs are delivered to WPC, less
Mont Belvieu T&F Costs, plus the T&F Costs paid by CUSA to a third Person to
fractionate Raw NGL Mix into Fractionated NGLs for the volumes of NGLs delivered
to WPC at the applicable Delivery Point at the tailgate of the Plants listed in
Exhibit "D" which is attached hereto and made a part hereof, (iv) [REDACTED] of
the Netback Price for the volumes of NGLs delivered to WPC at the applicable
Delivery Point at the tailgate of the Plants listed in Exhibit "E" which is
attached hereto and made a part hereof, and (v) the price for each NGL delivered
to WPC at the Delivery Point at the tailgate of the Venice Fractionator as set
forth in Exhibit "F" which is attached hereto and made a part hereof. WPC shall
use every reasonable effort to obtain the highest Netback Price for NGLs.
Notwithstanding the foregoing, it is understood and agreed that WPC's share of
the Netback Price received from the disposition of NGLs (i.e., the [REDACTED] as
set forth in (iv) above), shall never be less than [REDACTED] per Gallon of each
NGL delivered to WPC at the Delivery Point. The Parties recognize and
acknowledge that during any given Month, NGLs delivered to WPC may be sold to
WPC under different pricing scenarios as set forth in (i) through (iv) above,
depending on the particular market for such NGLs as set forth in Exhibits "B",
"C", "D" and "E".
5.2 With respect to the Raw NGL Mix delivered by or on behalf of CUSA
to WPC, the price set forth in Section 5.1 above shall be based on the
Components contained in the Raw NGL Mix delivered to WPC at the tailgate of the
applicable processing Plant.
9
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
5.3 If for any reason the OPIS index for a particular NGL should cease
to be published, the Parties agree promptly and in good faith to negotiate a
mutually satisfactory Alternate Index or substitute methodology for calculating
the price for such NGL (the "Alternate Index"). If, on or before thirty (30)
Days after the index used to determine the price ceases to be published, the
Parties are unable to agree on an Alternate Index upon which to base the
calculation of the price, the Parties shall submit such determination to
arbitration in accordance with the provisions of Article XIII hereinafter, which
arbitration procedure will determine the Alternate Index. From the date on which
the index price used to determine the price for a particular NGL ceases to be
available until the Alternate Index is determined, the price for such NGL shall
be the average of the prices in effect (or that would have been in effect)
during the twelve (12) Months preceding the Month in which the index upon which
the price was based ceased to be available, which price shall be effective until
the effective date of the Alternate Index determined as set forth in this
Section 5.3. Upon the determination of an Alternate Index, the price will be
adjusted retroactively to the date on which the index upon which the price
previously was based ceased to be available, plus interest thereon at the Base
Rate.
*
5.4 Every [REDACTED] after the Effective Date of this Agreement,
either Party shall have the option to open this Agreement solely for the purpose
of renegotiating the pricing provisions hereof. To exercise such option, a Party
at least ninety (90) Days before the expiration of such five (5) Year period
must provide to the other Party written notification (the "Renegotiation
Notice") of its desire to renegotiate the price for the NGLs sold and purchased
hereunder. If, after negotiating in good faith for a period of ninety (90) Days
following the date of the Renegotiation Notice, the Parties are unable to agree
upon a mutually acceptable price for such NGL(s), the matter shall be submitted
to the alternative dispute resolution procedures as provided in Article XIII
hereof. During the period while negotiations are ongoing until (i) a new price
is agreed to or (ii) a new price is established as provided herein, the price
for the NGL sold and purchased hereunder shall be determined in accordance with
the pricing formula that was applicable immediately prior to the date of the
Renegotiation Notice. If a new price is established under this Section 5.4,
whether by renegotiation, arbitration, or otherwise, such new price shall be
effective as of, and shall, if necessary, be made retroactive to, the first Day
of the applicable five (5) Year period immediately following the Renegotiation
Notice, plus interest thereon at the Base Rate.
5.5 Annually, during the term hereof, either Party shall have the
option to open this Agreement solely for the purpose of renegotiating the
pricing/basis differentials for the Venice plant as set forth in Exhibit F. To
exercise such option, a Party at least ninety (90) Days prior to the anniversary
of the Effective Date must provide to the other Party written notification (the
"Renegotiation Notice") of its desire to renegotiate the pricing/basis
differentials for the NGLs
10
produced at the Venice plant and sold and purchased hereunder. If, after
negotiating in good faith for a period of ninety (90) Days following the date of
the Renegotiation Notice, the Parties are unable to agree upon mutually
acceptable pricing/basis differentials for such NGL(s), the matter shall be
submitted to the alternative dispute resolution procedures as provided in
Article XIII hereof. During the period while negotiations are ongoing until (i)
new pricing/basis differentials are agreed to or (ii) pricing/basis
differentials are established as provided herein, the pricing/basis
differentials for the NGLs produced at the Venice plant and sold and purchased
hereunder shall be determined in accordance with the pricing/basis differentials
that were applicable immediately prior to the date of the Renegotiation Notice.
If new pricing/basis differentials are established under this Section 5.5,
whether by renegotiation, arbitration, or otherwise, such pricing/basis
differentials shall be effective as of, and shall, if necessary, be made
retroactive to, the first Day of the applicable annual period immediately
following the Renegotiation Notice, plus interest thereon at the Base Rate.
5.6 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CUSA and WPC shall meet to renegotiate in good faith such burdensome terms and
provisions so as to make them fair and equitable. Such renegotiations shall
occur within thirty (30) Days of the date of the non-requesting Party's receipt
of such written request for such renegotiations. If the parties are unable to
agree on new provisions to replace such burdensome terms and provisions within
ninety (90) Days of the non-requesting Party's receipt of such written request,
the matter shall be submitted to the alternative dispute resolution procedures
set forth in Article XIII hereof. It is understood and agreed that the rights
granted in this Section 5.6 can only be used by a Party to commence good faith
renegotiations once during each Year during the term hereof. If new provisions
are agreed upon under this Section 5.6, whether by renegotiation, arbitration,
or otherwise, such new provisions shall be effective as of, and shall, if
necessary, be made retroactive to, the date on which the notice commencing
renegotiations under this Section 5.6 was given, plus interest thereon at the
Base Rate.
ARTICLE VI
DELIVERIES
6.1 The NGLs to be sold by CUSA hereunder shall be delivered by CUSA
(or at CUSA's direction) to WPC or to WPC's designated representative for the
account of WPC, at the Delivery Points (as defined in Section 6.2).
6.2 The point(s) of delivery for NGLs sold and delivered hereunder
(hereinafter the "Delivery Point(s)") shall be determined as follows:
(a) In the event delivery is to be to or from a pipeline,
the Delivery Point shall be located, and delivery of
NGLs shall be deemed to occur, at the point at which
such NGLs pass the pipeline meter. If pipeline
delivery is by in-line inventory transfer, delivery
shall be deemed to occur on the date and time
11
that the relevant pipeline carrier advises CUSA and
WPC, by product transfer order, book transfer, or
letter of transfer, that NGLs shall be transferred to
CUSA's account, and the Delivery Point shall be the
location of the NGLs in the pipeline of the pipeline
carrier on the Day and time that such in-line
transfer of NGLs is deemed to occur. The parties
hereto understand and agree that WPC has no control
over the operations of the pipeline carrier and
therefore cannot control when NGLs are transferred to
WPC's account by the pipeline carrier will, in fact,
occur.
(b) In the event delivery is to be by or into a rail car,
truck, or barge owned, operated, leased, or hired by
WPC, the Delivery Point shall be located, and
delivery of NGLs shall be deemed to occur, at the
point at which the NGLs pass from the flange
connecting the loading facility to WPC's owned,
operated, leased, or hired rail car, truck, or barge
whether said rail car, truck, or barge is loaded by
CUSA or WPC directly or on behalf of CUSA or WPC
through CUSA's or WPC's agent.
(c) For the Venice, Louisiana facility, the Delivery
Point shall be located at the flange immediately
downstream of the product meters which measure the
NGLs produced at the Venice fractionator.
6.3 Title to and risk of loss (other than those losses described in
Section 6.4 (e) hereinafter) associated with the NGLs delivered hereunder shall
pass from CUSA to WPC upon the commencement of the delivery of such NGLs at the
Delivery Points. Nothing contained in this Section 6.3 shall in any way affect
WPC's rights as set forth in Article VII or CUSA's indemnity set forth in
Section 7.2 hereinafter. Except as otherwise provided in Section 7.2
hereinafter, WPC shall indemnify and save CUSA harmless against any claims for
damages and losses arising from injuries to persons or property attributable to
the NGLs delivered hereunder after delivery thereof has been made to WPC;
conversely, CUSA shall indemnify and hold WPC harmless against any claims for
damages and losses arising from injuries to persons or property attributable to
the NGLs prior to delivery. In addition, each of the parties (WPC and CUSA)
hereto shall indemnify and hold the other harmless from any losses and damages
arising out of the operations conducted hereunder by such indemnifying party to
the extent resulting from the negligent acts or willful misconduct of such
indemnifying party, its agents or its employees.
6.4 The following rules shall be applicable to the transportation and
loading of NGLs at the Delivery Point(s) situated at facilities neither owned
nor operated by WPC:
(a) The loading of NGLs at the applicable Delivery
Point(s) shall be performed in accordance with
schedules mutually agreed to by the parties.
(b) If rail cars subject to payment of demurrage or any
other similar charges to a third Person not
affiliated with either Party are used to transport
NGLs
12
from the Delivery Point, CUSA agrees to load or cause
to be loaded and start the relevant cars on the
return trip in accordance with the detention policy
of the owner or operator of such rail car equipment
and CUSA further agrees to pay any and all such
charges that may be due thereunder.
(c) CUSA shall be liable for the payment of invoices
from the railroad for demurrage and hazardous
materials storage charges incurred by WPC as the
prepaid shipper due to CUSA's inability to receive a
rail car and/or have a rail car placed on CUSA's
siding.
(d) Rail cars shall not be diverted while in transit
except upon prior written authorization of WPC. Any
charge incurred by WPC for the diversion of rail
car(s) by CUSA shall be for the account of CUSA.
(e) If WPC's owned or leased trucks are used to transport
NGLs from the Delivery Point, CUSA agrees to load
such trucks upon arrival at the Delivery Point, and
CUSA's failure to do so shall render CUSA liable to
WPC for damages incurred as a result of such delay.
Notwithstanding the foregoing, CUSA shall have the
right to refuse to load any truck that fails to meet
Department of Transportation or other applicable
laws, rules, regulations or standards.
(f) For NGLs purchased hereunder (other than in the
situation when a Netback Price is paid which will be
based on actual volumes sold), CUSA will be liable
for all tank car shortages claimed by WPC in excess
of one percent (1%) of the net Gallons reflected on
the bill of lading and acknowledged by the railroad
agent's signature prior to unloading; provided,
however, that such shortages, if any, are reported in
writing to CUSA within twenty-four (24) hours after
delivery by the carrier and prior to the unloading of
the shipment in which the relevant shortage occurs.
WPC shall ask CUSA for permission to unload, and
CUSA, at its expense, shall have the right to inspect
each car at its destination within forty-eight (48)
hours after receipt of written notice of such
shortage. All demurrage charges arising from the
failure of CUSA to release the car for unloading
within such forty-eight (48) hour period shall be
paid by CUSA. Similarly, CUSA shall be liable for all
truck shortages claimed by WPC in excess of three
percent (3%) of the net Gallons reflected on the bill
of lading; provided, however, that such shortages, if
any, are noted on the delivery ticket and
acknowledged by the truck driver's signature prior to
unloading. The failure of WPC to observe this
provision or any action by WPC which impedes
identification of an alleged defect shall operate as
a waiver of WPC's rights to make any such claim.
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Notwithstanding the foregoing, if the detention and/or
demurrage charges set forth above are insufficient to cover
any such charges paid by WPC to such third Person not
affiliated with WPC, CUSA shall reimburse WPC for such
amounts.
6.5 Notwithstanding anything contained herein to the contrary, CUSA
shall be allowed to consolidate its deliveries of NGLs behind one or more
Delivery Points so long as (i) sufficient notice is provided WPC and (ii) such
consolidation does not result in an economic or operational hardship on WPC.
ARTICLE VII
QUALITY
7.1 All NGLs sold by CUSA and purchased by WPC hereunder shall meet the
specifications set forth in Exhibit "A", attached hereto and made a part hereof.
WPC shall have the right to reject any NGLs which fails to meet such quality
specifications ("Offspec NGL"). All costs associated with the return and/or
disposal of Offspec NGL shall be borne by CUSA.
7.2 Should the NGLs delivered hereunder to WPC, or to WPC's designated
representative for the account of WPC, fail at any time to conform to the
specifications set forth in Exhibit A, either Party shall notify the other Party
of any such failure, and CUSA immediately shall undertake and diligently pursue
such acts as may be necessary to correct such failure so as to deliver NGLs
conforming to the specifications set forth above; but nothing contained in this
Article VII or any other part of this Agreement shall be construed to affect
WPC's right, at any time and from time to time, to reject any NGL not conforming
to said specifications and to refuse or suspend receipt until it is established
to WPC's reasonable satisfaction that subsequent deliveries of NGLs will conform
to said specifications. The term of this Agreement shall not be extended by the
length of time of any period or periods when deliveries have been rejected,
refused, or suspended as provided for herein. Notwithstanding the foregoing, the
knowing acceptance by WPC of Offspec NGL shall constitute a waiver by WPC of any
and all other rights and remedies available to WPC under this Agreement or
otherwise with respect to CUSA's tender of such Offspec NGL, and all risk of
loss, damage or liability arising out of WPC's ownership, control , possession,
or use of such Offspec NGLs shall pass to and be borne by WPC. If it is
subsequently determined that WPC unknowingly accepted Offspec NGLs, the Parties
will mutually agree upon a discounted price for such Offspec NGLs to reflect
their diminution in value from NGLs meeting the specifications hereof. If the
Parties are unable to agree on a mutually acceptable discount price for such
Offspec NGLs, the matter shall be subjected to the alternative dispute
resolution procedures set forth in Article XIII hereof. CUSA agrees to INDEMNIFY
and HOLD HARMLESS WPC, its Affiliates, and their respective officers, directors,
employees, agents, and contractors, from all actual losses, costs, expenses,
claims (including, without limitation, personal injury or property damage
claims), damages, and causes of action, including, without limitation,
reasonable attorneys' fees and costs of court (collectively, the "Losses")
incurred by WPC, such Persons, or such Affiliates arising out of, or in any way
associated with, the delivery to WPC of NGLs that fail to meet the
specifications set forth in Exhibit A which are unknowingly accepted by WPC.
14
7.3 From time to time during the term hereof, WPC may request CUSA to
provide certain NGLs that exceed the normal specifications as set forth in
Exhibit A ("Purity NGLs"). The Parties acknowledge that providing such Purity
NGLs will be to the mutual benefit of both Parties and that neither Party should
suffer an economic loss as a result thereof.
ARTICLE VIII
WARRANTY OF TITLE
8.1 CUSA warrants title to all NGLs sold and delivered by it to WPC,
and further warrants that CUSA has the right to sell such NGLs and that such
NGLs meet the quality specifications as set forth herein and are free from all
liens, mortgages, security interests, encumbrances and adverse claims or other
charges. CUSA shall be responsible for paying all royalties, production
payments, payments to other working interest owners, overriding royalties,
taxes, license fees or other charges on the NGLs (other than taxes, license fees
or other charges applicable to WPC's share of the NGLs) and CUSA agrees to and
does hereby indemnify and save WPC (including its directors, officers,
employees, agents, representatives, affiliates and subsidiaries) harmless from
and against any and all claims, suits, causes of action, debts, accounts,
damages, losses, costs and expenses (including reasonable attorney's fees)
arising out of or in any way connected with (i) any adverse title and/or
warranty claims to the NGLs, or (ii) the payment of royalties, overriding
royalties, production payments and payments to other working interest owners, if
any. THERE ARE, HOWEVER, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR
OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY CUSA AND
EXCLUDED FROM THIS AGREEMENT.
ARTICLE IX
TAXES
9.1 CUSA shall be liable for and shall pay, or cause to be paid, or
reimburse WPC, if WPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the NGLs sold hereunder upstream of the Delivery
Point(s). If WPC is required to remit such Tax, the amount thereof shall be
deducted from any sums becoming due to CUSA hereunder and shall be itemized on
the statement provided by WPC in accordance with Section 11.1. WPC shall be
liable for and shall pay, cause to be paid, or reimburse CUSA, if CUSA has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
NGLs hereunder at and downstream of the Delivery Point(s) including any Taxes
imposed or collected by a taxing authority with jurisdiction over WPC, provided,
however, when laws, ordinances or regulations permit or impose upon CUSA the
obligation to collect or pay Taxes applicable to the sale and/or delivery of NGL
hereunder at the Delivery Point, CUSA shall collect all such Taxes from WPC,
which shall be in
15
addition to the applicable Price, and remit the same to the appropriate
governmental authority, unless WPC furnishes a certificate of exemption. CUSA
SHALL INDEMNIFY, DEFEND, AND HOLD WPC HARMLESS FROM AND AGAINST ANY LIABILITY
WITH RESPECT TO THE TAXES FOR WHICH CUSA IS LIABLE AND WPC SHALL INDEMNIFY,
DEFEND, AND HOLD CUSA HARMLESS FROM AND AGAINST ANY LIABILITY WITH RESPECT TO
THE TAXES FOR WHICH WPC IS LIABLE.
9.2 Each Party will notify the other of the enactment of any New Taxes
as promptly as practical after it obtains knowledge thereof. It is understood
and agreed that the enactment of any material New Taxes shall constitute a
hardship under the provisions of Section 5.5 above.
9.3 To claim an exemption from payment of a Tax, a Party shall provide
a certificate of exemption or other reasonably satisfactory evidence of
exemption from any Tax, and each Party agrees to cooperate with the other Party
in obtaining any such exemption. In addition, WPC has provided CUSA with, and
CUSA acknowledges receipt of, the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986).
ARTICLE X
MEASUREMENT AND ANALYSES
10.1 On all deliveries into or out of rail cars, the quantity shall be
determined by official tank car capacity tables or slip tube gauges in
accordance with GAS PROCESSORS ASSOCIATION ("GPA") PUBLICATION 8162, latest
revision. On all deliveries into or out of truck equipment, quantities shall be
determined by meter, rotary gauge, weighing, or other measuring devices that
meet industry standards, in accordance with GPA PUBLICATIONS 8162 AND 8186,
latest revision. On all deliveries into or out of pipelines, quantities shall be
determined by pipeline meter in accordance with the America Petroleum Institute
("API") Manual of Petroleum Measurement Standards. For raw make mixtures,
volumes of the component products shall be determined (where practical) on a
mass (pound) measurement basis in accordance with the latest edition of GPA
PUBLICATIONS 8173 AND 8182. On all deliveries into or out of shore tanks,
quantities shall be determined either meter or gauge from a static tank in
accordance with the API Manual of Petroleum Measurement Standards and based upon
the practice of the relevant terminal. All quantities shall be corrected to
standard conditions of sixty degrees Fahrenheit (60/F) and equilibrium vapor
pressure in accordance with the API Manual of Petroleum Measurement Standards,
Chapter 14, Section B. The quantity and quality of NGLs covered by this
Agreement shall be measured according to the current versions of the applicable
standards of API and the American Society for Testing Materials, if available.
Each Party shall be entitled to have its representatives present during all
loadings, unloadings, tests, and measurements involving NGLs delivered
hereunder. If the parties cannot agree on measurement or quality tests results,
the measurements and quality tests required to determine the volume of receipts
or shipments or the conformity of the NGLs delivered to the specifications set
forth herein shall be made by an independent inspector selected jointly by the
parties, the cost of which shall be shared equally by the Parties.
16
ARTICLE XI
BILLING AND PAYMENT
11.1 After delivery of NGLs hereunder, CUSA shall submit a statement to
WPC by facsimile transmission setting forth the quantity of each NGL delivered
to WPC. By not later than thirty (30) Days after the receipt of CUSA's
statement, or ten (10) Days after NGLs are sold in the situation where a Netback
Price is applicable, whichever is later, WPC shall provide CUSA with a statement
setting forth the price or Netback Price, as applicable, of such NGLs, the
amount due CUSA for such NGLs, and such other information and detail as may be
mutually agreeable to the Parties, along with payment for such NGLs, which shall
be remitted by wire transfer of funds into an account designated by CUSA. If the
Day on which any payment is due is not a Business Day, then the relevant payment
shall be due upon the immediately preceding Business Day, except if such payment
due date is a Sunday or Monday, then the relevant payment shall be due upon the
immediately succeeding Business Day.
11.2 If either Party should fail to remit any amounts in full when due
as required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such accrued
interest shall be added to the amount reflected as being owed hereunder by
either WPC or CUSA, as the case may be, on the next invoice or by separate
invoice. In addition, if WPC fails to pay any amount due, as reflected in WPC's
statement, within ten (10) Days after the due date, or if WPC fails to provide a
statement as required by Section 11.1 above, CUSA shall have the right, upon
written notice to WPC, to (i) suspend any further deliveries of NGLs until such
statement has been provided and all amounts due have been paid with interest at
the rate specified in Section 11.1, and (ii) to provide notice to WPC that this
Agreement shall terminate if such statement is not provided and the payment
default has not been cured within sixty (60 ) Days after the date such written
notice is received by WPC.
11.3 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of the good faith dispute,
the withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance with
the alternative dispute resolution procedures of Article XIII. The performance
of both Parties under this Agreement shall continue pending the outcome of such
procedures. If it is subsequently determined, whether by mutual agreement of the
Parties or otherwise, that the withholding Party is required to pay all or any
portion of the disputed amounts to the other Party, the withholding Party, in
addition to paying over such amounts, shall also pay interest accrued on such
amounts from the original due date until paid, at the Base Rate.
17
11.4 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the NGL invoice or statement forming the basis of the overcharge
or undercharge was delivered or not delivered, as the case may be, unless a
claim for such adjustment shall have been presented prior to the end of such
period. Any payment with respect to a retroactive adjustment shall include an
amount equal to interest on all amounts past due from the date of the initial
payment at the Base Rate, except in instances where neither Party knew or could
have known that the overcharge or undercharge occurred, in which case interest
shall run from the date of demand for payment.
11.5 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
11.6 ALL DISPUTES ARISING UNDER THIS ARTICLE XI THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XIII HEREOF. TO THE EXTENT THAT
ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND
ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
11.7 All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the "defaulting Party") failure to make
payment of undisputed amounts on the due date, the other Party (the
"non-defaulting Party") may, at its option and in its sole discretion, setoff
against any amounts owed to the defaulting Party, any amounts owed by the
defaulting Party under this Agreement or otherwise. The obligations of the
non-defaulting Party and the defaulting Party under this Agreement in respect of
such amounts shall be deemed satisfied and discharged to the extent of any such
setoff. The non-defaulting Party will give the defaulting Party notice of any
setoff made under this Section 11.7 as soon as practicable after the setoff is
made, provided that failure to give such notice shall in no way affect the
validity of the setoff.
ARTICLE XII
FORCE MAJEURE
12.1 In the event either Party is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under this Agreement, other than
the obligation to make payment of money due hereunder, it is agreed that upon
such Party's giving notice and reasonably full particulars of such Force Majeure
in writing to the other Party after the occurrence of the cause
18
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
12.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of a gas processing plant or other related facilities, floods, washouts, arrests
or restraints of the government, either federal or state, civil or military,
civil disturbances, explosions, sabotage, breakage or accident to equipment,
machinery or lines of pipe, freezing of machinery, equipment, wells, or lines of
pipe, electric power shortages, failure of pipelines or carriers to transport,
partial or entire failure of wells, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules, orders, laws or
governmental authorities (both federal, state and local), temporary cleaning or
testing of facilities (including, but not limited to, scheduled gas processing
facility turnarounds and shutdowns for safety maintenance), shutdowns due to
explosion or other extraordinary incident, or any other causes, whether of the
kind herein enumerated or otherwise, and which are not within the control of the
Party claiming suspension and which such Party is unable to overcome by the
exercise of due diligence. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The term
"Force Majeure" shall also include any event of Force Majeure occurring with
respect to the facilities or services of either CUSA's or WPC's third Party
suppliers or customers delivering or receiving any product, fuel, feedstock, or
other substance necessary to the performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third Party suppliers or customers as a result of an event of Force Majeure.
ARTICLE XIII
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
13.1 Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach or performance hereof, including, but not limited
to, any disputes concerning the interpretation of the terms and provisions
hereof, shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to
resolve any disputes, controversy or claim arising
out of or relating to this Agreement.
19
(b) Should the Parties directly involved in any dispute,
controversy or claim be unable to resolve same within
a reasonable period of time, such dispute,
controversy or claim shall be submitted to the senior
executives of the Parties (the "Senior Executives")
with such explanation or documentation as the Parties
deem appropriate to aid the Senior Executives in
their consideration of the issues presented. The date
the matter is first submitted to the Senior
Executives shall be referred to as the "Submission
Date." The Senior Executives shall attempt in good
faith, through the process of discussion and
negotiation, to resolve any dispute, controversy, or
claim presented to it within forty-five (45) Days
after the Submission Date.
(c) If the Senior Executives cannot so resolve any
dispute, controversy, or claim submitted to it within
forty-five (45) Days after the Submission Date, the
Parties shall attempt in good faith to settle the
matter by submitting the dispute, controversy or
claim to mediation within sixty (60) Days after the
Submission Date using any mediator upon which they
mutually agree. If the Parties are unable to mutually
agree upon a mediator within seventy-five (75) Days
after the Submission Date, the case shall be referred
for mediation to the office of Judicial Arbitration
and Mediation Services, Inc. ("JAMS") in Houston,
Texas. The cost of the mediator will be split equally
between the Parties unless they agree otherwise in
writing.
(d) If the matter has not been resolved pursuant to the
aforesaid mediation procedure within thirty (30) Days
of the initiation of such procedure, or if either
Party will not participate in such mediation, either
Party may request that the matter be resolved through
arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration
that is conducted hereunder shall be governed by the
Federal Arbitration Act, 9 U.S.C. ' 1 ET SEQ., and
will not be governed by the arbitration acts,
statutes, or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing
Party's arbitrator and shall contain a statement of
the issue(s) presented for arbitration. Within
fifteen (15) Days of receipt of an Arbitration
Notice, the other Party shall name its arbitrator by
written notice to the other and may designate any
additional issue(s) for arbitration. The two named
arbitrators shall select the third arbitrator within
fifteen (15) Days after the date on which the second
arbitrator was named. Should the two arbitrators fail
to agree on the selection of the third arbitrator,
either Party shall be entitled to request the Senior
Judge of the United States District Court for the
Southern District of Texas to select the third
arbitrator. All arbitrators shall be qualified by
education or experience within the natural gas or
natural gas liquids industry to decide the issues
presented for arbitration. No arbitrator shall be: a
current or former director, officer, or employee of
either Party or its
20
Affiliates; an attorney (or member of a law firm) who
has rendered legal services to either Party or its
Affiliates within the preceding three Years; or an
owner of any of the common stock of either Party, or
its Affiliates.
(f) The three arbitrators shall commence the arbitration
proceedings within twenty-five (25) Days following
the appointment of the third arbitrator. The
arbitration proceedings shall be held at a mutually
acceptable site and if the Parties are unable to
agree on a site, the arbitrators shall select the
site. The arbitrators shall have the authority to
establish rules and procedures governing the
arbitration proceedings. Each Party shall have the
opportunity to present its evidence at the hearing.
The arbitrators may call for the submission of
pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be
submitted. The arbitration panel shall not have the
authority to award (i) punitive or exemplary damages
or (ii) consequential damages, except as expressly
provided herein. The arbitrators' decision must be
rendered within thirty (30) Days following the
conclusion of the hearing or submission of evidence,
but no later than ninety (90) Days after appointment
of the third arbitrator. With respect to disputes
regarding price or any redetermination thereof under
Article V or the selection of an Alternate Index
under Section 5.3, each Party shall submit to the
arbitration panel a final offer of its proposed
resolution of the dispute. A majority of the
arbitrators shall approve the final offer of one
Party without modification, and reject the offer of
the other Party.
(g) The decision of the arbitrators or a majority of
them, shall be in writing and shall be final and
binding upon the Parties as to the issue(s)
submitted. The cost of the hearing shall be shared
equally by the Parties, and each Party shall be
responsible for its own expenses and those of its
counsel or other representatives. Each Party hereby
irrevocably waives, to the fullest extent permitted
by law, any objection it may have to the
arbitrability of any such disputes, controversies or
claims and further agrees that a final determination
in any such arbitration proceeding shall be
conclusive and binding upon each Party. Judgment on
the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The
prevailing Party shall be entitled to recover
reasonable attorneys' fees and court costs in any
court proceeding relating to the enforcement or
collection of any award or judgment rendered by the
arbitration panel under this agreement.
(h) All deadlines specified herein may be extended by
mutual written agreement of the Parties. The
procedures specified herein shall be the sole and
exclusive procedures for the resolution of disputes
between the parties arising out of or relating to
this Agreement; provided, however, that a Party may
seek a preliminary injunction or other preliminary
judicial relief if in its judgment such action is
necessary to avoid irreparable damage.
21
Despite such action, the Parties will continue to
participate in good faith in the procedures specified
herein. All applicable statutes of limitation,
including, without limitation, contractual limitation
periods provided for in this Agreement, shall be
tolled while the procedures specified in this Section
are pending. The Parties will take all actions, if
any, necessary to effectuate the tolling of any
applicable statutes of limitation.
ARTICLE XIV
LIMITATION OF DAMAGES
14.1 Unless performance is excused by another provision of this
Agreement, if WPC fails to accept delivery of all quantities of NGLs tendered by
CUSA that WPC is obligated to receive during the term of this Agreement, WPC
shall pay to CUSA, within ten (10) Days after WPC's receipt of CUSA's invoice
therefor, an amount equal to the sum of the following amounts: (a) the
arithmetic product obtained by multiplying (i) the difference between the
quantity of NGLs actually accepted by WPC and the quantity of NGLs tendered by
CUSA (the "WPC Deficiency Quantity") by (ii) the positive difference, if any,
obtained by subtracting from the price that WPC would have otherwise paid as
provided herein, an amount derived from (1) the price obtained by CUSA in an
arms-length sale to a third party of a quantity of NGLs equal to the WPC
Deficiency Quantity, less (2) incremental transportation and storage costs
incurred by CUSA; PLUS (b) an amount, as liquidated damages, equal to one
quarter of one cent per Gallon ($0.0025/Gallon) multiplied by the WPC Deficiency
Quantity to cover CUSA's administrative and operational costs and expenses.
14.2 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE
OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
REMEDIES OR DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY
PROVISION HEREOF) FOR PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT
AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
UNDER ANY PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT
DAMAGES. THE PRECEDING SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE
OBLIGATION OF EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST CLAIMS
ASSERTED BY THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD PARTY CLAIMS
22
FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, BUT EXCLUDING CLAIMS FOR
SUCH DAMAGES UNDER ARTICLE IX. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE
PURSUANT TO ANY PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO
CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE
DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A
REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
ARTICLE XV
MISCELLANEOUS
15.1 This Agreement and the operations hereunder shall be subject to
the valid and applicable federal and state laws and the valid and applicable
orders, laws, local ordinances, rules, and regulations of any local, state or
federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, laws,
rules, or regulations in any forum having jurisdiction in the premises. If any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under the present or future laws effective during the term of this Agreement,
(i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Agreement, and (iii) the remaining provisions
of this Agreement will remain in full force and effect and will not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
15.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING
OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF
LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
15.3 This Agreement, including, without limitation, all exhibits
hereto, integrates the entire understanding between the Parties with respect to
the subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CUSA or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar)
23
nor shall such waiver constitute a continuing waiver unless expressly provided.
No waiver shall be effective unless made in writing and signed by the Party to
be charged with such wavier.
15.4 The terms, covenants and conditions of this Agreement shall inure
to and be binding upon the parties hereto and their successors and permitted
assigns; provided, however, that neither Party may assign this Agreement in
whole or in part without the prior written consent of the other Party, which
consent shall not be unreasonably withheld, and provided further, that either
Party may assign its rights hereunder to any Affiliate without the approval of
the other Party, but any such assignment shall in no way relieve or release such
assigning Party from any obligations hereunder, whether accrued or unaccrued,
unless agreed to in writing by the non-assigning Party; further provided that
each Party may, for collateral purposes, mortgage, pledge, encumber or grant a
security interest in or a lien on its interest in this Agreement and/or its
rights hereunder to any commercial bank, trustee or other Person acting on
behalf of any such commercial bank without the consent of the other Party. Any
transfer or assignment in violation of this Section shall be void.
15.5 With the other documents required hereunder, CUSA shall provide to
WPC a Material Safety Data Sheet for each NGL delivered hereunder. WPC
acknowledges that there may be hazards associated with the loading, unloading,
transporting, handling, or use of the NGL sold hereunder, which may require that
warning be communicated to or other precautionary action taken with all Persons
handling, coming into contact with, or in any way concerned with the NGLs sold
hereunder. WPC assumes as to its employees, independent contractors, and
subsequent purchasers of the NGLs sold hereunder all responsibility for all such
necessary warnings or other precautionary measures relating to hazards to Person
and property associated with the NGLs sold hereunder and, furthermore, WPC shall
defend at its own expense, indemnify fully and hold harmless CUSA and its
parents, subsidiaries and Affiliates and its and their agents, officers,
directors, employees, representatives, successors and assigns from and against
any and all liabilities; losses; damages; demands; claims; penalties; fines;
actions; suits; legal, administrative or arbitration or alternative dispute
resolution proceedings; judgments, orders, directives, injunctions, decrees or
awards of any jurisdiction; costs and expenses (including, but not limited to,
reasonable attorneys' fees and related costs) arising out of or in any manner
related to WPC's failure to provide necessary warnings or other precautionary
measures in connection with the NGLs sold hereunder.
15.7 Except as otherwise provided herein, each Party reserves to itself
all rights, set-offs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
15.8 (a) Each Party agrees that it will maintain this
Agreement, all terms and conditions of this
Agreement, and all other Confidential Information (as
hereinafter defined) in strictest confidence, and
that it will not cause or permit disclosure of
Confidential Information to any third Person without
the express written consent of the other Party
hereto. Disclosures of Confidential Information
otherwise prohibited by this Section 15.8 may be
24
made by either Party: (i) to the extent necessary for
such Party to enforce its rights hereunder against
the other Party; (ii) to the extent a Party is
contractually or legally bound to disclose
information to a third Person (such as a shareholder
or commercial lender); (iii) only to the extent to
which a Party hereto is required to disclose all or
part of this Agreement by a statute or by the order
of a court, agency, or other governmental body
exercising jurisdiction over the subject matter
hereof, by order, by regulations, or by other
compulsory process (including, but not limited to,
deposition, subpoena, interrogatory, or request for
production of documents); (iv) to the extent required
by the applicable regulations of a securities or
commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the
provisions of this Section). "Confidential
Information" shall mean any information, proprietary
to either Party and maintained by it in confidence or
as a trade secret, including, without limitation,
business plans and strategies, proprietary software,
financial statements, customer or client lists,
personnel records, analysis of general energy market
conditions, sales, transportation, and service
contracts and the commercial terms thereof,
relationships with current and potential business
partners, supplies customers, service providers and
financial sources, data base contents and valuable
information of a like nature relating to the business
of such Party. It is understood and agreed that
Confidential Information shall not include
information of a Party that (w) becomes generally
available to the public at the time of disclosure to
the other Party, or (x) after the time of disclosure
to the other Party, was generally made available to
the public without breach of this Agreement, or (y)
the Person receiving the information can show was
rightfully in its possession at the time of
disclosure, or (z) was rightfully acquired by the
recipient from third Persons who did not themselves
obtain such information under a confidentiality or
other similar agreement with the Party whose
information was disclosed.
(b) If either Party is or becomes aware of a fact,
obligation, or circumstance that has resulted or may
result in a disclosure of Confidential Information
authorized by this Section 15.8, it shall so notify
the other Party promptly and shall provide
documentation or an explanation of such disclosure as
soon as it is available. Each Party further agrees to
cooperate to the fullest extent in seeking
confidential status to protect any Confidential
Information so disclosed.
(c) The Parties hereto acknowledge that independent legal
counsel, certified public accountants, or other
consultants or independent contractors of a Party
(collectively, "Outside Consultants") may, from time
to time, be provided with a copy of this Agreement
if, in the judgment of the disclosing Party, the
information contained in this Agreement is necessary
to the
25
performance of such Outside Consultants' duties.
Accordingly, the Parties agree that such disclosure
does not require consent by the other Party, provided
that any such Outside Consultants agree to be bound
by the provisions of this Section 15.8.
(d) Each Party will be deemed solely responsible and
liable for the actions of its employees, Outside
Consultants, officers, and agents for maintaining the
confidentiality commitments of this Section 15.8, but
will be required in that regard only to exercise such
care in maintaining the confidentiality of the
Confidential Information as such Party normally
exercises in preserving the confidentiality of its
other commercially sensitive information.
15.9 Nothing contained in this Agreement shall be construed to create
an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
15.10 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser
hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding
syntactical variant expressions; and
(d) the plural shall be deemed to include the singular
and vice versa, as applicable.
15.11 EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF
ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY CONSENTS TO
THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT HEREBY REPRESENTS
AND WARRANTS TO THE OTHER PARTY THAT (I) SUCH PARTY'S LEGAL COUNSEL WAS NOT
DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER PARTY OR
BY AN AGENT OF SUCH OTHER PARTY, AND (II) NEITHER PARTY EXECUTING THIS AGREEMENT
IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
26
15.12 Any notice or other communication provided for in this Agreement
or any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand; or, if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail, or certified
mail, with all postage fully prepaid; or, if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the parties at the
following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager
NGL Marketing
Telephone: (713)
Telecopy: (713) 507-____
with a copy to:
Vice President & General Counsel WARREN
PETROLEUM COMPANY, LIMITED PARTNERSHIP 13430
Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
If to CUSA: CHEVRON U.S.A. INC.
1301 McKinney Street
Houston, TX 77010
Attention: _______________
Telephone: (___) ___-____
Telecopy: (___) ___-____
with a copy to:
Vice President & General Counsel
CHEVRON U.S.A. INC.
1301 McKinney Street
Houston, TX 77010
Attention: _______________
Telephone: (___) ___-____
Telecopy: (___) ___-____
27
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the Day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
15.13 No director, employee, or agent of either Party shall give or
receive any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement. Any mutually agreeable
representative(s) authorized by either Party may audit the applicable records of
the other Party solely for the purpose of determining whether there has been
compliance with this section, but no more often than once during each Year
during the term hereof.
15.14 Each Party shall provide the other Party with such reports as may
be mutually agreeable to both Parties. Each Party shall maintain such records
and accounts as may be necessary to the performance of its respective duties and
obligations hereunder, in accordance with good business practices.
15.15 This Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever, it being the intention of the Parties that no
third Person shall be deemed a third Party beneficiary of this Agreement.
15.16 Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to each of them, in
order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
Day and Year first above written.
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G. P., INC.,
ITS GENERAL PARTNER
By: ____________________________________
Name: ____________________________________
28
Title: ____________________________________
CHEVRON U.S.A. INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
29
EXHIBIT A
ATTACHED TO AND MADE A PART OF THAT CERTAIN MASTER NATURAL
GAS LIQUIDS PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM
COMPANY, LIMITED PARTNERSHIP AND CHEVRON U. S. A. INC.
INDEX OF THE SPECIFICATIONS
FOR NGLS PURCHASED BY WPC
NUMBER NAME PAGE
- ------ ---- ----
S-100 Demethanized Raw Product - Pipelined 30
S-101 Demethanized Raw Product - Trucked 32
S-103 Deethanized Raw Product 34
S-104 Propane-Butane Mix 36
S-105 Butane-Natural Gasoline 38
S-200 80-20 Ethane-Propane Mix 40
S-202 Purity Ethane 41
S-300 Propane 42
S-400 Normal Butane 44
S-401 Isobutane 45
S-402 Mixed Butanes 46
S-500 Normal Pentane 47
S-501 Isopentane 48
S-600 Natural Gasoline 49
S-601 Hexanes Plus 50
<PAGE>
DEMETHANIZED RAW PRODUCT
PIPELINE SPECIFICATION
S-100
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for any
demethanized raw material of natural gas liquids received by WPC for delivery
into a Pipeline System.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Predominantly Ethane, Propane, Butanes
& Natural Gasoline (Pentanes & Heavier) GPA 2177
Methane & Ethylene 2.0 of Ethane
Ethylene 1.0 of Ethane
Propylene 5.0 of Propane
Butylene 1.0 of Butanes ASTM D-2163
2. CORROSION
Copper Strip @ 100/F (Invalid if 1-b ASTM D-1838
additive or inhibitor is used.)
Corrosion Additive or Inhibitor, PPM by Weight 1 Applicable Industry
3. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
4. CARBON DIOXIDE
PPM by Weight in Liquid 1000 GPA 2177
5. DRYNESS No Free Water Visual
6. PENTANES & HEAVIER No Color Visual Using White Cup Method
Perform the Saybolt color test after weathering
sample to 70/F if white cup indicates possible color.
COLOR
Saybolt No. Plus 25 ASTM D-156
DISTILLATION
End Point, /F 375 ASTM D-216
7. VAPOR PRESSURE
WPC reserves the right to limit the amount of product having a vapor
pressure above four-hundred (400) psia at 85/F delivered at any point for
injection into a pipeline to the extent necessary to ensure that the vapor
pressure of the composite stream transported in the pipeline does not exceed
four-hundred (400) psia at 85/F. Vapor pressure shall be determined by ASTM
Method D-1267 with an 85/F constant temperature bath.
8. DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
COS 1
Ammonia 1
Fluorides 1
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene shall be considered propane, and butylenes shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
TARIFF SPECIFICATIONS
<PAGE>
Products delivered to WPC shall also meet any individual requirements of the
applicable Pipeline Company's published tariff product specifications in effect
at time of delivery if the individual tariff specification is more stringent
than that of WPC.
METHANOL
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
DEMETHANIZED RAW PRODUCT
TRUCK TRANSPORT SPECIFICATION
S-101
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for any
demethanized raw material of natural gas liquids transported by insulated tank
trucks for receipt by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Predominantly Ethane, Propane Butanes
& Natural Gasoline (Pentanes & Heavier) GPA 2177
Methane & Ethylene 2.0 of Ethane
Ethylene 1.0 of Ethane
Propylene 5.0 of Propane ASTM D-2163
Butylene 1.0 of Butanes
2. PRODUCT VAPOR PRESSURE 275 psig ASTM D-1267
3. LOADING TEMPERATURE
Minimum Product Loading
Temperature, /F 0
4. CORROSION
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
5. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
6. CARBON DIOXIDE
PPM by Weight in Liquid 1000 GPA 2177
7. DRYNESS No Free Water Visual
8. PENTANES & HEAVIER No Color Visual using white cup method
Perform the Saybolt color test
after weathering sample to 70/F
if white cup indicates possible
color.
COLOR
Saybolt No. Plus 25 ASTM D-156
DISTILLATION
End Point, /F 375 ASTM D-216
9. ODORIZATION
This product shall not be odorized.
10. DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
COS 1
Ammonia 1
Fluorides 1
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene shall be considered propane, and butylenes shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
METHANOL
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
DEETHANIZED RAW PRODUCT
TRUCK TRANSPORT SPECIFICATION
S-103
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for any
deethanized raw material of natural gas liquids transported by tank trucks for
receipt by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Predominantly Propane, Butanes &
Natural Gasoline (Pentanes & Heavier) GPA 2177
Ethane and Ethylene As limited by other
Components & Vapor
Pressure
Propylene 5.0 of Propane ASTM D-2163
Butylene 1.0 of Butanes
2. VAPOR PRESSURE
Psig @ 100/F 240 ASTM D-1267
3. CORROSION
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.).
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
5. CARBON DIOXIDE
PPM by Weight in Liquid 1000 GPA 2177
6. DRYNESS No Free Water Visual
7. PENTANES & HEAVIER No Color Visual using White
Cup Method
Perform the Saybolt color test after
weathering sample to 70/F if white
cup indicates possible color.
COLOR
Saybolt No. Plus 25 ASTM D-156
DISTILLATION
End Point, /F 375 ASTM D-216
8. ODORIZATION
This product shall not be odorized.
9. DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
COS 1
Ammonia 1
Fluorides 1
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, ethylene shall be considered ethane, propylene shall be
considered propane and butylenes shall be considered normal butane within the
above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
METHANOL
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
PROPANE-BUTANE MIXTURE
SPECIFICATION
S-104
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for
propane-butane mixtures received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Predominantly Propane, Isobutane &
Normal Butane
Ethane 2.0 of Propane ASTM D-2597
Propylene 1.0 of Propane ASTM D-2163
Butylene 1.0 of Isobutane
Pentanes & Heavier 2.0 of Butanes
2. CORROSION
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
4. VOLATILE RESIDUE
95% Evaporated, Temperature, /F +36 ASTM D-1837
5. DRYNESS No Free Water Visual
6. CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field - Length of
(Field test invalid if Stain Tube
C4+ exceeds 1.0 LV%) Lab - UOP 212 or UOP 791
Lab-Gas Chromatography with
Flame Photometric Detector
7. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of Stain Tube.
(Lab test required if field Lab - Gas Chromatography
test is positive.) with Flame Photometric Detector
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING UPON PRODUCT SOURCE:
8. AMMONIA (PPM BY WEIGHT IN LIQUID)
PPM by Weight in Liquid 1 Field - Length of Stain Tube
Lab - UOP 430
9. FLUORIDES (PPM BY WEIGHT IN LIQUID)
PPM by Weight in Liquid as 1 Field - Length of
Monatomic Fluorine Stain Tube
Lab-UOP 619-83
10. PENTANES & HEAVIER No Color Visual using white cup
(For C5+ > 2% LV) method Perform the following
Saybolt color test after weathering sample to
70/F if white cup indicates possible color.
COLOR
Saybolt No. Plus 25 ASTM D-156
DISTILLATION
End Point, /F 375 ASTM D-216
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, ethane and propylene shall be considered propane,
butylenes shall be considered normal butane, and pentanes and heavier shall be
considered normal butane within the above listed specification limits. Any
excess of these hydrocarbon components above the specification limits shall not
be accounted for.
NOTE: The test method for Item 4 is not necessary if an adequate compositional
analysis is available which indicates compliance with this requirement.
<PAGE>
BUTANE-NATURAL GASOLINE MIXTURE
SPECIFICATION
S-105
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for
butane-natural gasoline mixtures received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION Predominantly Isobutane, ASTM E-260
Percent by Liquid Volume Normal Butane & Natural
Gasoline (Pentanes &
Heavier) GPA 2177
ASTM D2597
Propane 3.0 of Isobutane
Butylene 1.0 of Isobutane
Pentanes & Heavier 15.0
2. CORROSION
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or inhibitor is used.)
Corrosion Additive or Applicable Industry
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
or Gas Chromatography
with Flame Photometric
Detection
4. DRYNESS No Free Water Visual
5. AMMONIA
PPM by Weight in Liquid 1 Field - Length of
Stain Tube
Lab - UOP 430
6. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of
(Lab test required if field Stain Tube
test is positive) Lab - Gas Chromatography
with Flame Photometric
Detection
7. PENTANES & HEAVIER No Color Visual using
(Only if C5+ > 2 LV%) White Cup Method
Perform the Saybolt color test after weathering
sample to 70/F if white cup test indicates
possible color.
COLOR
Saybolt No. Plus 25 ASTM D-156
DISTILLATION
End Point, /F 375 ASTM D-216
8. FLUORIDES
PPM by weight in liquid 1
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, propane shall be considered isobutane and butylenes
shall be considered normal butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
ETHANE-PROPANE
80-20 MIXTURE
SPECIFICATION
S-200
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for
ethane-propane 80-20 mixtures received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Methane (Percent of Ethane) 2.0 GPA 2177
Ethylene (Percent of Ethane) 1.0
Methane, Ethane & Ethylene 78.0 82.0
Propane, Propylene & Butanes 18.0 22.0 ASTM D-2163
Propylene 1.0
Butanes 0.8
2. CORROSION
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
4. DRYNESS No Free Water Visual
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
PURITY ETHANE
SPECIFICATION
S-202
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for purity ethane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Methane 3.0 GPA-2177
Ethane 95.0 100.0
Ethylene 1.0
Heavier than Ethane 3.5 ASTM D-2163
Propylene 1.0
2. CORROSION
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 30 ASTM D-3246
4. DRYNESS No Free Water Visual
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
PROPANE
SPECIFICATION
S-300
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for propane
received by WPC. This product meets the requirement of the GPA HD-5 propane
specification.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Ethane As limited by other
components & vapor
pressure.
Propane 90.0 100
Propylene 5.0 ASTM D-2163
Butanes & Heavier 2.5
2. VAPOR PRESSURE
Psig @ 100OF 208 ASTM D-1267
3. CORROSION
Copper Strip @ 100OF 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.) Corrosion
Additive or Inhibitor, PPM by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
5. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of Stain Tube
(Lab test required if field test is positive.) Lab Chromatography with
Flame Photometric Detector
6. CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field-Length of
(Field test invalid if C4+ exceeds Stain Tube
1.0 LV%) (Lab test required if Lab-UOP 212 or UOP 791
field test is positive.) Lab-Gas Chromatography with
Flame Photometric Detector
7. NON-VOLATILE RESIDUE
a) Milliliters @ 100OF 0.05 ASTM D-2158
b) Oil Stain Pass
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING UPON THE PRODUCT SOURCE:
8. DRYNESS
Freeze Valve, Seconds 60 (Note 2) ASTM D-2713
9. VOLATILE RESIDUE
95% Evaporated-Temperature, OF -37 ASTM D-1837
10. AMMONIA
PPM by Weight in Liquid 1 Field-Length of
Stain Tube
Lab - UOP 430
11. FLUORIDES
PPM by Weight in Liquid as 5 Field-Length of Stain Tube
Monatomic Fluorine Lab-UOP-619-83
12. OTHER DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
Includes but not limited to 1 Gas chromatography with flame
(Isoprene, Butadiene, Vinyl ionization or electron
Chloride, glycol, amine, caustic) capture detection or other
industry accepted methods
</TABLE>
NOTES: (1) The test methods for items 2 and 7 are not necessary if a
compositional analysis is available which indicates compliance with
these requirements.
(2) The addition of methanol in the distribution system should be on a
spot basis and must not exceed a rate of 5 gallons per 10,000 gallons
of product.
<PAGE>
NORMAL BUTANE
SPECIFICATION
S-400
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for normal butane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Isobutane and Lighter 5.0 ASTM D-2163
Butylene (Percent of N.Butane) 1.0
N. Butane & Butylene 95.0 100 GPA 2165
Pentanes & Heavier 2.0
2. VAPOR PRESSURE
Psig @ 10O/F 50 ASTM D-1267
3. CORROSION
Copper Strip @100/F 1-b ASTM D-1838
(Invalid if additive
or inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated-Temperature, /F +36 ASTM D-1837
6. DRYNESS No Free Water Visual
</TABLE>
NOTE: The test methods for Items 2 and 5 are not necessary if a compositional
analysis indicates compliance with these requirements.
<PAGE>
ISOBUTANE
SPECIFICATION
S-401
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for isobutane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Propane, Propylene and Lighter 3.0 ASTM D-2163
Isobutane 96.0 100
Butylene, Normal Butane
& Heavier 4.0
2. VAPOR PRESSURE
Psig @ 100OF 62 ASTM D-1267
3. CORROSION
Copper Strip @ 100OF 1-b ASTM D-1838
Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated-Temperature OF +16 ASTM D-1837
6. DRYNESS No Free Water Visual
</TABLE>
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
compositional analysis is available which indicates compliance with
these requirements.
<PAGE>
MIXED BUTANES
SPECIFICATION
S-402
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for commercial
butane received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION Predominately Isobutane ASTM E-260
Percent by Liquid Volume & Normal Butane
Propane 3.0 of Isobutane ASTM D-2163
Butylene 1.0 of Isobutane
Pentanes & Heavier 2.0 of Butanes
2. VAPOR PRESSURE
Psig @ 100OFF 70 ASTM D-1267
3. CORROSION
Copper Strip @ 100OF 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated, Temperature, OF +36 ASTM D-1837
6. DRYNESS No Free Water Visual
7. BUTADIENE
Percent by Liquid Volume 0.5 Gas Chromatography
</TABLE>
PRODUCT ACCOUNTING
For Accounting purposes, propane shall be considered isobutane, butylenes shall
be considered normal butane, and pentanes and heavier shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
compositional analysis is available which indicates compliance with
these requirements.
<PAGE>
NORMAL PENTANE
SPECIFICATION
S-500
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for normal
pentane received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Isopentane & Lighter 5.0 GPA 2165
Normal Pentane 90 100 ASTM D-2597
Heavier than Normal Pentane 7.0
2. VAPOR PRESSURE
Psi @ 100OF, Reid 17 ASTM D-323
3. CORROSION
Copper Strip @ 100OF 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. DRYNESS No Free Water Visual
5. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
or Gas Chromatography
with Flame Photometric
Detection
</TABLE>
<PAGE>
ISOPENTANE
SPECIFICATION
S-501
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for isopentane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION
Percent by Liquid Volume ASTM E-260
Normal Butane & Lighter 5.5 ASTM D-2597
Isopentane 94.0 100 GPA 2165
Neopentane 2.0
Normal Pentane & Heavier 4.0
2. VAPOR PRESSURE
Psi @ 100OF, Reid 22 ASTM D-323
3. CORROSION
Copper Strip @ 100OF 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. DRYNESS No Free Water VISUAL
5. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
or Gas Chromatography
with Flame Photometric
Detection
</TABLE>
<PAGE>
NATURAL GASOLINE
SPECIFICATION
S-600
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for natural
gasoline received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Butanes & Lighter 3.0 GPA 2165
Pentanes & Heavier 97 100
2. VAPOR PRESSURE
Psi @ 100/F, Reid 14 ASTM D-323
3. CORROSION
Copper Strip @ 104/F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. DOCTOR TEST Negative GPA 1138
5. DRYNESS No Free Water Visual
6. COLOR plus 25 No Color Field White Cup Method
Lab-ASTM D-156
7. DISTILLATION
End Point, /F 375 ASTM D-216
</TABLE>
NOTE: The test methods for Items 2 and 7 are not necessary if an adequate
compositional analysis is available which indicates compliance with
these requirements.
<PAGE>
HEXANES PLUS
SPECIFICATION
S-601
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for hexanes plus
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Normal Pentane and Lighter 5.0
Heavier than Normal Pentane 95.0 100 GPA 2165
2. VAPOR PRESSURE
Psi @ 100/F, Reid 8 ASTM D-323
3. CORROSION
Copper Strip @ 100^/F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. DRYNESS No Free Water VISUAL
5. DISTILLATION ENDPOINT 375/F ASTM D-216
</TABLE>
<PAGE>
EXHIBIT B
ATTACHED TO AND MADE A PART OF THAT CERTAIN MASTER NATURAL GAS LIQUIDS
PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP AND
CHEVRON U. S. A. INC.
CUSA NGL SALES TO WPC
STATE PLANT MARKET
- ----- ----- ------
Wyoming Carter Creek Gas Plant Mapco Pipeline
Wyoming Whitney Canyon Gas Plant Mapco Pipeline
Wyoming Enron Fractionator/Millis Terminal Mapco Pipeline
Utah Anschutz Ranch Gas Plant Mapco Pipeline
Colorado Rangely/Weber SU Gas Plant Mapco Pipeline
Eunice Gas Plant (operated by a
New Mexico third Person) Pipeline
New Mexico Monument Gas Plant Pipeline
New Mexico Eunice Gas Plant (operated by WPC) Pipeline
New Mexico Saunders V/B Gas Plant Pipeline
Texas Goldsmith Gas Plant Pipeline
Texas Headlee Gas Plant Pipeline
Texas Monahans Gas Plant Pipeline
Texas Sand Hills Gas Plant Pipeline
Texas Moore's Orchard Gas Plant Pipeline
Texas Sherman Gas Plant Pipeline
<PAGE>
EXHIBIT C
ATTACHED TO AND MADE A PART OF THAT CERTAIN MASTER NATURAL
GAS LIQUIDS PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM
COMPANY, LIMITED PARTNERSHIP AND CHEVRON U. S. A. INC
CUSA NGL SALES TO WPC
STATE PLANT MARKET
- ----- ----- ------
Oklahoma Comanche Tap Pipeline
Oklahoma Leedey Gas Plant Pipeline
Texas Canadian Gas Plant Pipeline
<PAGE>
EXHIBIT D
ATTACHED TO AND MADE A PART OF THAT CERTAIN MASTER NATURAL
GAS LIQUIDS PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM
COMPANY, LIMITED PARTNERSHIP AND CHEVRON U. S. A. INC
CUSA NGL SALES TO WPC
STATE PLANT MARKET
- ----- ----- ------
Wyoming Enron Fractionator/Millis Terminal Local Storage
<PAGE>
EXHIBIT E
ATTACHED TO AND MADE A PART OF THAT CERTAIN MASTER NATURAL
GAS LIQUIDS PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM
COMPANY, LIMITED PARTNERSHIP AND CHEVRON U. S. A. INC
CUSA NGL SALES TO WPC
STATE PLANT MARKET
- ----- ----- ------
Wyoming Enron Fractionator/Millis Terminal Local Sales
Wyoming Opal Gas Plant Local Sales
Colorado West Frac Fractionating Plant Local Sales
Texas Sherman Gas Plant Local Sales
California McKittrick Gas Plant Local Sales
California Taft 1C Gas Plant Local Sales
California Four Star Gas Plant Local Sales
California Elks Hills Gas Plant Local Sales
California Kettlemen hills Gas Plant Local Sales
California Gaviota Gas Plant Local Sales
California N. Coles Levee Gas Plant Local Sales
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT F
* [REDACTED]
EXHIBIT 10.50
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
GAS SUPPLY AND SERVICE AGREEMENT
BETWEEN
CHEVRON CHEMICAL COMPANY
(ST. JAMES STYRENE PLANT)
AS "BUYER"
AND
NATURAL GAS CLEARINGHOUSE
AS "SELLER"
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.......................................................1
ARTICLE 2. QUANTITY; NOMINATIONS.............................................3
ARTICLE 3. FAILURE TO PERFORM................................................3
ARTICLE 4. TRANSPORTATION....................................................5
ARTICLE 5. QUALITY...........................................................6
ARTICLE 6. DELIVERY AND PRESSURE; TITLE AND CONTROL; LIABILITY...............7
ARTICLE 7. MEASUREMENT.......................................................7
ARTICLE 8. COMMODITY CHARGE..................................................7
ARTICLE 9. MANAGEMENT INCENTIVE FEE.........................................10
ARTICLE 10. MANAGEMENT OF EXISTING CONTRACTS................................11
ARTICLE 11. BILLING AND PAYMENT.............................................12
ARTICLE 12. TAXES...........................................................13
ARTICLE 13. LAWS AND REGULATION.............................................13
ARTICLE 14. FORCE MAJEURE...................................................13
ARTICLE 15. WARRANTY OF TITLE AND ROYALTIES.................................14
ARTICLE 16. TERM............................................................15
ARTICLE 17. CONFIDENTIALITY.................................................15
ARTICLE 18. ARBITRATION.....................................................16
ARTICLE 19. MISCELLANEOUS...................................................17
GAS SUPPLY AND SERVICE AGREEMENT
THIS AGREEMENT is made and entered into as of ________________, 1996 (the
"Effective Date"), by and between Chevron Chemical Company, a Delaware
corporation, herein referred to as "Buyer", and Natural Gas Clearinghouse, a
Colorado general partnership, herein referred to as "Seller".
WITNESSETH
WHEREAS, Buyer requires a firm supply of natural gas for use in Buyer's
St. James Styrene Plant in St. James Parish, Louisiana (the "Facility"), and
also desires that Seller provide certain supply and transportation management
services for the Facility; and
WHEREAS, Seller desires to sell such gas to Buyer on a firm basis, and
provide such services under the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the Parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
For the purpose of this Agreement, the following definitions are
applicable:
1.1. The term "Agreement" means this agreement, including all amendments
hereof that may be made from time to time.
1.2. The term "Btu" means British thermal unit, and is the quantity of
heat required to raise the temperature of 1 pound of water from 58.5(degree) to
59.5(degree) Fahrenheit.
1.3. The term "Business Day" means any day on which commercial banks in
Houston, Texas, are open for general business.
1.4. The term "day" means a period of 24 consecutive hours, beginning and
ending at 8:00 a.m., Central Time.
1.5. The term "Existing Contracts" means Buyer's existing gas supply and
transportation arrangements as described in Article 10. hereof.
1.6. The term "Facility" means Buyer's St. James Styrene Plant located in
St. James Parish, Louisiana.
1.7. The term "gas" means natural gas to be made available by Seller to
Buyer under the terms of this Agreement and natural gas which Buyer may purchase
under the Existing Contracts described in Article 10. hereof.
1.8. The term "MMBtu" means 1,000,000 British thermal units.
1.9. The term "month" means the period beginning at 8:00 a.m., Central
Time on the first day of a calendar month and ending at 8:00 a.m., Central Time
on the first day of the next succeeding month.
1.10. The term "Party" or "Parties" means Seller and/or Buyer under this
Agreement.
1.11. The term "Purchase Option Price" means the price which Buyer would
pay for gas in the applicable month under the Existing Contracts for gas
purchased from the Transporter in question.
1.12. The term "Transporter" means Louisiana Intrastate Gas Company
("LIG"), Louisiana Resource Pipeline ("LRP"), or Bridgeline Gas Company
("Bridgeline"), depending upon which pipeline is to deliver the gas in question.
1.13. The term "Facility Delivery Point" means (a) the interconnection of
LIG pipeline to the Facility at LIG's meter number 20649901, (b) the
interconnection of LRP pipeline to the Facility at LRP meter number 847713, or
(c) the interconnection of Bridgeline's pipeline to the Facility at Bridgeline's
meter number 460-135, depending upon which pipeline is to deliver the gas in
question.
1.14 The term "Transport Gas Delivery Point" means any receipt point on
(a) LIG, (b) LRP, or Bridgeline which Seller may elect to utilize in accordance
with the Existing Contracts to deliver Transport Gas to the Facility Delivery
Point.
1.15. The term "Transport Gas" means gas which Seller acquires on Buyer's
behalf and ships to Buyer's Facility using the transportation options in the
Existing Contracts.
1.16. The term "Locked Price" means the price per MMBtu to be paid by
Buyer, in lieu of the otherwise applicable Commodity Charge, for Locked
Quantities of gas purchased hereunder. A Locked Price shall be determined in
accordance with Section 8.2. hereof.
1.17. The term "Locked Quantities" means quantities of gas to be sold by
Seller and purchased by Buyer during any month during the term hereof, as to
which a Locked Price has been established.
1.18. The term "Unlocked Quantities" means quantities of gas as to which
no Locked Price has been established.
ARTICLE 2.
QUANTITY; NOMINATIONS
2.1. SELLER'S OBLIGATION.
At least one Business Day prior to the first of the month nomination deadline
of the Transporter having the earliest such deadline, and periodically during
each month as required to meet the needs of Buyer's Facility, Seller will
cooperate with appropriate representatives of Buyer's Facility to determine the
gas requirements of the Facility for the upcoming month. Seller shall then
advise such representatives of the actions which Seller recommends with respect
to Buyer's purchase and transport options under the Existing Contracts. To the
extent that Seller recommends the purchase of Transport Gas, and unless Buyer
requests that Transport Gas not be provided in the recommended quantities,
Seller shall take all steps necessary to acquire appropriate quantities of gas
and make arrangements to have such gas delivered to Buyer's Facility in
accordance with the transportation options in the Existing Contracts. If so
requested and authorized by Buyer, Seller shall also handle all nominations and
other administrative duties related to the Existing Contracts, except that Buyer
shall remain responsible for paying amounts due to the Transporters under the
Existing Contracts. Nothing in this Section shall require Seller to deliver gas
to the Facility via any pipeline other than the Transporters.
2.2. BUYER'S OBLIGATION.
Each month Buyer shall advise Seller of the gas requirements of the Facility,
and will consult with Seller to develop a supply plan for the full gas
requirements of the Facility using an optimal combination of Transport Gas and
gas purchased under the Existing Contracts. In addition, Buyer shall purchase
from Seller such quantities of Transport Gas as Seller shall acquire on Buyer's
behalf in accordance with Section 2.1. Other than purchases under the Existing
Contracts, or any extensions or renewals thereof, Buyer agrees that it will not
purchase gas from third parties for use in the Facility during the term of this
Agreement, unless Seller shall default in its obligation to deliver Transport
Gas as agreed. Buyer shall also consult with Seller before taking any actions
regarding the Existing Contracts.
2.3. PURCHASE OF EXCESS GAS FROM BUYER.
Upon request by Buyer, Seller will make reasonable efforts to purchase from
Buyer any gas which Buyer is obligated to purchase hereunder in excess of the
requirements of Buyer's Facility. The price for any such purchases shall be a
mutually agreeable price negotiated between the Parties and confirmed in
writing.
ARTICLE 3.
FAILURE TO PERFORM
3.1. SELLER'S FAILURE TO MAKE GAS AVAILABLE.
If Seller fails on any day, in whole or in part, to make available at the
Transport Gas Delivery Point the quantity of Transport Gas agreed to as provided
in Section 2.1., and if such failure is not excused by an event of force
majeure, Buyer shall be entitled to recover liquidated damages for such failure
in an amount equal to the shortfall in delivery, multiplied by the amount, if
any, by which Buyer's cost per MMBtu of cover supplies exceeds the Commodity
Charge which would have been payable hereunder for the Transport Gas. Seller
agrees to pay Buyer any liquidated damages to which Buyer is entitled under this
Section 3.1. on or before the 10th day after Seller receives a written
calculation of the amount of such liquidated damages from Buyer. Buyer shall use
reasonable efforts to notify Seller prior to obtaining replacement supplies and
to obtain any replacement supplies at the lowest reasonable price, but it is
understood that Buyer's Facility does not employ full time gas supply management
personnel and the only practical source of cover may be unauthorized overrun gas
from the system supply of the Transporter or other pipeline to which the
Facility is connected.
3.2. BUYER'S FAILURE TO PURCHASE GAS.
If Buyer fails on any day, to purchase the quantity of Transport Gas agreed to
as provided in Section 2.1., and if such failure is not excused by an event of
force majeure or Seller's failure to make gas available, Seller shall be
entitled to recover liquidated damages for such failure in an amount equal to
the purchase deficiency multiplied by the amount, if any, by which the Commodity
Charge which would have been payable hereunder exceeds the price per MMBtu
received by Seller in an alternate sale of the deficient quantity. Buyer agrees
to pay Seller any liquidated damages to which Seller is entitled under this
Section 3.2. on or before the 10th day after Buyer receives a written
calculation of the amount of such liquidated damages from Buyer. Seller shall
use reasonable efforts to obtain the highest price reasonably available in any
such alternate sale.
3.3. TERMINATION RIGHTS UPON MATERIAL DEFAULT.
If Seller fails to make available to Buyer's Facility at least ninety-five
percent of Transport Gas which Seller undertakes to supply as specified in
Section 2.1. hereof on any three consecutive days after notice to Seller that a
default has occurred, or on five or more days (following notice in each case),
which need not be consecutive, in any calendar year, and if such failure is not
excused by an event of force majeure, Buyer shall have the right to terminate
this Agreement by giving Seller at least thirty days prior written notice of
termination. Any notice of termination under this Section must be given within
thirty days after occurrence of the event(s) on which the termination is based.
Neither Party shall have any liability to the other under this Agreement
following any termination of this Agreement pursuant to this Section, except for
payment of amounts accruing prior to such termination.
3.4. NO SPECIAL DAMAGES.
THE REMEDIES SPECIFIED IN SECTIONS 3.1., 3.2., AND 3.3. ABOVE, AND SECTION
8.2.5., BELOW, SHALL BE THE SOLE AND EXCLUSIVE REMEDIES FOR EITHER PARTY'S
FAILURE TO DELIVER OR PURCHASE GAS ACCORDING TO THIS AGREEMENT. NEITHER PARTY
SHALL BE LIABLE IN ANY EVENT FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE
DAMAGES OR LOSSES WHICH MAY BE SUFFERED BY THE OTHER PARTY AS A RESULT OF A
FAILURE TO DELIVER OR PURCHASE THE REQUIRED QUANTITIES OF GAS.
3.4. NO THIRD PARTY BENEFICIARIES.
It is specifically agreed that there are no third party beneficiaries to this
Agreement, and that this Agreement shall not impart any rights enforceable by
any person, firm, organization, or corporation not a Party hereto.
ARTICLE 4.
TRANSPORTATION
4.1. TRANSPORTATION GUIDELINES.
The rules, guidelines, operational procedures and policies of the
Transporters, as they may be changed from time to time, shall define and control
the manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer each agree to provide to the other, in as prompt a manner as
reasonable, all information necessary to permit scheduling pursuant to such
requirements.
2.2. TRANSPORTATION IMBALANCES.
4.2.1. GENERAL.
If Seller delivers at the Transport Gas Delivery Point or Buyer takes at the
Facility Delivery Point a quantity of gas not equal to the quantity nominated
and confirmed for transportation, a "Transportation Imbalance" may occur. Upon
notification by the other Party or Transporter that a Transportation Imbalance
exists, each Party will exercise due diligence to correct the Transportation
Imbalance, subject to any restrictions imposed by Transporter. Buyer and Seller
agree to use due diligence to prevent or diminish any occurrences of
Transportation Imbalances, and to minimize any resulting imbalance penalties
through the use of imbalance trading or netting procedures, or other methods
offered by the Transporter. Adjustments to transportation nominations made
pursuant to this paragraph shall not modify or impair the Parties' obligations
or remedies as set forth in Article 3.
4.2.2. IMBALANCE CASHOUTS.
The Transporter's tariff or applicable contracts may contain provisions under
which, in the event of Transportation Imbalances related to the gas sold and
purchased hereunder, a Party to this Agreement may be required to purchase net
imbalance quantities from the Transporter, or to sell net imbalance quantities
to the Transporter, at prices determined pursuant to the Transporter's tariff or
the applicable contract (such purchases and/or sales being referred to herein as
"cash-outs"). If one Party hereto is required by the Transporter to cash out an
imbalance caused by the other Party's failure to deliver or receive the quantity
of gas nominated and confirmed for transportation, the Party whose act or
omission caused the Transportation Imbalance shall reimburse the other Party for
the penalty component of the cash-out price. For purposes of this Agreement, the
penalty component of a cash-out price shall be the amount by which the price at
which a Party is required to buy the cashed-out quantity exceeds the Commodity
Charge effective when the imbalance accrued, or the amount by which the
Commodity Charge in effect when the imbalance accrued exceeds the price at which
a Party is required to sell the cashed-out quantity. Due to the possibility of
graduated penalties in the Transporter's tariff, several different penalty
components may apply to portions of a Transportation Imbalance. Once determined,
any penalty components of cash-out prices shall be multiplied by the quantities
cashed out to which such penalties are applicable.
4.2.3. OTHER TRANSPORTATION PENALTIES.
Seller shall hold Buyer harmless from all costs and penalties in addition
to those described in Section 4.2.2. which may be assessed by Transporter as
a result of over-delivery or under-delivery of gas caused by Seller. Buyer
shall hold Seller harmless from all costs and penalties in addition to those
described in Section 4.2.2. which may be assessed by Transporter as a result
of over-takes or under-takes of gas caused by Buyer.
4.2.4. MINIMIZATION OF PENALTIES.
If any costs or penalties associated with the transportation of gas are
anticipated, the Party becoming aware that such costs or penalties may be
assessed or incurred shall inform the other Party promptly after the Party
becomes aware, followed by notice in writing. Each Party shall then promptly
cooperate in good faith with the other Party to minimize or eliminate, if
possible, such costs or penalties. The Parties shall cooperate with each other
and with the Transporter to verify delivery and receipt of the Nominated
Purchase Quantity on a timely basis.
4.3. UPSTREAM TRANSPORTATION.
Seller shall be responsible for transportation to the Transport Gas Delivery
Point and payment of all transportation charges relating thereto. Buyer shall be
responsible for transportation from the Transport Gas Delivery Point and payment
of all transportation charges relating thereto; provided that Seller agrees to
perform administrative duties related to such transportation, as provided in
Section 2.1..
ARTICLE 5.
QUALITY
5.1. SPECIFICATIONS OF TRANSPORTER(S).
All gas delivered hereunder shall conform to the quality specifications set
forth in the transportation agreement or tariff of the Transporter delivering
the gas at the Facility Delivery Point. Seller's tender of Transport Gas which
does not meet such quality specifications shall be deemed a failure to deliver
gas for purposes of Article 3. hereof unless the tender of off-spec gas is
caused by an event of force majeure.
5.2. TESTING.
Buyer shall have the right to be represented and to participate in all tests
of gas delivered hereunder. Upon request by Buyer, not more often than once a
month, Seller shall cause the Transporter delivering gas at the Facility to
provide Buyer's representative at least once per month a Certificate of Analysis
showing the composition and content of the gas at the Delivery Point.
ARTICLE 6.
DELIVERY AND PRESSURE; TITLE AND CONTROL; LIABILITY
6.1. DELIVERY AND PRESSURE.
All Transport Gas to be sold and purchased hereunder shall be delivered to the
applicable Transporter for the account of Buyer at the Transport Gas Delivery
Point at the pressure maintained in the facilities of the Transporter from time
to time.
6.2. TITLE AND CONTROL.
Title to the Transport Gas delivered hereunder shall pass to and vest in Buyer
at the Transport Gas Delivery Point. As between the parties hereto, Seller shall
be deemed to be in exclusive control and possession of said gas prior to the
time of delivery for the account of Buyer at the Transport Gas Delivery Point,
and Buyer shall be deemed to be in exclusive control and possession of said gas
thereafter.
6.3. LIABILITY.
The Party deemed to be in control and possession of the gas sold hereunder
shall be responsible for and shall indemnify, defend and hold the other Party
harmless with respect to any losses, claims, liabilities or damages arising
therefrom when such gas is deemed to be in that Party's control and possession.
ARTICLE 7.
MEASUREMENT
The unit of volume for measurement of gas delivered hereunder shall be 1
cubic foot of gas. The sales unit of the gas shall be 1 MMBtu, determined on a
dry basis. All measurements of Transport Gas delivered and sold hereunder shall
be in accordance with the provisions of the Transporter's tariff.
ARTICLE 8.
COMMODITY CHARGE
8.1. CALCULATION.
For each MMBtu of Transport Gas delivered by Seller to a Transporter for
Buyer's account, Buyer shall pay Seller a "Commodity Charge" equal to the lesser
of (a) Seller's actual cost of acquisition of such gas, delivered to the
Transport Gas Delivery Point on the Transporter which is to deliver the gas to
the Facility, or (b) the Purchase Option Price applicable during the month in
question under the Existing Contract with such Transporter less Buyer's actual
cost per MMBtu of transporting the Transport Gas from the Transport Gas Delivery
Point to the Facility Delivery Point under the applicable Existing Contract.
8.2. LOCKED PRICE.
Subject to the terms set forth herein, in lieu of paying the applicable
Commodity Charge hereunder, Buyer may lock the price of all or a portion of the
gas to be purchased during any of the 12 months immediately following the date
of Buyer's request to lock price (insofar as such months are during the term
hereof), by notifying one of Seller's authorized representatives by telephone of
Buyer's desire to lock price on such gas. If Buyer opts for such a Locked Price
and the Commodity Charge otherwise payable is based in part upon a published
index, or other base amount, plus a monetary adjustment, the Locked Price so
established shall replace the index or base amount as to Locked Quantities
affected by such Locked Price, but the monetary adjustment shall still be
applied to such Locked Quantities.
8.2.1. TIMING FOR REQUESTING LOCKED PRICE; RECORDING OF
CONVERSATIONS.
Buyer may request quote of a Locked Price for gas to be delivered hereunder by
telephone on any Business Day, between the hours of 8:30 a.m. and 2:00 p.m.,
local Houston, Texas time, up to and including the 7th Business Day prior to the
beginning of the month to which the Locked Price shall apply. The Parties
acknowledge and agree that all telephone conversations between them relating to
a Locked Price may by recorded by either Party, or both, for purposes of
establishing the terms and conditions associated with the Locked Price. The
Parties also agree that the taped conversation may be used to prove the terms
and conditions associated with a Locked Price if the Parties subsequently
disagree on such terms and conditions.
8.2.2. PROCEDURES.
As soon as possible after Buyer's telephonic request, but in any event within
24 hours (excluding weekends and holidays), Seller shall determine the price per
MMBtu at which it is willing and able to lock price and shall notify Buyer's
authorized representative of such price. The Locked Price will be based on the
NYMEX (or other exchange selected by Seller) posting for the natural gas futures
contract applicable to the month(s) requested by Buyer and prevailing at the
time of Buyer's request for a Locked Price, plus a basis differential adjustment
to equate the posted price with an imputed price at the applicable Delivery
Point. If Buyer accepts such Locked Price, then Seller shall forward to Buyer a
"Price Lock Confirmation", similar to the form attached hereto as Exhibit "A",
which specifies the terms to which the Parties have agreed. Said Price Lock
Confirmation shall be forwarded to Buyer prior to the end of the month in which
deliveries are to be made. The terms set forth in the Price Lock Confirmation
shall be binding upon the Parties unless Buyer notifies Seller in writing that
Buyer disputes one or more of the terms set forth in said Price Lock
Confirmation within 48 hours, exclusive of weekends and Chevron holidays, after
Buyer receives the same. Any terms which remain undisputed after expiration of
said period shall be binding on the Parties, and the Parties shall work together
in good faith to resolve any disputes as expeditiously as possible.
8.2.3. MULTIPLE PRICE LOCKS.
Buyer may request and establish a Locked Price on gas quantities for a
particular month more than once, so long as Buyer meets the requirements of this
Section 8.2. with regard to timing. Seller at its option may include all Locked
Prices and Locked Quantities in one Price Lock Confirmation for any applicable
month.
8.2.4. IRREVOCABILITY; NOMINATIONS; ALLOCATION.
Once a Locked Price has been established for a delivery month hereunder, the
Locked Price shall be irrevocable as to the affected Locked Quantities, and
shall not thereafter be subject to change. Additionally, for any month as to
which a Locked Price has been established, Buyer shall be obligated to nominate
and take a quantity of gas not less than the Locked Quantities then in effect.
If Buyer elects to establish a Locked Price for less than all of the gas to be
delivered in any applicable month, and/or if Buyer and Seller have established
more than one Locked Price for different Locked Quantities, the first gas
delivered during said month shall be the first Locked Quantities established,
followed by any additional Locked Quantities in the order they were established,
followed by any Unlocked Quantities of gas.
8.2.5. FAILURE TO PURCHASE LOCKED QUANTITIES. If Buyer fails to
purchase the full quantity of gas subject to a Locked Price in any month, then,
to the extent such failure is not the result of force majeure or Seller's
failure to make the gas available, Buyer shall pay Seller liquidated damages
calculated as follows. The unexcused deficient purchase quantity of gas subject
to a Locked Price shall be multiplied by the difference between the Locked Price
and the settlement price of the natural gas futures contract on NYMEX (or other
applicable exchange) for the month in which the deficiency occurred, plus or
minus the basis differential set forth in the Price Lock Confirmation. In
addition, if Seller has entered into a financial instrument, including, without
limitation, an over-the-counter basis swap, for purposes of hedging the risk
associated with the basis differential component of the Locked Price, Buyer
shall reimburse Seller one hundred percent (100%) of the actual losses incurred
by Seller under such financial instrument to the extent such losses result from
Buyer's unexcused failure to purchase gas subject to a Locked Price. Seller
shall exercise its best efforts to minimize such losses (including for example
the early termination of financial instruments if Seller reasonably believes at
the time of termination that early termination may minimize such losses).
Buyer's obligation to purchase gas subject to a Locked Price is a monthly
obligation and not a daily obligation and therefore for purposes of this Section
Buyer shall have compiled with its obligation to purchase quantities of gas
subject to a Locked Price if it purchases such quantities during the course of
the month.
8.2.6. CESSATION OF FUTURES TRADING.
If natural gas futures contracts cease to be traded on the New York Mercantile
Exchange or on any other mercantile exchange acceptable to Seller in its sole
discretion, then after such cessation Seller shall be relieved of any and all
obligation to establish Locked Prices hereunder.
ARTICLE 9.
MANAGEMENT INCENTIVE FEE
9.1. CALCULATION.
For each month in which Seller is able to cause Transport Gas to be delivered
to the Facility via one or more of the Transporters at a weighted average
delivered price (including transportation and any associated fuel or other
surcharges) which is less than the applicable Purchase Option Price associated
with that Transporter (a "Transport Gas Savings"), Buyer shall pay Seller a
Management Incentive Fee ("MIF") calculated as follows:
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
The MIF will be a variable percentage of the amount by which the Purchase Option
Price exceeds the delivered cost to the Facility of the Transport Gas, as
follows: *
[REDACTED]
The foregoing calculation will be done separately for each Transporter on which
a Transport Gas Savings is achieved in the month in question, and the MIF for
that month will be the sum of the results of such calculation.
ARTICLE 10.
MANAGEMENT OF EXISTING CONTRACTS
10.1. COOPERATION.
Buyer and Seller shall cooperate to manage the natural gas requirements of
Buyer's Facility by optimizing Buyer's rights to purchase gas and transportation
services under the Existing Contracts described on Exhibit "B" hereto. Seller
shall advise Buyer of alternate supply opportunities and shall either (a) assist
Buyer in making nominations and taking other actions necessary to achieve such
optimization, or (b) if requested by Buyer, take such actions on Buyer's behalf.
The Management Incentive Fee described in Section 9.1. is intended to compensate
Seller for all such efforts expended on behalf of Buyer, and no additional
compensation shall be due therefor.
10.2. TERMINATION, AMENDMENT OR RENEWAL OF EXISTING CONTRACTS.
Buyer shall consult with Seller prior to amending, terminating, or renewing
the Existing Contracts, and shall allow Seller an opportunity to propose
alternate arrangements that may better serve the needs of Buyer's Facility
covered hereby. The parties will amend this Agreement as needed to reflect any
changes in the Existing Contracts as they occur.
10.3. APPOINTMENT OF SELLER AS BUYER'S AGENT.
If necessary to permit Seller to perform the actions described in Section
10.1., Buyer shall appoint Seller as Buyer's agent for day to day administration
of the Existing Contracts, including the placing of purchase and transportation
nominations, the adjustment of imbalances, and the reconciliation of statements.
Upon request, Buyer shall provide such documentation of Seller's Agency as the
Transporters may reasonably require. Notwithstanding the foregoing, Seller shall
not amend, terminate, or otherwise modify any of the Existing Contracts without
Buyer's prior written consent.
ARTICLE 11.
BILLING AND PAYMENT
11.1. BILLING AND PAYMENT.
Not later than the 15th day of each month, Seller shall provide Buyer an
invoice (which may be transmitted by electronic facsimile) setting forth the
quantities of Transport Gas acquired on Buyer's behalf and delivered at the
Transport Gas Delivery Point(s) during the preceding month, the amount due
therefor and any other charges, credits or adjustments due under the terms
hereof. If actual quantities are not available by the time Seller prepares its
invoice, Seller may invoice based on the quantities nominated and confirmed for
transportation, subject to appropriate adjustments to actual quantities when
available. Buyer shall make payment by wire transfer by the 25th day of the
month following the delivery month, or within 10 days after receipt of Seller's
invoice, whichever is later; provided, however, that payments which would be due
on a Saturday or bank holiday shall be due on the last preceding Business Day,
unless the bank holiday falls on a Monday. Payments otherwise due on Sunday or
on a Monday bank holiday shall be due on the first succeeding Business Day.
11.2. BILLING DISPUTES.
If a dispute arises as to the amount payable in any invoice rendered
hereunder, Buyer shall nevertheless pay when due the amount not in dispute under
such invoice. Such payment shall not be deemed to be a waiver of the right by
Buyer to recoup any overpayment, nor shall acceptance of any payment be deemed
to be a waiver by Seller of any underpayment. If Buyer fails to forward the
entire undisputed amount due to Seller when same is due, interest on the unpaid
portion shall accrue at a rate equal to 2% above the prime rate charged by Wells
Fargo Bank, San Francisco, from time to time, or the maximum legal rate,
whichever is the lesser, compounded daily from the date such payment is due
until the same is paid. If Buyer's failure to pay the undisputed portion of any
invoice rendered hereunder continues beyond five days after the due date of such
invoice, then Seller, in addition to all other legal remedies available to it,
shall have the right and option upon written notice to Buyer to (a) suspend
further deliveries of gas until such default shall have been cured, and (b)
terminate this Agreement if the payment default is not cured within five days
after such written notice is given.
11.3. NOTICE OF DISPUTE.
If Buyer withholds payment of any disputed amount as authorized herein, Buyer
shall within 15 days after the due date of the disputed invoice submit to Seller
a written explanation of the dispute and any available supporting documentation.
The Parties shall then cooperate in good faith to resolve such dispute as
expeditiously as possible, and the portion, if any, of such disputed amount
eventually determined to be due shall bear interest at the rate stated in
Section 11.2. from the original due date until the date actually paid.
11.4. AUDIT.
Each Party shall have the right at its own expense to examine and audit at any
reasonable time the books, records and charts of the other to the extent
necessary to verify the accuracy of any statements or charges made under or
pursuant to any of the provisions of this Agreement. Upon request, Buyer shall
also make available to Seller for audit purposes any relevant records of the
Transporter to which Buyer has access. A formal audit of accounts shall not be
made more often than once per calendar year. Any inaccuracy will be promptly
corrected when discovered; provided, however, that neither Party shall be
required to maintain books, records or charts for a period of more than two
years following the end of the calendar year to which they are applicable.
Neither Party shall have any right to question or contest any charge or credit
if the matter is not called to the attention of the other Party in writing
within two years after the end of the calendar year which the charge or credit
was made.
ARTICLE 12.
TAXES
The price for Transport Gas delivered hereunder is inclusive of all
production, severance, ad valorem, or similar taxes levied on the production or
transportation of the gas prior to its delivery to or for the account of Buyer
at the Transport Gas Delivery Point, and all such taxes shall be borne and paid
exclusively by Seller. The price does not include any Federal, Indian, State or
local sale, use, consumption, or similar taxes of whatever designation which may
now or hereafter be imposed on the transfer of title or possession of the gas to
or for the account of Buyer, or on Buyer's subsequent use or disposition
thereof. Any such taxes shall be paid by Buyer directly to the taxing authority
unless Seller is required by law to collect and remit such taxes, in which case
Buyer shall reimburse Seller for all amounts so paid. If Buyer claims exemption
from any such taxes, Buyer shall provide Seller a tax exemption certificate or
other appropriate documentation thereof.
ARTICLE 13.
LAWS AND REGULATION
This Agreement is subject to all valid laws, orders, rules and/or
regulations of any and all duly constituted governmental authorities, Federal,
State or local, to the extent such laws, regulations, and orders are applicable
and effective from time to time.
ARTICLE 14.
FORCE MAJEURE
14.1. SUSPENSION OF OBLIGATIONS.
If either Party hereto is rendered unable, wholly or in part, by force majeure
to carry out its obligations under this Agreement, other than to make payment
for gas delivered hereunder, then upon such Party's giving notice and full
particulars of such force majeure in writing to the other Party as soon as
practicable after the occurrence of the cause relied on, the obligations of the
Party giving such notice, so far as they are affected by such force majeure,
shall be suspended during the continuance of any inability so caused but for no
longer period, and such cause shall as far as possible be remedied with all
reasonable dispatch.
14.2. DEFINITION OF FORCE MAJEURE.
The term "force majeure" as employed herein means acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, hurricanes or
storms, hurricane or storm warnings which result in the precautionary shut-down
or evacuation of production facilities, earthquakes, fires, floods, washouts,
arrest and restraints of governments and people, civil disturbances, explosions,
breakage or accidents to machinery, equipment, or lines of pipe, freezing of
wells or lines of pipe, interruption or curtailment of transportation by the
Transporter, partial or entire failure of wells, and any other cause beyond the
reasonable control of the Party affected which renders that Party unable to
carry out its obligations under this Agreement. The settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and the above requirement that any force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of strikes or
lockouts by acceding to the demands of opposing party when such course is
inadvisable in the discretion of the Party having the difficulty. A failure to
perform by a supplier of gas to Seller shall constitute force majeure under this
Agreement only to the extent that such failure was caused by force majeure as
defined herein.
ARTICLE 15.
WARRANTY OF TITLE AND ROYALTIES
15.1. TITLE.
Seller hereby warrants title to the Transport Gas sold by it hereunder and its
right to sell the same and warrants that all such gas shall be delivered by
Seller free from all liens, encumbrances and adverse claims, including, but not
limited to liens to secure payment of production taxes, severance taxes and
other taxes.
15.2. ROYALTIES AND OTHER CHARGES.
Seller shall pay or cause to be paid all royalties and other sums due on the
gathering and handling of the Transport Gas prior to its delivery to Buyer.
Seller shall indemnify and save Buyer harmless from and against all suits,
actions, damages, costs and expenses arising from or out of any breach of this
provision.
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
ARTICLE 16.
TERM
*
This Agreement shall commence on the Effective Date and shall continue in
force and effect, unless terminated earlier under the provisions hereof, for a
primary term of [REDACTED], and year to year thereafter until and unless
terminated by either party upon prior written notice delivered not less than
ninety days prior to the end of the primary term or any annual renewal term
thereafter.
ARTICLE 17.
CONFIDENTIALITY
17.1. CONFIDENTIALITY.
Each Party agrees that it will maintain the commercial terms of this Agreement
in strictest confidence and that it will not cause or permit disclosure of those
terms to any third party without the express written consent of the other Party
hereto; provided, however, that such third party restriction does not apply to
affiliated companies. Disclosures otherwise prohibited by this Article 17. may
be made by either Party (1) to the extent necessary for such Party to enforce
its rights hereunder against the other Party, (2) to the extent a Party is
contractually or legally bound to disclose financial information to a third
party such as a royalty owner or partner, or (3) only to the extent to which a
Party hereto is required to disclose all or part of this Agreement by a statute
or by a court, agency, or other governmental body exercising jurisdiction over
the subject matter hereof, by order, by regulation or by other compulsory
process (including, but not limited to, deposition, subpoena, interrogatory, or
request for production of documents).
17.2. NOTIFICATION OF DISCLOSURE.
If either Party is or becomes aware of a fact, obligation or circumstance that
has resulted or may result in a disclosure authorized in Section 17.1., it shall
so notify the other Party promptly and shall provide documentation or an
explanation of the disclosure as soon as it is available. Each Party further
agrees to cooperate to the fullest extent in seeking confidential status to
protect any material so disclosed.
17.3. DISCLOSURE TO CONSULTANTS OR COUNSEL.
The Parties hereto acknowledge that consultants or legal counsel may, from
time to time, be provided with a copy of this Agreement and agree that such
disclosure does not require consent by the other Party, provided that such
consultants or counsel are obligated to abide by the terms and conditions of
this Article 17.
ARTICLE 18.
ARBITRATION
18.1. ALL DISPUTES ARBITRATION.
All disputes between the parties arising under this Agreement shall be
submitted to arbitration in accordance with this Article 18., and the parties
hereby expressly waive all rights to have any such disputes heard before a court
of law, except the right to enforce an arbitration award as described in Section
18.5. Arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.
1, et seq., and not by the arbitration acts, statutes or rules of any other
jurisdiction.
18.2. PROCEDURE.
In the event the parties are unable to resolve a dispute arising under this
Agreement after exercising good faith efforts to do so, either party may require
that the matter be resolved through binding arbitration by submitting a written
notice to the other. The notice shall name the noticing party's arbitrator and
shall contain a statement of the issue(s) presented for arbitration. Within
fifteen days after receipt of a notice of arbitration, the other party shall
name its arbitrator by written notice and may designate any additional issue(s)
for arbitration. The two named arbitrators shall select the third arbitrator
within fifteen days after the date on which the second arbitrator was named.
Should the two arbitrators fail to agree on the selection of the third
arbitrator, either party shall be entitled to request the Senior Judge of the
United States District Court of the Southern District of Texas to select the
third arbitrator. All arbitrators shall be qualified by education or experience
within the energy industry to decide the issues presented for arbitration. No
arbitrator shall be a current or former director, officer or employee of either
party, or its affiliates; an attorney (or member of a law firm) who has rendered
legal services to either party, or its affiliates, within the preceding three
years; or an owner of any of the common stock of either party or its affiliates.
18.3. ARBITRATION HEARINGS.
The three arbitrators shall commence the arbitration hearing within twenty-five
days following the appointment of the third arbitrator. The proceeding shall be
held at a mutually acceptable site in Houston, Texas. If the parties are unable
to agree on a site, the arbitrators shall select a site. The arbitrators shall
have the authority to establish rules and procedures governing the arbitration
hearing. Each party shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of pre-hearing statements
of position and legal authority, but no post-hearing briefs shall be submitted.
After the presentation of the evidence has concluded, each party shall submit to
the arbitration panel a final offer of its proposed resolution of the dispute.
The arbitration panel shall not have the authority to award incidental (except
as specifically provided herein), consequential, special, punitive or exemplary
damages. The arbitrators' decision must be rendered within thirty days following
the conclusion of the hearing or submission of evidence, but no later than 90
days after appointment of the third arbitrator. All evidence submitted in an
arbitration proceeding, transcripts of such proceedings, and all documents
submitted by the parties in an arbitration proceeding shall be deemed
confidential information subject to Article 17., above.
18.4. ARBITRATION DECISION.
The decision of the arbitrators or a majority of them, shall be in writing and
shall be final and binding upon the parties as to the issue submitted. Each
party shall bear the expense and cost of own attorneys and witnesses, its own
arbitrator and one-half of the expense and cost of the third arbitrator.
18.5. ENFORCEMENT OF AWARD.
Judgment upon any award rendered by the arbitrators may be entered in any court
having jurisdiction. The prevailing party shall be entitled to reasonable
attorneys' fees in any court proceeding brought to enforce or collect any award
or judgment rendered by the arbitrators.
ARTICLE 19.
MISCELLANEOUS
19.1. WAIVERS.
No waiver by either Seller or Buyer of any default of the other under this
Agreement shall operate as a waiver of future default, whether of like or
different character nature.
19.2. ASSIGNMENT.
Seller and Buyer reserve the right to assign this Agreement in its entirety to
any of their affiliates; however, ultimate responsibility for performance
hereunder shall remain with the respective Party hereto. Except provided in the
foregoing sentence, this Agreement may not be assigned by either Party without
the prior written consent of the other Party, which shall not unreasonably be
withheld. Notwithstanding the foregoing, either Party shall have the right to
condition such Party's consent to an assignment of this Agreement to an
unaffiliated third party on the agreement of the assignee to a renegotiation of
the terms of this Agreement within one year after the effective date of the
assignment.
19.3. FACILITY SHUTDOWN OR DOWNSIZING.
If Buyer, during the term of this Agreement, shuts down the Facility entirely,
Buyer may terminate this Agreement without liability upon not less than ninety
days' prior written notice to Seller. If Buyer reduces operation of the Facility
so as to significantly reduce the Facility's gas requirements, Buyer shall have
the right, upon similar notice to Seller, to reduce any applicable minimum daily
quantity to correspond to such reduced requirements. Nothing in this Section
shall relieve Buyer from its obligations with respect to quantities of gas for
which a Locked Price has been established in accordance with Section 8.2.
19.4. NOTICES.
Any notice, request, demand, or statement, provided for in this Agreement,
except as otherwise herein provided, may be given in writing, delivered in
person or by United States Mail, to the Parties hereto at the addresses shown
below or at such other addresses as may hereafter be furnished to the other
Party in writing:
BUYER: Invoices, Notices, and Correspondence:
Chevron Chemical Company
[Buyer's Address]
[City, State Zip]
Attention: [Name Of Contact]
Telephone: _____________
Telecopy: _______________
SELLER: Correspondence and Notices:
Natural Gas Clearinghouse
[Address & contacts]
Telephone: _____________
Telecopy: _______________
Payments Shall Be Made By Wire Transfer To:
Natural Gas Clearinghouse
Account No. _________________
[Bank]
ABA Ref. No. _________________
Statements:
Chevron Chemical Company
[Address]
Any notice initially delivered by telecopy shall be confirmed by
regular mail within 1 week after transmission of the telecopy, but an
inadvertent failure to confirm by regular mail shall not impact the
effectiveness of the telecopied notice.
19.5. CHOICE OF LAW.
Except as provided in Article 18., all disputes directly or indirectly arising
from or connected with this Agreement shall be resolved in accordance with the
laws of the State of Texas; however, conflict-of-laws provisions that would
require application of the law of some other state shall be disregarded in their
entirety.
19.6. MODIFICATIONS.
No modification of the terms and provisions of this Agreement shall be or
become effective except pursuant to and upon the due and mutual execution of an
appropriate supplemental written contract by the Parties hereto.
19.7. CONFLICTS OF INTEREST.
No director, employee, or agent of either Party shall give or receive any
commission, fee, rebate, gift, or entertainment of significant cost or value in
connection with this Agreement. Any mutually agreeable representative(s)
authorized by either Party may audit the applicable records of the other Party
solely for the purpose of determining whether there has been compliance with
this paragraph.
19.8. MASTER ALLIANCE AGREEMENT.
So long as both parties to this Agreement are subsidiaries or affiliates of
Chevron Corporation or NGC Corporation, this Agreement shall subject to, and
shall be construed in accordance with, the Master Alliance Agreement dated
_______________ between Buyer and Seller and certain of their Affiliates.
Consequently, any disputes arising under this Agreement shall be addressed as
provided in the Master Alliance Agreement. The Master Alliance Agreement shall
cease to be a part of this Agreement, and this Section 19.8. shall be of no
further force or effect, at such time as either party to this Agreement ceases
to be a subsidiary or affiliate of Chevron Corporation or NGC Corporation.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals, each of which shall constitute and be an original contract.
SELLER:
NATURAL GAS CLEARINGHOUSE
By
[Title]
BUYER:
CHEVRON CHEMICAL COMPANY
By
Title
<PAGE>
EXHIBIT "A"
[Date]
Price Lock Confirmation
Gas Purchase Agreement
Our Contract No.
Chevron Chemical Company
[Address]
Gentlemen:
In accordance with that certain Gas Purchase Agreement dated effective
_______________, by and between Chevron Chemical Company, a division of Chevron
U.S.A. Inc., as Buyer, and Natural Gas Clearinghouse, as Seller, which agreement
is incorporated herein and made a part hereof, Seller hereby confirms
establishment of the following "Locked Price" and "Locked Quantities" as
previously discussed and agreed orally:
Date of Parties' Oral Agreement:
Month of Delivery Affected:
Locked Quantities (MMBtus/day):
Locked Price ($/MMBtu):
Basis Differential Adjustment ($/MMBtu):
Previously Locked Quantities for this month:
Remaining Unlocked Quantities (MMBtus/day):
This Sales Confirmation is binding upon the Parties unless Buyer notifies Seller
of a dispute with all or a portion hereof 48 hours (exclusive of weekends and
Chevron holidays) after Buyer's receipt hereof.
Very truly yours,
Natural Gas Clearinghouse
BY
TRADING REPRESENTATIVE
DATE
APPROVAL & EXECUTION:
REVIEW: CA T/M/TR
<PAGE>
EXHIBIT "B"
To Gas Supply and Service Agreement effective as of ____________,
between Natural Gas Clearinghouse as Seller, and Chevron Chemical
Company, as Buyer.
BUYER'S EXISTING SUPPLY ARRANGEMENTS
[TO BE COMPLETED PRIOR TO SIGNING]
EXHIBIT 10.50 SUPP
The following agreements, in accordance with Instruction 2 of Item 601, are
substantially identical in all material respects to the agreement filed as
Exhibit 10.50 to the Registration Statement:
1. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Oak Point).
2. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Orange Plant).
3. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Cedar Bayou Plant).
4. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Pascagoula Refinery).
5. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Salt Lake City Refinery).
6. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (El Segundo Refinery).
7. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Perth Amboy Refinery).
8. Gas Supply and Service Agreement, dated as of _________,
1996, among Chevron Products Company and Natural Gas
Clearinghouse (Richmond Refinery).
The following is a list of material details in which such agreements differ from
Exhibit 10.50:
1. The calculation of the commodity charge differs slightly
depending on the delivery method.
2. The location of each of the refineries is different.
3. With the exception of the St. James Styrene Plant
Agreement, these agreements contain a provision by which
the prices realized for the gas purchased thereunder may be
opened for renegotiation after two years.
4. With the exception of the Oak Point Plant Agreement that
terminates on September 30, 1996 with the stated intention
of being renegotiated, these agreements have an initial
five-year term that extends year-to-year until terminated
by either party by giving notice 90 days prior to the end
of any term.
EXHIBIT 10.51
THIS MASTER POWER SERVICE AGREEMENT (the "MPSA"), made and entered into
this 1st day of ______, 1996, ("Effective Date") by and between Electric
Clearinghouse, Inc., a Texas corporation, hereinafter referred to as "ECI", and
Chevron U.S.A. Production Company, a division of Chevron U.S.A. Inc., a
Pennsylvania corporation, hereinafter referred to as "CUSA PRODUCTION". ECI and
CUSA PRODUCTION may be referred to herein individually as "Party" or
collectively as the "Parties".
I.
RECITALS
1.1 CUSA PRODUCTION currently (A) owns or controls (i) certain Power
generation, distribution and transmission facilities and may in the future own
or control additional Power generation, distribution and transmission facilities
and (ii) facilities that consume Power and may in the future own or control
additional facilities that consume Power and (B) intends to pursue market
opportunities that involve the sale, purchase, transmission, distribution and/or
generation of Power in a manner that will not subject CUSA PRODUCTION to state
or federal jurisdiction, as set forth in more detail in Section 6.15 below.
1.2 The Parties desire that ECI have the opportunity, as more fully
described herein, to: (i) purchase Power from generating units or contractual
supply owned, controlled or operated by CUSA, (ii) supply Power to facilities
owned, controlled or operated by CUSA or to which CUSA is contractually
obligated to supply; and (iii) participate in any existing and future market
opportunities in which CUSA is involved during the term of this MPSA that
involve the sale, purchase, transmission, distribution and/or generation of
Power.
1.3 The Parties recognize that current laws, regulations and market
conditions render certain opportunities non-feasible or otherwise not
commercially beneficial to either Party, but anticipate that throughout the Term
laws, regulations and market conditions will change such that opportunities will
become feasible and commercially beneficial to either Party.
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1.4 The Parties desire to specify terms and conditions under which the
Parties will participate in Opportunities, as defined below.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
conditions herein contained, CUSA PRODUCTION and ECI hereby agree as follows:
II.
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply hereunder:
2.1 AFFILIATE shall mean with respect to any person, any other person
(other than an individual) that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. For purposes of this definition, "control" means the direct or
indirect ownership of more than fifty percent (50%) of the outstanding capital
stock or other equity interests having ordinary voting power.
2.2 CUSA PRODUCTION shall mean Chevron U.S.A. Production Company, a
division of Chevron U.S.A. Inc., excluding any operations outside of Hawaii and
the lower forty eight states of the United States.
2.3 EFFECTIVE DATE shall mean the date first written above.
2.4 EXISTING OPPORTUNITY shall mean an Opportunity for which a Party has
made an internal commitment to pursue as of the Effective Date, which
Opportunities are listed on Exhibit A.
2.5 MASTER ALLIANCE AGREEMENT shall mean that certain Master Alliance
Agreement entered into between Chevron U.S.A. Inc., Chevron Chemical Company,
Chevron Pipeline
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Company and NGCC, Natural Gas Clearinghouse, Warren Petroleum Company, and ECI
as of _________, 1996.
2.6 MATERIAL CHANGE shall mean any change in any element of an Opportunity
that could reasonably be expected to affect the Opportunity significantly enough
to cause either Party, in accordance with commercially reasonable criteria, to
reassess its previous commercial assessment of the Opportunity.
2.7 MPSA shall mean this Master Power Service Agreement.
2.8 OPPORTUNITY or OPPORTUNITIES shall mean any proposed transaction that
includes the ability of a Party, whether on an initial or incremental basis, to:
(i) purchase, or facilitate the purchase of, Power from generating units or
contractual supply owned, controlled or operated by CUSA PRODUCTION, (ii) sell,
or facilitate the sale of, Power to facilities owned, controlled or operated by
CUSA PRODUCTION or to which CUSA PRODUCTION is contractually obligated to
supply; or (iii) participate in any existing and future market opportunities in
which CUSA PRODUCTION is involved during the term of this MPSA that involve the
sale, purchase, transmission, distribution and/or generation of Power; provided,
however, that this term shall only include proposed transactions described above
that would result in the sale, purchase, transmission, distribution and/or
generation of Power to, from, or over the facility or aggregated facilities
involved in the proposed transaction in an amount that exceeds an average rate
of 5 MW per hour over a representative period of time.
2.9 POWER shall mean electric energy and/or capacity and/or related
products and services.
2.10 TERM shall mean a period ending after a primary term of ten years,
commencing on the Effective Date, and year to year thereafter until terminated
by either Party at the end of the primary term, or at the end of any annual
period after the primary term, by giving the other Party at least one hundred
and eighty days prior written notice of termination; provided, that if
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CUSA PRODUCTION and ECI enter into any definitive agreements regarding the
purchase and/or sale of Power and associated services, such agreements shall
continue in full force and effect until terminated in accordance with the
provisions thereof.
III.
OPPORTUNITY PROTOCOL
3.1 OPPORTUNITY DESCRIPTIONS.
3.1.1 Promptly upon making an internal commitment to actively pursue an
Opportunity, but in no event later than 10 working days after making that
determination, the Party that has made such a commitment ("Presenting Party")
shall present to the other Party a written description of each Opportunity
("Opportunity Description") containing the elements set forth in Section 3.1.2
below. The Parties may expand or lessen the period by which the Presenting Party
will notify the other Party of an Opportunity by mutual written agreement.
Within fifteen working days of the Effective Date, CUSA PRODUCTION shall submit
Opportunity Descriptions for Existing Opportunities; this period shall be
referred to hereinafter as the "Existing Opportunity Description Period." The
Presenting Party shall include in the Opportunity Description a commercially
reasonable period, taking into consideration the expected time frame of the
Opportunity, by which the non-Presenting Party must notify the Presenting Party
whether or not the non-Presenting Party will pursue the Opportunity with the
Presenting Party ("Strike Period").
3.1.2 The Presenting Party shall include in each Opportunity Description a
thorough description of the Opportunity that, based on information available to
the Presenting Party in accordance with commercially reasonable practices,
includes without limitation the Presenting Party's assessment of the following
elements of the Opportunity:
A) proposed economics including projected cost savings, return on
capital investment, incremental economic impacts and market based
returns;
B) geographic, market, and operational scope; determined Opportunity
specifics including quantity, price that will be paid for, and
production costs of Power and/or related services that will be
purchased or soldOpportunity projections relating to quantity,
price, and production costs of Power;
D) market conditions relied upon in developing the Opportunity;
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E) any other material facts or assumptions relied upon in developing or
considering the Opportunity;
F) confidentiality requirements associated with the Opportunity;
G) the time frame of the Opportunity, including the date by which the
Opportunity is expected to become commercially beneficial and the
expected duration of the anticipated benefit;
H) the Presenting Party's goals with respect to the Opportunity, which
goals shall not contravene either Party's right to participate in an
Opportunity as stated herein; and
I) the effect of legal and regulatory conditions and the expected
effect of changes in legal and regulatory conditions on items A
through H aboveI) .
3.1.3 If the Presenting Party becomes aware of, or reasonably could be
expected to have become aware of, any Material Change to the Opportunity, the
Presenting Party shall promptly forward the other Party a redlined version of
the affected Opportunity Description showing the changes from the previous
Opportunity Description. The Presenting Party shall continue to update the
Opportunity Description for a particular Opportunity in accordance with the
conditions set forth in the preceding sentence until the earlier of (i) the
consummation of the Opportunity in the form of definitive executed agreements or
(ii) the Parties agree that such updates are no longer necessary. If either
Party opts out of participation in an Opportunity, but the other Party intends
to pursue the Opportunity ("Remaining Party"), the Remaining Party, regardless
of whether the Remaining Party is the Presenting Party with respect to the
Opportunity in question, shall report Material Changes to the other Party as
though the Remaining Party were the Presenting Party.
3.2 EXCLUSIVITY.
3.2.1 Prior to the expiration of the Strike Period relating to any
Opportunities for which CUSA PRODUCTION is the Presenting Party, CUSA PRODUCTION
shall not (i) enter into definitive negotiations with any third party to
participate in, develop, or otherwise further the purposes of an Opportunity
that has been described in an Opportunity Description or (ii) on its
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own accord, participate in, develop, or otherwise further the purposes of an
Opportunity that has been described in an Opportunity Description.
Notwithstanding the foregoing, during the Existing Opportunity Description
Period CUSA PRODUCTION shall be entitled to participate in, develop or otherwise
further the purposes of Existing Opportunities with third parties or on its own
accord in a manner that will not interfere with CUSA PRODUCTION's obligations
hereunder.
3.2.2 ECI shall not pursue any Opportunity described in an Opportunity
Description with any third party to the exclusion of CUSA PRODUCTION until CUSA
PRODUCTION has notified ECI that CUSA PRODUCTION does not intend to pursue the
Opportunity.
3.3 PARTICIPATION AND WAIVER THEREOF.
3.3.1 Prior to the expiration of the Strike Period for a particular
Opportunity, the non-Presenting Party shall notify the Presenting Party whether
the non-Presenting Party chooses to participate in the Opportunity with the
Presenting Party or opt out of participation. The non-Presenting Party shall
base the decision of whether it will or will not participate in an Opportunity
on the information provided in the Opportunity Descriptions, as modified by the
Presenting Party in accordance with the procedures set forth in Section 3.1, and
the non-Presenting Party's commercially reasonable determination that: (i) ECI
and CUSA PRODUCTION may benefit from participation in the Opportunity, (ii) the
non-Presenting Party's participation does not materially impede the Presenting
Party's stated and reasonable goals with respect to that Opportunity, which
goals shall not contravene either Party's right to participate in or derive
benefit from an Opportunity as stated herein, and (iii) the non-Presenting
Party's participation is allowed, or is expected to be allowed, by applicable
laws and regulations. These three criteria shall be referred to hereinafter as
the "Principles for Participation." Election by the non-Presenting Party to opt
out of an Opportunity shall not prohibit the Presenting Party from requesting
the non-Presenting Party to participate in that Opportunity at a later date.
3.3.2 If the non-Presenting Party chooses to participate in the
Opportunity, ECI and CUSA PRODUCTION shall use commercially reasonable efforts
to work together to develop the Opportunity until the earlier of the occurrence
of the following events: (i) the Opportunity
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has been consummated in the form of definitive executed agreements or (ii) the
non-Presenting Party opts out of participation (upon the Presenting Party's
request, which request shall include a commercially reasonable time by which the
non-Presenting Party must respond).
3.3.3 If ECI opts out of an Opportunity, CUSA PRODUCTION shall be free to
participate in, develop, or otherwise further the interests of the Opportunity
free from any obligations to ECI (other than CUSA PRODUCTION's continuing
obligation to notify ECI of any Material Change, as set forth in Section 3.1
above) until, in response to CUSA PRODUCTION's notification of a Material
Change, ECI determines, in a commercially reasonable manner in accordance with
the Principles of Participation, that ECI desires to participate in the
Opportunity. ECI's right to participate in an Opportunity, as described in the
preceding sentence, shall be referred to as a "Re-Entry Right." ECI shall notify
CUSA PRODUCTION in writing of ECI's intent to exercise the Re-Entry Right as
soon as commercially practicable upon discovering the occurrence of the Material
Change causing ECI to choose to participate in the Opportunity, which notice
shall be referred to hereinafter as the "Re-Entry Notice."
3.4 CONFIDENTIALITY OBLIGATIONS TO THIRD PARTIES. Neither Party shall enter into
an agreement with a third party that would in any way impede that Party's
obligation to provide the other Party information necessary to complete and
continually update Opportunity Descriptions without the other Party's prior
written consent, which consent shall not be withheld unreasonably. With respect
to existing agreements that restrict a Party from providing the information
necessary to complete and continually update Opportunity Descriptions ("Third
Party Confidentiality Agreements"), each Party shall fulfill its obligation to
provide the other Party with such information to the extent doing so does not
cause either Party to breach any Third Party Confidentiality Agreement. Each
Party shall use commercially reasonable efforts to obtain necessary and adequate
releases for the dissemination of information pertaining to Opportunities in
which that Party is currently involved.
3.5 SHARED BENEFITS. In addition to any terms and conditions that may be agreed
to with respect to any Opportunity contemplated hereunder, CUSA PRODUCTION shall
compensate
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ECI for the relative benefit or savings ECI causes the Opportunity to realize,
regardless of whether ECI actually participates in the Opportunity. ECI and CUSA
PRODUCTION shall agree upon the amount of such compensation on an
Opportunity-by-Opportunity basis.
3.6 MEETINGS OF POWER ALLIANCE. CUSA PRODUCTION and ECI shall each designate one
or more representatives as Power Alliance Coordinators ("PAC") who shall serve
as the primary points of contact for communication between the Parties for the
purposes of this MPSA. PACs from both Parties shall meet in Houston, Texas not
less than quarterly to identify and discuss potential and existing
Opportunities. The appropriate PACs from either Party may agree to alter the
location of any such meeting.
3.7 DISPUTE RESOLUTION. ECI and CUSA PRODUCTION shall promptly resolve any
dispute between ECI and CUSA PRODUCTION arising out of this MPSA, including
without limitation disputes regarding ECI's Re-Entry Right and ECI's
compensation for causing a benefit or savings, in accordance with the procedures
providing for dispute resolution in the Master Alliance Agreement.
IV.
REPORTING AND CONFIDENTIALITY
4.1 REPORTING. In connection with fulfilling the purposes of this MPSA, CUSA
PRODUCTION and ECI may be required by certain governmental entities to supply
information regarding ownership, operation, purchases, and sales of Power and/or
assets for the generation, transmission, and distribution of such. Each Party
shall cooperate with the other in the compilation and supply of such data.
4.2 CONFIDENTIALITY. Each Party and its Affiliates possesses confidential and
secret technical and business information pertaining to the Opportunities that
are the subject of this MPSA, which information, if designated in writing as
confidential shall be referred to as "Confidential Information."
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A. Each Party will use Confidential Information only for evaluation of
Opportunities as defined above. Confidential Information, which may have
been provided as part of an evaluation process, but which is not necessary
to provide continuing service under an arrangement, shall be returned to
the Party that originally submitted it. Confidential Information that is in
electronic form or converted by the receiving party into electronic form
shall be destroyed and certified as destroyed by the receiving party.
B. Each Party shall keep Confidential Information confidential during the
term of this MPSA, unless otherwise agreed with respect to a particular
transaction. Notwithstanding the foregoing, either Party may disclose the
Confidential Information to (i) those of its officers, directors,
employees, legal advisors, Affiliates, consultants, or financing entities
who, in the receiving party's reasonable judgment, need access to the
Confidential Information to further the purposes of this MPSA and (ii) any
governmental authorities as may be legally required by such authority.
Notwithstanding the foregoing, prior to either Party's disclosure of
Confidential Information to any Affiliates, consultants or financing
entities, the party desiring to disclose the Confidential Information will
first obtain the other Party's prior written consent. Each Party
understands that with regard to such consent, the other Party will
generally require that the proposed recipient of Confidential Information
enter into a separate confidentiality agreement directly with the Party
whose Confidential Information is being disclosed before such consent is
given. Such an agreement shall be substantially in the form attached hereto
as Exhibit B. If either Party is required by a governmental authority to
disclose Confidential Information (a) to the extent possible, all proposed
disclosures shall be provided to the other Party in advance for review and
approval, such approval not to be unreasonably withheld, and (b) if such
public or permitting agency is subject to laws and regulations by which the
agency can keep information disclosed to it secret and confidential, each
Party, as appropriate, shall take all reasonable steps necessary to obtain
the protection of such laws and regulations so as to maintain the secrecy
and confidentiality of the information disclosed.
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C. If either Party becomes compelled by administrative action or court
order to disclose any of the Confidential Information or if either Party is
notified that any Confidential Information is the subject of a Freedom of
Information Act request, the receiving Party shall provide the disclosing
Party with notice of that requirement or request in a timely manner so that
the disclosing Party may seek a protective order or other appropriate
remedy at its own risk and expense. The disclosing Party will cooperate
with the receiving Party's counsel to enable the receiving Party (at the
receiving Party's expense) to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information required to be disclosed. If such protective order or other
remedy is not obtained, the receiving Party will furnish only that portion
of the Confidential Information that is required to comply with the
administrative action or court order.
D. The provisions of paragraphs A, B, and C above shall not apply to any
portion of Confidential Information:
(i) that was developed by the receiving Party and was in its possession
prior to the receiving Party's first receipt of the same, either
directly or indirectly, from the disclosing Party,
(ii) that is acquired by the receiving Party from persons that are not
known by the receiving Party to be under an obligation of secrecy
(whether legal or contractual) to the disclosing Party or an Affiliate
and that are not affiliated companies of the disclosing Party;
(iii) that is now, or hereafter becomes, through no act or failure to
act on the receiving Party's part, part of the public domain; and
provided, however, that the occurrence of (i), (ii), or (iii) above
shall not be construed to grant to either Party any rights, express or
implied, under any patents, trade secrets, or copyrights licensable by
the other Party or its Affiliates.
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V.
REPRESENTATIONS AND WARRANTIES
5.1 Each Party represents and warrants to the other Party as of the date hereof
as follows:
(A) STATUS AND AUTHORITY. Each Party has full power and authority to
execute and be bound by this MPSA, to carry out its obligations in accordance
with the terms and provisions hereof, and to enter into the necessary agreements
to fulfill each Party's obligations hereunder. The execution, delivery and
performance of this MPSA have been duly authorized by all requisite corporate
actions on the part of such Party or such Party's corporate parents. This MPSA
constitutes the valid and legally binding obligation of such Party, enforceable
against it and its Affiliates in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and other similar laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (whether enforced
at law or in equity).
(B) NO BREACH OR DEFAULT. The execution, delivery and performance by each
Party of this MPSA and the transactions contemplated hereby will not constitute
a breach of any term or provision of, or a default under (i) any outstanding
indenture, mortgage, loan agreement or other contract or agreement to which such
Party is a party or its property is bound, (ii) its organizational documents,
(iii) any law, rule or regulation, or (iv) any order, writ, judgment or decree
having applicability to it.
(C) COMPLIANCE WITH APPLICABLE LAWS. This Agreement is made expressly
subject to, and each Party expressly agrees to comply with and abide by, all of
the laws of the United States and of the State and any political subdivision
insofar as the same may be applicable to such Party's performance under this
MPSA, including all rules and regulations now existing or that may be hereafter
promulgated under and in accordance with any such law or laws.
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(D) GOVERNMENT APPROVALS. There is no proceeding pending, or to the best of
each Party's knowledge, threatened against it that seeks, or may be reasonably
expected to rescind, terminate, modify or suspend any government approval
necessary for the performance of any obligation by such Party hereunder.
(E) LITIGATION. There are no pending or, to the best of its knowledge,
threatened legal actions, suits or arbitration or other proceedings before any
governmental authority against or affecting such Party or any of its Affiliates
with respect to the subject matter of this Agreement or its ability to perform
any of its obligations hereunder.
VI.
MISCELLANEOUS
6.1 INDEMNITY. Each Party hereby agrees to defend, indemnify and hold the other
Party, its subsidiaries, Affiliates, directors, officers, employees and agents
of each of them harmless from any and all liabilities, claims, penalties,
demands, fines, forfeitures, suits, causes of action or damages, which may arise
or accrue because of failure or neglect of such Party or its subcontractors to
comply, either directly or indirectly, with any laws and/or regulations
applicable to such Party's performance under this Agreement.
6.2 ASSIGNMENT. This MPSA shall be binding upon and shall inure to the benefit
of the Parties hereto and their respective successors and assigns. This MPSA
shall not be assignable by either Party without the prior written consent of the
other.
6.3 RECORDS. Each Party shall maintain a true and correct set of records
pertaining to all activities relating to its performance of this MPSA and all
transactions related thereto for a period of not less than two (2) years after
termination of this MPSA. Any Party, at is own expense, may audit the records of
the other Party during reasonable business hours during the Term of this MPSA
and during the two (2) year period after termination.
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6.4 NOTICE. Whenever a provision is made in this MPSA for the giving of any
notice, such notice shall be deemed to have been given if faxed, personally
delivered or if mailed by United States mail, addressed to the Party entitled to
receive same at the address indicated below, or at such other address as shall
be provided from time to time. Notice shall be deemed to have been received when
sent, if faxed, and three (3) business days after the date on which such notice
was mailed.
NOTICE TO ECI:
Electric Clearinghouse, Inc.
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Telephone: 713/507-6500
Facsimile: 713/507-6505
NOTICE TO CUSA PRODUCTION:
Chevron U.S.A. Inc. Midstream Unit
1301 McKinney
P.O. Box 2100
Houston, Texas 77252
6.5 PRESS RELEASES. No publicity or public announcement regarding the
transactions contemplated by this MPSA may be released without the prior consent
of the Parties. This provision will be understood to allow discussion by the
Parties in advance of public announcements.
6.6 COUNTERPARTS. This MPSA may be executed by the Parties in any number of
counterparts, which, taken together, shall constitute one and the same legally
binding instrument.
6.7 ENTIRE AGREEMENT. This MPSA sets forth the entire agreement between the
Parties as to the subject matter of this MPSA and any and all prior or
contemporaneous proposals, negotiation, agreements, commitments and
representations, oral and written are merged herein. This MPSA may not be
modified or amended except by means of a writing duly executed by the Parties
subsequent to the date hereof that states its intent to amend this MPSA.
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6.8 WAIVER. The right of any Party to require strict performance by the other
Party of any or all obligations imposed upon such other Party by this MPSA shall
not in any way be affected by previous waiver, forbearance or course of dealing.
6.9 RELATIONSHIP. Notwithstanding any implication herein to the contrary, this
MPSA does not create and shall not be deemed to create a partnership, company,
joint venture or any other entity or similar legal relationship between the
Parties. No Party is or shall act as or be deemed or represent themselves to be
the agent or representative of the other except as permitted in under a specific
agreement.
6.10 GOVERNING LAW AND VENUE. THIS MPSA SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. THE EXCLUSIVE JURISDICTION FOR ANY ACTION
ARISING HEREUNDER SHALL BE IN THE COURTS OF HARRIS COUNTY, TEXAS.
6.11 HEADINGS. The headings contained in this MPSA are for reference purposes
only and shall not effect in any way the meaning or interpretation of this MPSA.
6.12 NO RECOURSE. Notwithstanding any of the terms or provisions of this MPSA to
the contrary, each of the Parties hereto agrees that neither it nor any person
acting on its behalf may assert any claim or cause of action against any officer
or director of any other Party hereto in connection with or arising out of this
MPSA or any of the transactions contemplated hereby.
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6.13 LIMITATION OF DAMAGES. In no event shall either Party be liable for
punitive, exemplary, consequential or incidental damages arising from any breach
or default under this MPSA or from any act or omission under or in connection
with this MPSA or any of the transactions contemplated hereunder.
6.14 REGULATORY AUTHORITY. Each Party shall obtain and maintain all regulatory
orders and authorizations necessary for it to perform its obligations hereunder.
Each Party further agrees to perform its respective obligations hereunder in
compliance with all applicable laws, regulations and orders of governmental
entities having proper jurisdiction.
6.15 NON-UTILITY STATUS. Each Party agrees that it will not cause the other
Party to become regulated as a public utility or similar entity pursuant to
state or federal laws. To the extent this Agreement contemplates transactions
involving assets, such transactions shall not be construed as a dedication of
any part of either Party's assets to the public. If any third party brings an
action before any regulatory body seeking a decision that transactions
contemplated hereunder subjects either Party to regulation as a public utility
or similar entity, CUSA PRODUCTION and ECI shall promptly restructure any
transactions arising out of this MPSA in a mutually satisfactory manner to the
extent necessary to avoid implementation of such regulation.
IN WITNESS WHEREOF, this MPSA is executed on the ____ day of ________,
1996.
"ECI" "CUSA PRODUCTION"
ELECTRIC CLEARINGHOUSE, INC. CHEVRON U.S.A PRODUCTION
COMPANY, A DIVISION OF
CHEVRON U.S.A. INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
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EXHIBIT A
As of the Effective Date, Chevron U.S.A. Production Company has not made an
internal commitment to pursue any Opportunities.
2
EXHIBIT B
[BRACKETED SECTIONS ARE OPTIONAL, ALTERNATIVE, OR TO BE FILLED IN]
[DATE]
[ADDRESSEE]
Confidentiality Agreement
[NAME OR BRIEF DESCRIPTION OF OPPORTUNITY]
[LOCATION OF OPPORTUNITY]
[DEAR ____;.]:
[THE DISCLOSING PARTY] (the "Disclosing Party") possesses certain confidential
and proprietary ideas, information and data ("Data and Information") relating to
a certain business opportunity involving the potential purchase, sale,
transmission, distribution, and/or generation of electric power ("Opportunity"),
which Data and Information is considered by the Disclosing Party to be secret
and confidential and to constitute a valuable commercial asset. You wish to
[STATE PURPOSE OF DISCLOSURE, E.G., PROVIDE SERVICES RELATED TO THE OPPORTUNITY]
and the Disclosing Party is willing, subject to the terms and conditions hereof,
to disclose the Data and Information to you for that Purpose. In consideration
for the Disclosing Party's willingness to disclose to you such Data and
Information, you hereby agree that such disclosure shall be subject to the
following terms and conditions:
1. Data and Information shall include any and all confidential or proprietary
ideas, information and data supplied by the Disclosing Party to you in writing,
orally or by observation, including, but not limited to, [COPIES OR ORIGINALS
DATA, MODELS, ANALYSES, ESTIMATES OF POTENTIAL RETURNS, INTERPRETATIONS AND
CONTRACTUAL AND FINANCIAL INFORMATION] confidential to the Disclosing Party, and
any other information relating to the Purpose.
2. Data and Information shall not include any ideas, data or information which:
(a) was or becomes generally available to the public other than as a result of
an act or failure to act by you, or your employees or representatives; or (b)
was known to you on a non-confidential basis prior to disclosure to you by
Chevron; or (c) becomes available to you on a non-confidential basis from a
source (other than the Disclosing Party) which is permitted to disclose the
same; or (d) was already in your possession or to which you were otherwise
entitled at the time of disclosure. It is understood and agreed that data and
information referred to in this Section 2 are not subject to the terms of this
Agreement and may be used and/or disclosed to third parties by you.
3
3. You shall receive and maintain such Data and Information in confidence and
you shall make all reasonable efforts to prevent disclosure to others. You shall
not use the Data or Information except for the Purpose set out above. You shall
not disclose, show or otherwise release such Data and Information to any third
party, including consultants or advisors, without the Disclosing Party's prior
written consent. Should your evaluation require you to disclose Data and
Information to outside agents, consultants, representatives or advisors, then
you must seek the Disclosing Party's prior consent for such disclosure, which
consent shall be at the Disclosing Party's sole discretion. If consent to such
disclosure is granted, you shall ensure that each such third party agrees in
writing prior to such disclosure to keep the Data and Information confidential
to the same extent as you are obliged to under this Agreement.
4. You agree to keep all such Data and Information strictly secret and
confidential, and, to that end, without limiting the generality of the
foregoing, to prevent unauthorized use or reproduction of the Data and
Information, and to take all precautions to preserve the secrecy and
confidentiality of such Data and Information among your employees having access
to any portion of such Data and Information, and to assume the responsibility
that such employees will preserve the secrecy and confidentiality of such Data
and Information with respect to third parties. Such Data and Information shall
only be revealed to your employees who have a need to know such Data and
Information for the Purpose specified above.
5. You shall not make any copies, excerpts or in any way reproduce any of the
Data and Information without the Disclosing Party's prior written consent. If
reproductions are permitted in accordance with this Section, each reproduction
shall be appropriately marked to show that it contains the Disclosing Party's
proprietary information.
6. You shall promptly return to the Disclosing Party all Data and Information,
as well as any reproductions or excerpts therefrom and any notes, summaries or
compilations thereof without retaining any copies thereof.
7. If you, or your representatives, are required by any court or legislative or
administrative body (by oral questions, depositions, interrogatories, requests
for information or documents, subpoena, Civil Investigation Demand, or any
similar process) to disclose any Data and Information, you shall provide the
Disclosing Party with prompt notice of such requirement in order to afford the
Disclosing Party an opportunity to seek a protective order or other appropriate
remedy and/or to waive compliance with the terms of this Agreement. However, if
the Disclosing Party is unable to obtain or does not seek such protective order,
or if the Disclosing Party waives compliance with the terms hereof, you or your
representatives agree to provide only that limited portion of the Data and
Information that you are advised by written opinion of counsel is legally
required and to exercise your best efforts to obtain assurance that confidential
treatment will be accorded such Data and Information.
8. The Disclosing Party makes no representations or warranties, express or
implied, statutory or otherwise, as to, or in any way with respect to, validity,
accuracy or completeness of, any data and information (whether Data and
Information or other data and information) imparted or otherwise obtained by you
during the course of any review or thereafter, or any condition
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or aspect thereof, whether such data and information/Data and Information is
acquired in conversation with the Disclosing Party's employees or as a result of
viewing written materials and documents covering or affecting, directly or
indirectly, the Opportunity. Neither the Disclosing Party, nor any of its
affiliates, directors, officers, employees, agents or consultants shall have any
liability whatsoever with respect to the use of any data and information
(whether Data and Information or other data and information) furnished under
this Agreement. Any decision or action taken by you with respect to your
evaluation of Data and Information shall be based solely on your independent
judgment.
9. You shall release and forever defend, indemnify and hold the Disclosing
Party, its parent corporations, subsidiaries and affiliates, directors,
officers, employees, agents and consultants, harmless from and against any claim
as to the lack of completeness or accuracy of any data and information disclosed
(whether Data and Information or other data and information), and you shall
further release and forever defend, indemnify and hold the Disclosing Party, its
parent corporations, subsidiaries and affiliates, directors, officers,
employees, agents and consultants harmless from and against all responsibility
and/or liability for any conclusions that are derived from any such disclosed
data and information (whether Data and Information or other data and
information). "Affiliate" in relation to a Party to this Agreement means
[Chevron U.S.A. Production Company or Electric Clearinghouse, Inc., as
appropriate] and any person, partnership or corporation which (i) is controlled
by that Party; (ii) is controlled by another corporation which also controls
that Party; or (iii) controls that Party, where "control" and "controlled" mean
direct or indirect ownership of 50% or more of the stock having a right to vote
for directors.
10. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, permitted assigns,
affiliates, officers and employees for a period of ____ years from the effective
date hereof.
11. This Agreement comprises our full and complete agreement with respect to
disclosure of the Data and Information and replaces and supersedes all prior
communications, understandings and agreements between us, whether written,
express or implied. Any purported modification or amendment hereto shall be
binding on the Parties only if same is in writing, is executed by an authorized
representative of each party hereto and expressly refers to this Agreement.
12. Your rights hereunder may not be assigned without the Disclosing Party's
prior written consent.
13. This Agreement is effective as of the date set out at the top of this
Agreement.
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If the foregoing correctly sets forth your understanding of our agreement,
please so indicate by signing in the space below and returning both executed
copies for our signature.
Very truly yours,
[THE DISCLOSING PARTY]
EXHIBIT 10.52
THIS MASTER POWER SERVICE AGREEMENT (the "MPSA"), made and entered into
this 1st day of ______, 1996, ("Effective Date") by and between Electric
Clearinghouse, Inc., a Texas corporation, hereinafter referred to as "ECI", and
Chevron Chemical Company, a Delaware corporation, hereinafter referred to as
"CCC". ECI and CCC may be referred to herein individually as "Party" or
collectively as the "Parties".
I.
RECITALS
1.1 CCC currently (A) owns or controls (i) certain Power generation,
distribution and transmission facilities and may in the future own or control
additional Power generation, distribution and transmission facilities and (ii)
facilities that consume Power and may in the future own or control additional
facilities that consume Power and (B) intends to pursue market opportunities
that involve the sale, purchase, transmission, distribution and/or generation of
Power in a manner that will not subject CCC to state or federal jurisdiction, as
set forth in more detail in Section 6.15 below.
1.2 The Parties desire that ECI have the opportunity, as more fully
described herein, to: (i) purchase Power from generating units or contractual
supply owned, controlled or operated by CUSA, (ii) supply Power to facilities
owned, controlled or operated by CUSA or to which CUSA is contractually
obligated to supply; and (iii) participate in any existing and future market
opportunities in which CUSA is involved during the term of this MPSA that
involve the sale, purchase, transmission, distribution and/or generation of
Power.
1.3 The Parties recognize that current laws, regulations and market
conditions render certain opportunities non-feasible or otherwise not
commercially beneficial to either Party, but anticipate that throughout the Term
laws, regulations and market conditions will change such that opportunities will
become feasible and commercially beneficial to either Party.
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1.4 The Parties desire to specify terms and conditions under which the
Parties will participate in Opportunities, as defined below.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
conditions herein contained, CCC and ECI hereby agree as follows:
II.
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply hereunder:
2.1 AFFILIATE shall mean with respect to any person, any other person
(other than an individual) that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. For purposes of this definition, "control" means the direct or
indirect ownership of more than fifty percent (50%) of the outstanding capital
stock or other equity interests having ordinary voting power.
2.2 CCC shall mean Chevron Chemical Company, excluding any operations
outside of Hawaii and the lower forty eight states of the United States.
2.3 CEDAR BAYOU/MONT BELVIEU TRANSACTION shall mean the transaction, as
contemplated by CCC (or an Affiliate) as of the Effective Date, to develop a
cogeneration facility that will generate approximately 180 MW and will be sited
at either CCC's Cedar Bayou, Texas facility or Warren Petroleum Company's Mont
Belvieu facility, as well as any transactions arising directly out of the
development of that facility that would otherwise qualify as Opportunities
hereunder.
2.4 EFFECTIVE DATE shall mean the date first written above.
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2.5 EXISTING OPPORTUNITY shall mean an Opportunity for which a Party has
made an internal commitment to pursue as of the Effective Date, which
Opportunities are listed on Exhibit A.
2.6 MASTER ALLIANCE AGREEMENT shall mean that certain Master Alliance
Agreement entered into between Chevron U.S.A. Inc., Chevron Chemical Company,
Chevron Pipeline Company and NGCC, Natural Gas Clearinghouse, Warren Petroleum
Company, and ECI as of _________, 1996.
2.7 MATERIAL CHANGE shall mean any change in any element of an Opportunity
that could reasonably be expected to affect the Opportunity significantly enough
to cause either Party, in accordance with commercially reasonable criteria, to
reassess its previous commercial assessment of the Opportunity.
2.8 MPSA shall mean this Master Power Service Agreement.
2.9 OPPORTUNITY or OPPORTUNITIES shall mean any proposed transaction that
includes the ability of a Party, whether on an initial or incremental basis, to:
(i) purchase, or facilitate the purchase of, Power from generating units or
contractual supply owned, controlled or operated by CCC, (ii) sell, or
facilitate the sale of, Power to facilities owned, controlled or operated by CCC
or to which CCC is contractually obligated to supply; or (iii) participate in
any existing and future market opportunities in which CCC is involved during the
term of this MPSA that involve the sale, purchase, transmission, distribution
and/or generation of Power; provided, however, that this term shall only include
proposed transactions described above that would result in the sale, purchase,
transmission, distribution and/or generation of Power to, from, or over the
facility or aggregated facilities involved in the proposed transaction in an
amount that exceeds an average rate of 5 MW per hour over a representative
period of time. Notwithstanding the foregoing, the term "Opportunity" shall not
include any transactions initiated directly in connection with the initial
development of the Cedar Bayou/Mont Belvieu Transaction until and to the extent
such transactions have expired or terminated .
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2.10 POWER shall mean electric energy and/or capacity and/or related
products and services.
2.11 TERM shall mean a period ending after a primary term of ten years,
commencing on the Effective Date, and year to year thereafter until terminated
by either Party at the end of the primary term, or at the end of any annual
period after the primary term, by giving the other Party at least one hundred
and eighty days prior written notice of termination; provided, that if CCC and
ECI enter into any definitive agreements regarding the purchase and/or sale of
Power and associated services, such agreements shall continue in full force and
effect until terminated in accordance with the provisions thereof.
III.
OPPORTUNITY PROTOCOL
3.1 OPPORTUNITY DESCRIPTIONS.
3.1.1 Promptly upon making an internal commitment to actively pursue an
Opportunity, but in no event later than 10 working days after making that
determination, the Party that has made such a commitment ("Presenting Party")
shall present to the other Party a written description of each Opportunity
("Opportunity Description") containing the elements set forth in Section 3.1.2
below. The Parties may expand or lessen the period by which the Presenting Party
will notify the other Party of an Opportunity by mutual written agreement.
Within fifteen working days of the Effective Date, CCC shall submit Opportunity
Descriptions for Existing Opportunities; this period shall be referred to
hereinafter as the "Existing Opportunity Description Period." The Presenting
Party shall include in the Opportunity Description a commercially reasonable
period, taking into consideration the expected time frame of the Opportunity, by
which the non-Presenting Party must notify the Presenting Party whether or not
the non-Presenting Party will pursue the Opportunity with the Presenting Party
("Strike Period").
3.1.2 The Presenting Party shall include in each Opportunity Description a
thorough description of the Opportunity that, based on information available to
the Presenting Party in accordance with commercially reasonable practices,
includes without limitation the Presenting Party's assessment of the following
elements of the Opportunity:
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A) proposed economics including projected cost savings, return on
capital investment, incremental economic impacts and market based
returns;
B) geographic, market, and operational scope; determined Opportunity
specifics including quantity, price that will be paid for, and
production costs of Power and/or related services that will be
purchased or soldOpportunity projections relating to quantity,
price, and production costs of Power;
D) market conditions relied upon in developing the Opportunity;
E) any other material facts or assumptions relied upon in developing
or considering the Opportunity;
F) confidentiality requirements associated with the Opportunity;
G) the time frame of the Opportunity, including the date by which the
Opportunity is expected to become commercially beneficial and the
expected duration of the anticipated benefit;
H) the Presenting Party's goals with respect to the Opportunity,
which goals shall not contravene either Party's right to
participate in an Opportunity as stated herein; and
I) the effect of legal and regulatory conditions and the expected
effect of changes in legal and regulatory conditions on items A
through H above I) .
3.1.3 If the Presenting Party becomes aware of, or reasonably could be
expected to have become aware of, any Material Change to the Opportunity, the
Presenting Party shall promptly forward the other Party a redlined version of
the affected Opportunity Description showing the changes from the previous
Opportunity Description. The Presenting Party shall continue to update the
Opportunity Description for a particular Opportunity in accordance with the
conditions set forth in the preceding sentence until the earlier of (i) the
consummation of the Opportunity in the form of definitive executed agreements or
(ii) the Parties agree that such updates are no longer necessary. If either
Party opts out of participation in an Opportunity, but the other Party intends
to pursue the Opportunity ("Remaining Party"), the Remaining Party, regardless
of whether the Remaining Party is the Presenting Party with respect to the
Opportunity in question, shall report Material Changes to the other Party as
though the Remaining Party were the Presenting Party.
5
3.2 EXCLUSIVITY.
3.2.1 Prior to the expiration of the Strike Period relating to any
Opportunities for which CCC is the Presenting Party, CCC shall not (i) enter
into definitive negotiations with any third party to participate in, develop, or
otherwise further the purposes of an Opportunity that has been described in an
Opportunity Description or (ii) on its own accord, participate in, develop, or
otherwise further the purposes of an Opportunity that has been described in an
Opportunity Description. Notwithstanding the foregoing, during the Existing
Opportunity Description Period CCC shall be entitled to participate in, develop
or otherwise further the purposes of Existing Opportunities with third parties
or on its own accord in a manner that will not interfere with CCC's obligations
hereunder.
3.2.2 ECI shall not pursue any Opportunity described in an Opportunity
Description with any third party to the exclusion of CCC until CCC has notified
ECI that CCC does not intend to pursue the Opportunity.
3.3 PARTICIPATION AND WAIVER THEREOF.
3.3.1 Prior to the expiration of the Strike Period for a particular
Opportunity, the non-Presenting Party shall notify the Presenting Party whether
the non-Presenting Party chooses to participate in the Opportunity with the
Presenting Party or opt out of participation. The non-Presenting Party shall
base the decision of whether it will or will not participate in an Opportunity
on the information provided in the Opportunity Descriptions, as modified by the
Presenting Party in accordance with the procedures set forth in Section 3.1, and
the non-Presenting Party's commercially reasonable determination that: (i) ECI
and CCC may benefit from participation in the Opportunity, (ii) the
non-Presenting Party's participation does not materially impede the Presenting
Party's stated and reasonable goals with respect to that Opportunity, which
goals shall not contravene either Party's right to participate in or derive
benefit from an Opportunity as stated herein, and (iii) the non-Presenting
Party's participation is allowed, or is expected to be allowed, by applicable
laws and regulations. These three criteria shall be referred to hereinafter as
the "Principles for Participation." Election by the non-Presenting Party to opt
out of an Opportunity shall not prohibit the Presenting Party from requesting
the non-Presenting Party to participate in that Opportunity at a later date.
6
3.3.2 If the non-Presenting Party chooses to participate in the
Opportunity, ECI and CCC shall use commercially reasonable efforts to work
together to develop the Opportunity until the earlier of the occurrence of the
following events: (i) the Opportunity has been consummated in the form of
definitive executed agreements or (ii) the non-Presenting Party opts out of
participation (upon the Presenting Party's request, which request shall include
a commercially reasonable time by which the non-Presenting Party must respond).
3.3.3 If ECI opts out of an Opportunity, CCC shall be free to participate
in, develop, or otherwise further the interests of the Opportunity free from any
obligations to ECI (other than CCC's continuing obligation to notify ECI of any
Material Change, as set forth in Section 3.1 above) until, in response to CCC's
notification of a Material Change, ECI determines, in a commercially reasonable
manner in accordance with the Principles of Participation, that ECI desires to
participate in the Opportunity. ECI's right to participate in an Opportunity, as
described in the preceding sentence, shall be referred to as a "Re-Entry Right."
ECI shall notify CCC in writing of ECI's intent to exercise the Re-Entry Right
as soon as commercially practicable upon discovering the occurrence of the
Material Change causing ECI to choose to participate in the Opportunity, which
notice shall be referred to hereinafter as the "Re-Entry Notice."
3.4 CONFIDENTIALITY OBLIGATIONS TO THIRD PARTIES. Neither Party shall enter into
an agreement with a third party that would in any way impede that Party's
obligation to provide the other Party information necessary to complete and
continually update Opportunity Descriptions without the other Party's prior
written consent, which consent shall not be withheld unreasonably. With respect
to existing agreements that restrict a Party from providing the information
necessary to complete and continually update Opportunity Descriptions ("Third
Party Confidentiality Agreements"), each Party shall fulfill its obligation to
provide the other Party with such information to the extent doing so does not
cause either Party to breach any Third Party Confidentiality Agreement. Each
Party shall use commercially reasonable efforts to obtain necessary and adequate
releases for the dissemination of information pertaining to Opportunities in
which that Party is currently involved.
7
3.5 SHARED BENEFITS. In addition to any terms and conditions that may be agreed
to with respect to any Opportunity contemplated hereunder, CCC shall compensate
ECI for the relative benefit or savings ECI causes the Opportunity to realize,
regardless of whether ECI actually participates in the Opportunity. ECI and CCC
shall agree upon the amount of such compensation on an
Opportunity-by-Opportunity basis.
3.6 MEETINGS OF POWER ALLIANCE. CCC and ECI shall each designate one or more
representatives as Power Alliance Coordinators ("PAC") who shall serve as the
primary points of contact for communication for between the Parties for the
purposes of this MPSA. PACs from both Parties shall meet in Houston, Texas not
less than quarterly to identify and discuss potential and existing
Opportunities. The appropriate PACs from either Party may agree to alter the
location of any such meeting.
3.7 DISPUTE RESOLUTION. ECI and CCC shall promptly resolve any dispute between
ECI and CCC arising out of this MPSA, including without limitation disputes
regarding ECI's Re-Entry Right and ECI's compensation for causing a benefit or
savings, in accordance with the procedures providing for dispute resolution in
the Master Alliance Agreement.
IV.
REPORTING AND CONFIDENTIALITY
4.1 REPORTING. In connection with fulfilling the purposes of this MPSA, CCC and
ECI may be required by certain governmental entities to supply information
regarding ownership, operation, purchases, and sales of Power and/or assets for
the generation, transmission, and distribution of such. Each Party shall
cooperate with the other in the compilation and supply of such data.
4.2 CONFIDENTIALITY. Each Party and its Affiliates possesses confidential and
secret technical and business information pertaining to the Opportunities that
are the subject of this MPSA, which information, if designated in writing as
confidential shall be referred to as "Confidential Information."
8
A. Each Party will use Confidential Information only for evaluation of
Opportunities as defined above. Confidential Information, which may have
been provided as part of an evaluation process, but which is not necessary
to provide continuing service under an arrangement, shall be returned to
the Party that originally submitted it. Confidential Information that is in
electronic form or converted by the receiving party into electronic form
shall be destroyed and certified as destroyed by the receiving party.
B. Each Party shall keep Confidential Information confidential during the
term of this MPSA, unless otherwise agreed with respect to a particular
transaction. Notwithstanding the foregoing, either Party may disclose the
Confidential Information to (i) those of its officers, directors,
employees, legal advisors, Affiliates, consultants, or financing entities
who, in the receiving party's reasonable judgment, need access to the
Confidential Information to further the purposes of this MPSA and (ii) any
governmental authorities as may be legally required by such authority.
Notwithstanding the foregoing, prior to either Party's disclosure of
Confidential Information to any Affiliates, consultants or financing
entities, the party desiring to disclose the Confidential Information will
first obtain the other Party's prior written consent. Each Party
understands that with regard to such consent, the other Party will
generally require that the proposed recipient of Confidential Information
enter into a separate confidentiality agreement directly with the Party
whose Confidential Information is being disclosed before such consent is
given. Such an agreement shall be substantially in the form attached hereto
as Exhibit B. If either Party is required by a governmental authority to
disclose Confidential Information (a) to the extent possible, all proposed
disclosures shall be provided to the other Party in advance for review and
approval, such approval not to be unreasonably withheld, and (b) if such
public or permitting agency is subject to laws and regulations by which the
agency can keep information disclosed to it secret and confidential, each
Party, as appropriate, shall take all reasonable steps necessary to obtain
the protection of such laws and regulations so as to maintain the secrecy
and confidentiality of the information disclosed.
9
C. If either Party becomes compelled by administrative action or court
order to disclose any of the Confidential Information or if either Party is
notified that any Confidential Information is the subject of a Freedom of
Information Act request, the receiving Party shall provide the disclosing
Party with notice of that requirement or request in a timely manner so that
the disclosing Party may seek a protective order or other appropriate
remedy at its own risk and expense. The disclosing Party will cooperate
with the receiving Party's counsel to enable the receiving Party (at the
receiving Party's expense) to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information required to be disclosed. If such protective order or other
remedy is not obtained, the receiving Party will furnish only that portion
of the Confidential Information that is required to comply with the
administrative action or court order.
D. The provisions of paragraphs A, B, and C above shall not apply to any
portion of Confidential Information:
(i) that was developed by the receiving Party and was in its possession
prior to the receiving Party's first receipt of the same, either
directly or indirectly, from the disclosing Party,
(ii) that is acquired by the receiving Party from persons that are not
known by the receiving Party to be under an obligation of secrecy
(whether legal or contractual) to the disclosing Party or an Affiliate
and that are not affiliated companies of the disclosing Party;
(iii) that is now, or hereafter becomes, through no act or failure to
act on the receiving Party's part, part of the public domain; and
provided, however, that the occurrence of (i), (ii), or (iii) above
shall not be construed to grant to either Party any rights, express or
implied, under any patents, trade secrets, or copyrights licensable by
the other Party or its Affiliates.
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V.
REPRESENTATIONS AND WARRANTIES
5.1 Each Party represents and warrants to the other Party as of the date hereof
as follows:
(A) STATUS AND AUTHORITY. Each Party has full power and authority to
execute and be bound by this MPSA, to carry out its obligations in accordance
with the terms and provisions hereof, and to enter into the necessary agreements
to fulfill each Party's obligations hereunder. The execution, delivery and
performance of this MPSA have been duly authorized by all requisite corporate
actions on the part of such Party or such Party's corporate parents. This MPSA
constitutes the valid and legally binding obligation of such Party, enforceable
against it and its Affiliates in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and other similar laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (whether enforced
at law or in equity).
(B) NO BREACH OR DEFAULT. The execution, delivery and performance by each
Party of this MPSA and the transactions contemplated hereby will not constitute
a breach of any term or provision of, or a default under (i) any outstanding
indenture, mortgage, loan agreement or other contract or agreement to which such
Party is a party or its property is bound, (ii) its organizational documents,
(iii) any law, rule or regulation, or (iv) any order, writ, judgment or decree
having applicability to it.
(C) COMPLIANCE WITH APPLICABLE LAWS. This Agreement is made expressly
subject to, and each Party expressly agrees to comply with and abide by, all of
the laws of the United States and of the State and any political subdivision
insofar as the same may be applicable to such Party's performance under this
MPSA, including all rules and regulations now existing or that may be hereafter
promulgated under and in accordance with any such law or laws.
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(D) GOVERNMENT APPROVALS. There is no proceeding pending, or to the best of
each Party's knowledge, threatened against it that seeks, or may be reasonably
expected to rescind, terminate, modify or suspend any government approval
necessary for the performance of any obligation by such Party hereunder.
(E) LITIGATION. There are no pending or, to the best of its knowledge,
threatened legal actions, suits or arbitration or other proceedings before any
governmental authority against or affecting such Party or any of its Affiliates
with respect to the subject matter of this Agreement or its ability to perform
any of its obligations hereunder.
VI.
MISCELLANEOUS
6.1 INDEMNITY: Each Party hereby agrees to defend, indemnify and hold the other
Party, its subsidiaries, Affiliates, directors, officers, employees and agents
of each of them harmless from any and all liabilities, claims, penalties,
demands, fines, forfeitures, suits, causes of action or damages, which may arise
or accrue because of failure or neglect of such Party or its subcontractors to
comply, either directly or indirectly, with any laws and/or regulations
applicable to such Party's performance under this Agreement.
6.2 ASSIGNMENT. This MPSA shall be binding upon and shall inure to the benefit
of the Parties hereto and their respective successors and assigns. This MPSA
shall not be assignable by either Party without the prior written consent of the
other.
6.3 RECORDS. Each Party shall maintain a true and correct set of records
pertaining to all activities relating to its performance of this MPSA and all
transactions related thereto for a period of not less than two (2) years after
termination of this MPSA. Any Party, at is own expense, may audit the records of
the other Party during reasonable business hours during the Term of this MPSA
and during the two (2) year period after termination.
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6.4 NOTICE. Whenever a provision is made in this MPSA for the giving of any
notice, such notice shall be deemed to have been given if faxed, personally
delivered or if mailed by United States mail, addressed to the Party entitled to
receive same at the address indicated below, or at such other address as shall
be provided from time to time. Notice shall be deemed to have been received when
sent, if faxed, and three (3) business days after the date on which such notice
was mailed.
NOTICE TO ECI:
Electric Clearinghouse, Inc.
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Telephone: 713/507-6500
Facsimile: 713/507-6505
NOTICE TO CCC:
Chevron U.S.A. Inc. Midstream Unit
1301 McKinney
P.O. Box 2100
Houston, Texas 77252
6.5 PRESS RELEASES. No publicity or public announcement regarding the
transactions contemplated by this MPSA may be released without the prior consent
of the Parties. This provision will be understood to allow discussion by the
Parties in advance of public announcements.
6.6 COUNTERPARTS. This MPSA may be executed by the Parties in any number of
counterparts, which, taken together, shall constitute one and the same legally
binding instrument.
6.7 ENTIRE AGREEMENT. This MPSA sets forth the entire agreement between the
Parties as to the subject matter of this MPSA and any and all prior or
contemporaneous proposals, negotiation, agreements, commitments and
representations, oral and written are merged herein. This MPSA may not be
modified or amended except by means of a writing duly executed by the Parties
subsequent to the date hereof that states its intent to amend this MPSA.
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6.8 WAIVER. The right of any Party to require strict performance by the other
Party of any or all obligations imposed upon such other Party by this MPSA shall
not in any way be affected by previous waiver, forbearance or course of dealing.
6.9 RELATIONSHIP. Notwithstanding any implication herein to the contrary, this
MPSA does not create and shall not be deemed to create a partnership, company,
joint venture or any other entity or similar legal relationship between the
Parties. No Party is or shall act as or be deemed or represent themselves to be
the agent or representative of the other except as permitted in under a specific
agreement.
6.10 GOVERNING LAW AND VENUE. THIS MPSA SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. THE EXCLUSIVE JURISDICTION FOR ANY ACTION
ARISING HEREUNDER SHALL BE IN THE COURTS OF HARRIS COUNTY, TEXAS.
6.11 HEADINGS. The headings contained in this MPSA are for reference purposes
only and shall not effect in any way the meaning or interpretation of this MPSA.
6.12 NO RECOURSE. Notwithstanding any of the terms or provisions of this MPSA to
the contrary, each of the Parties hereto agrees that neither it nor any person
acting on its behalf may assert any claim or cause of action against any officer
or director of any other Party hereto in connection with or arising out of this
MPSA or any of the transactions contemplated hereby.
6.13 LIMITATION OF DAMAGES. In no event shall either Party be liable for
punitive, exemplary, consequential or incidental damages arising from any breach
or default under this MPSA or from any act or omission under or in connection
with this MPSA or any of the transactions contemplated hereunder.
14
6.14 REGULATORY AUTHORITY. Each Party shall obtain and maintain all regulatory
orders and authorizations necessary for it to perform its obligations hereunder.
Each Party further agrees to perform its respective obligations hereunder in
compliance with all applicable laws, regulations and orders of governmental
entities having proper jurisdiction.
6.15 NON-UTILITY STATUS. Each Party agrees that it will not cause the other
Party to become regulated as a public utility or similar entity pursuant to
state or federal laws. To the extent this Agreement contemplates transactions
involving assets, such transactions shall not be construed as a dedication of
any part of either Party's assets to the public. If any third party brings an
action before any regulatory body seeking a decision that transactions
contemplated hereunder subjects either Party to regulation as a public utility
or similar entity, CCC and ECI shall promptly restructure any transactions
arising out of this MPSA in a mutually satisfactory manner to the extent
necessary to avoid implementation of such regulation.
IN WITNESS WHEREOF, this MPSA is executed on the ____ day of ________,
1996.
"ECI" "CCC"
ELECTRIC CLEARINGHOUSE, INC. CHEVRON CHEMICAL COMPANY
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
15
EXHIBIT A
As of the Effective Date, Chevron Chemical Company has not made an internal
commitment to pursue any Opportunities.
EXHIBIT B
[BRACKETED SECTIONS ARE OPTIONAL, ALTERNATIVE, OR TO BE FILLED IN]
[DATE]
[ADDRESSEE]
Confidentiality Agreement
[NAME OR BRIEF DESCRIPTION OF OPPORTUNITY]
[LOCATION OF OPPORTUNITY]
[DEAR ____;.]:
[THE DISCLOSING PARTY] (the "Disclosing Party") possesses certain confidential
and proprietary ideas, information and data ("Data and Information") relating to
a certain business opportunity involving the potential purchase, sale,
transmission, distribution, and/or generation of electric power ("Opportunity"),
which Data and Information is considered by the Disclosing Party to be secret
and confidential and to constitute a valuable commercial asset. You wish to
[STATE PURPOSE OF DISCLOSURE, E.G., PROVIDE SERVICES RELATED TO THE OPPORTUNITY]
and the Disclosing Party is willing, subject to the terms and conditions hereof,
to disclose the Data and Information to you for that Purpose. In consideration
for the Disclosing Party's willingness to disclose to you such Data and
Information, you hereby agree that such disclosure shall be subject to the
following terms and conditions:
1. Data and Information shall include any and all confidential or proprietary
ideas, information and data supplied by the Disclosing Party to you in writing,
orally or by observation, including, but not limited to, [COPIES OR ORIGINALS
DATA, MODELS, ANALYSES, ESTIMATES OF POTENTIAL RETURNS, INTERPRETATIONS AND
CONTRACTUAL AND FINANCIAL INFORMATION] confidential to the Disclosing Party, and
any other information relating to the Purpose.
2. Data and Information shall not include any ideas, data or information which:
(a) was or becomes generally available to the public other than as a result of
an act or failure to act by you, or your employees or representatives; or (b)
was known to you on a non-confidential basis prior to disclosure to you by
Chevron; or (c) becomes available to you on a non-confidential basis from a
source (other than the Disclosing Party) which is permitted to disclose the
same; or (d)
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was already in your possession or to which you were otherwise entitled at the
time of disclosure. It is understood and agreed that data and information
referred to in this Section 2 are not subject to the terms of this Agreement and
may be used and/or disclosed to third parties by you.
3. You shall receive and maintain such Data and Information in confidence and
you shall make all reasonable efforts to prevent disclosure to others. You shall
not use the Data or Information except for the Purpose set out above. You shall
not disclose, show or otherwise release such Data and Information to any third
party, including consultants or advisors, without the Disclosing Party's prior
written consent. Should your evaluation require you to disclose Data and
Information to outside agents, consultants, representatives or advisors, then
you must seek the Disclosing Party's prior consent for such disclosure, which
consent shall be at the Disclosing Party's sole discretion. If consent to such
disclosure is granted, you shall ensure that each such third party agrees in
writing prior to such disclosure to keep the Data and Information confidential
to the same extent as you are obliged to under this Agreement.
4. You agree to keep all such Data and Information strictly secret and
confidential, and, to that end, without limiting the generality of the
foregoing, to prevent unauthorized use or reproduction of the Data and
Information, and to take all precautions to preserve the secrecy and
confidentiality of such Data and Information among your employees having access
to any portion of such Data and Information, and to assume the responsibility
that such employees will preserve the secrecy and confidentiality of such Data
and Information with respect to third parties. Such Data and Information shall
only be revealed to your employees who have a need to know such Data and
Information for the Purpose specified above.
5. You shall not make any copies, excerpts or in any way reproduce any of the
Data and Information without the Disclosing Party's prior written consent. If
reproductions are permitted in accordance with this Section, each reproduction
shall be appropriately marked to show that it contains the Disclosing Party's
proprietary information.
6. You shall promptly return to the Disclosing Party all Data and Information,
as well as any reproductions or excerpts therefrom and any notes, summaries or
compilations thereof without retaining any copies thereof.
7. If you, or your representatives, are required by any court or legislative or
administrative body (by oral questions, depositions, interrogatories, requests
for information or documents, subpoena, Civil Investigation Demand, or any
similar process) to disclose any Data and Information, you shall provide the
Disclosing Party with prompt notice of such requirement in order to afford the
Disclosing Party an opportunity to seek a protective order or other appropriate
remedy and/or to waive compliance with the terms of this Agreement. However, if
the Disclosing Party is unable to obtain or does not seek such protective order,
or if the Disclosing Party waives compliance with the terms hereof, you or your
representatives agree to provide only that limited portion of the Data and
Information that you are advised by written opinion of counsel is legally
required and to exercise your best efforts to obtain assurance that confidential
treatment will be accorded such Data and Information.
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8. The Disclosing Party makes no representations or warranties, express or
implied, statutory or otherwise, as to, or in any way with respect to, validity,
accuracy or completeness of, any data and information (whether Data and
Information or other data and information) imparted or otherwise obtained by you
during the course of any review or thereafter, or any condition or aspect
thereof, whether such data and information/Data and Information is acquired in
conversation with the Disclosing Party's employees or as a result of viewing
written materials and documents covering or affecting, directly or indirectly,
the Opportunity. Neither the Disclosing Party, nor any of its affiliates,
directors, officers, employees, agents or consultants shall have any liability
whatsoever with respect to the use of any data and information (whether Data and
Information or other data and information) furnished under this Agreement. Any
decision or action taken by you with respect to your evaluation of Data and
Information shall be based solely on your independent judgment.
9. You shall release and forever defend, indemnify and hold the Disclosing
Party, its parent corporations, subsidiaries and affiliates, directors,
officers, employees, agents and consultants, harmless from and against any claim
as to the lack of completeness or accuracy of any data and information disclosed
(whether Data and Information or other data and information), and you shall
further release and forever defend, indemnify and hold the Disclosing Party, its
parent corporations, subsidiaries and affiliates, directors, officers,
employees, agents and consultants harmless from and against all responsibility
and/or liability for any conclusions that are derived from any such disclosed
data and information (whether Data and Information or other data and
information). "Affiliate" in relation to a Party to this Agreement means
[Chevron Chemical Company, or Electric Clearinghouse, Inc., as appropriate] and
any person, partnership or corporation which (i) is controlled by that Party;
(ii) is controlled by another corporation which also controls that Party; or
(iii) controls that Party, where "control" and "controlled" mean direct or
indirect ownership of 50% or more of the stock having a right to vote for
directors.
10. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, permitted assigns,
affiliates, officers and employees for a period of ____ years from the effective
date hereof.
11. This Agreement comprises our full and complete agreement with respect to
disclosure of the Data and Information and replaces and supersedes all prior
communications, understandings and agreements between us, whether written,
express or implied. Any purported modification or amendment hereto shall be
binding on the Parties only if same is in writing, is executed by an authorized
representative of each party hereto and expressly refers to this Agreement.
12. Your rights hereunder may not be assigned without the Disclosing Party's
prior written consent.
3
13. This Agreement is effective as of the date set out at the top of this
Agreement.
If the foregoing correctly sets forth your understanding of our agreement,
please so indicate by signing in the space below and returning both executed
copies for our signature.
Very truly yours,
[THE DISCLOSING PARTY]
EXHIBIT 10.53
THIS MASTER POWER SERVICE AGREEMENT (the "MPSA"), made and entered into
this 1st day of _____, 1996, ("Effective Date") by and between Electric
Clearinghouse, Inc., a Texas corporation, hereinafter referred to as "ECI", and
Chevron Products Company, a division of Chevron U.S.A. Inc., a Pennsylvania
corporation, hereinafter referred to as "CPC". ECI and CPC may be referred to
herein individually as "Party" or collectively as the "Parties".
I.
RECITALS
1.1 CPC currently (A) owns or controls (i) certain Power generation,
distribution and transmission facilities and may in the future own or control
additional Power generation, distribution and transmission facilities and (ii)
facilities that consume Power and may in the future own or control additional
facilities that consume Power and (B) intends to pursue market opportunities
that involve the sale, purchase, transmission, distribution and/or generation of
Power in a manner that will not subject CPC to state or federal jurisdiction, as
set forth in more detail in Section 6.15 below.
1.2 The Parties desire that ECI have the opportunity, as more fully
described herein, to: (i) purchase Power from generating units or contractual
supply owned, controlled or operated by CUSA, (ii) supply Power to facilities
owned, controlled or operated by CUSA or to which CUSA is contractually
obligated to supply; and (iii) participate in any existing and future market
opportunities in which CUSA is involved during the term of this MPSA that
involve the sale, purchase, transmission, distribution and/or generation of
Power.
1.3 The Parties recognize that current laws, regulations and market
conditions render certain opportunities non-feasible or otherwise not
commercially beneficial to either Party, but anticipate that throughout the Term
laws, regulations and market conditions will change such that opportunities will
become feasible and commercially beneficial to either Party.
1
1.4 The Parties desire to specify terms and conditions under which the
Parties will participate in Opportunities, as defined below.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
conditions herein contained, CPC and ECI hereby agree as follows:
II.
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply hereunder:
2.1 AFFILIATE shall mean with respect to any person, any other person
(other than an individual) that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. For purposes of this definition, "control" means the direct or
indirect ownership of more than fifty percent (50%) of the outstanding capital
stock or other equity interests having ordinary voting power.
2.2 CPC shall mean Chevron Products Company, a division of Chevron U.S.A.
Inc., excluding any operations outside of Hawaii and the lower forty eight
states of the United States.
2.3 EFFECTIVE DATE shall mean the date first written above.
2.4 EXISTING OPPORTUNITY shall mean an Opportunity for which a Party has
made an internal commitment to pursue as of the Effective Date, which
Opportunities are listed on Exhibit A.
2
2.5 MASTER ALLIANCE AGREEMENT shall mean that certain Master Alliance
Agreement entered into between Chevron U.S.A. Inc., Chevron Chemical Company,
Chevron Pipeline Company and NGCC, Natural Gas Clearinghouse, Warren Petroleum
Company, and ECI as of _________, 1996.
2.6 MATERIAL CHANGE shall mean any change in any element of an Opportunity
that could reasonably be expected to affect the Opportunity significantly enough
to cause either Party, in accordance with commercially reasonable criteria, to
reassess its previous commercial assessment of the Opportunity.
2.7 MPSA shall mean this Master Power Service Agreement.
2.8 OPPORTUNITY or OPPORTUNITIES shall mean any proposed transaction that
includes the ability of a Party, whether on an initial or incremental basis, to:
(i) purchase, or facilitate the purchase of, Power from generating units or
contractual supply owned, controlled or operated by CPC, (ii) sell, or
facilitate the sale of, Power to facilities owned, controlled or operated by CPC
or to which CPC is contractually obligated to supply; or (iii) participate in
any existing and future market opportunities in which CPC is involved during the
term of this MPSA that involve the sale, purchase, transmission, distribution
and/or generation of Power; provided, however, that this term shall only include
proposed transactions described above that would result in the sale, purchase,
transmission, distribution and/or generation of Power to, from, or over the
facility or aggregated facilities involved in the proposed transaction in an
amount that exceeds an average rate of 5 MW per hour over a representative
period of time.
2.9 POWER shall mean electric energy and/or capacity and/or related
products and services.
2.10 TERM shall mean a period ending after a primary term of ten years,
commencing on the Effective Date, and year to year thereafter until terminated
by either Party at the end of the primary term, or at the end of any annual
period after the primary term, by giving the other Party at least one hundred
and eighty days prior written notice of termination; provided, that if
3
CPC and ECI enter into any definitive agreements regarding the purchase and/or
sale of Power and associated services, such agreements shall continue in full
force and effect until terminated in accordance with the provisions thereof.
III.
OPPORTUNITY PROTOCOL
3.1 OPPORTUNITY DESCRIPTIONS.
3.1.1 Promptly upon making an internal commitment to actively pursue an
Opportunity, but in no event later than 10 working days after making that
determination, the Party that has made such a commitment ("Presenting Party")
shall present to the other Party a written description of each Opportunity
("Opportunity Description") containing the elements set forth in Section 3.1.2
below. The Parties may expand or lessen the period by which the Presenting Party
will notify the other Party of an Opportunity by mutual written agreement.
Within fifteen working days of the Effective Date, CPC shall submit Opportunity
Descriptions for Existing Opportunities; this period shall be referred to
hereinafter as the "Existing Opportunity Description Period." The Presenting
Party shall include in the Opportunity Description a commercially reasonable
period, taking into consideration the expected time frame of the Opportunity, by
which the non-Presenting Party must notify the Presenting Party whether or not
the non-Presenting Party will pursue the Opportunity with the Presenting Party
("Strike Period").
3.1.2 The Presenting Party shall include in each Opportunity Description a
thorough description of the Opportunity that, based on information available to
the Presenting Party in accordance with commercially reasonable practices,
includes without limitation the Presenting Party's assessment of the following
elements of the Opportunity:
A) proposed economics including projected cost savings, return on
capital investment, incremental economic impacts and market based
returns;
B) geographic, market, and operational scope;
C) Opportunity projections relating to quantity, price, and production
costs of Power;
D) market conditions relied upon in developing the Opportunity;
4
E) any other material facts or assumptions relied upon in developing
or considering the Opportunity;
F) confidentiality requirements associated with the Opportunity;
G) the time frame of the Opportunity, including the date by which the
Opportunity is expected to become commercially beneficial and the
expected duration of the anticipated benefit;
H) the Presenting Party's goals with respect to the Opportunity, which
goals shall not contravene either Party's right to participate in
an Opportunity as stated herein; and I) the effect of legal and
regulatory conditions and the expected effect of changes in legal
and regulatory conditions on items A through H above.
3.1.3 If the Presenting Party becomes aware of, or reasonably could be
expected to have become aware of, any Material Change to the Opportunity, the
Presenting Party shall promptly forward the other Party a redlined version of
the affected Opportunity Description showing the changes from the previous
Opportunity Description. The Presenting Party shall continue to update the
Opportunity Description for a particular Opportunity in accordance with the
conditions set forth in the preceding sentence until the earlier of (i) the
consummation of the Opportunity in the form of definitive executed agreements or
(ii) the Parties agree that such updates are no longer necessary. If either
Party opts out of participation in an Opportunity, but the other Party intends
to pursue the Opportunity ("Remaining Party"), the Remaining Party, regardless
of whether the Remaining Party is the Presenting Party with respect to the
Opportunity in question, shall report Material Changes to the other Party as
though the Remaining Party were the Presenting Party.
3.2 EXCLUSIVITY.
3.2.1 Prior to the expiration of the Strike Period relating to any
Opportunities for which CPC is the Presenting Party, CPC shall not (i) enter
into definitive negotiations with any third party to participate in, develop, or
otherwise further the purposes of an Opportunity that has
5
been described in an Opportunity Description or (ii) on its own accord,
participate in, develop, or otherwise further the purposes of an Opportunity
that has been described in an Opportunity Description. Notwithstanding the
foregoing, during the Existing Opportunity Description Period CPC shall be
entitled to participate in, develop or otherwise further the purposes of
Existing Opportunities with third parties or on its own accord in a manner that
will not interfere with CPC's obligations hereunder.
3.2.2 ECI shall not pursue any Opportunity described in an Opportunity
Description with any third party to the exclusion of CPC until CPC has notified
ECI that CPC does not intend to pursue the Opportunity.
3.3 PARTICIPATION AND WAIVER THEREOF.
3.3.1 Prior to the expiration of the Strike Period for a particular
Opportunity, the non-Presenting Party shall notify the Presenting Party whether
the non-Presenting Party chooses to participate in the Opportunity with the
Presenting Party or opt out of participation. The non-Presenting Party shall
base the decision of whether it will or will not participate in an Opportunity
on the information provided in the Opportunity Descriptions, as modified by the
Presenting Party in accordance with the procedures set forth in Section 3.1, and
the non-Presenting Party's commercially reasonable determination that: (i) ECI
and CPC may benefit from participation in the Opportunity, (ii) the
non-Presenting Party's participation does not materially impede the Presenting
Party's stated and reasonable goals with respect to that Opportunity, which
goals shall not contravene either Party's right to participate in or derive
benefit from an Opportunity as stated herein, and (iii) the non-Presenting
Party's participation is allowed, or is expected to be allowed, by applicable
laws and regulations. These three criteria shall be referred to hereinafter as
the "Principles for Participation." Election by the non-Presenting Party to opt
out of an Opportunity shall not prohibit the Presenting Party from requesting
the non-Presenting Party to participate in that Opportunity at a later date.
3.3.2 If the non-Presenting Party chooses to participate in the
Opportunity, ECI and CPC shall use commercially reasonable efforts to work
together to develop the Opportunity until the earlier of the occurrence of the
following events: (i) the Opportunity has been consummated in the form of
definitive executed agreements or (ii) the non-Presenting Party
6
opts out of participation (upon the Presenting Party's request, which request
shall include a commercially reasonable time by which the non-Presenting Party
must respond).
3.3.3 If ECI opts out of an Opportunity, CPC shall be free to participate
in, develop, or otherwise further the interests of the Opportunity free from any
obligations to ECI (other than CPC's continuing obligation to notify ECI of any
Material Change, as set forth in Section 3.1 above) until, in response to CPC's
notification of a Material Change, ECI determines, in a commercially reasonable
manner in accordance with the Principles of Participation, that ECI desires to
participate in the Opportunity. ECI's right to participate in an Opportunity, as
described in the preceding sentence, shall be referred to as a "Re-Entry Right."
ECI shall notify CPC in writing of ECI's intent to exercise the Re-Entry Right
as soon as commercially practicable upon discovering the occurrence of the
Material Change causing ECI to choose to participate in the Opportunity, which
notice shall be referred to hereinafter as the "Re-Entry Notice."
3.4 CONFIDENTIALITY OBLIGATIONS TO THIRD PARTIES. Neither Party shall enter into
an agreement with a third party that would in any way impede that Party's
obligation to provide the other Party information necessary to complete and
continually update Opportunity Descriptions without the other Party's prior
written consent, which consent shall not be withheld unreasonably. With respect
to existing agreements that restrict a Party from providing the information
necessary to complete and continually update Opportunity Descriptions ("Third
Party Confidentiality Agreements"), each Party shall fulfill its obligation to
provide the other Party with such information to the extent doing so does not
cause either Party to breach any Third Party Confidentiality Agreement. Each
Party shall use commercially reasonable efforts to obtain necessary and adequate
releases for the dissemination of information pertaining to Opportunities in
which that Party is currently involved.
3.5 SHARED BENEFITS. In addition to any terms and conditions that may be agreed
to with respect to any Opportunity contemplated hereunder, CPC shall compensate
ECI for the relative benefit or savings ECI causes the Opportunity to realize,
regardless of whether ECI actually
7
participates in the Opportunity. ECI and CPC shall agree upon the amount of such
compensation on an Opportunity-by-Opportunity basis.
3.6 MEETINGS OF POWER ALLIANCE. CPC and ECI shall each designate one or more
representatives as Power Alliance Coordinators ("PAC") who shall serve as the
primary points of contact for communication between the Parties for the purposes
of this MPSA. PACs from both Parties shall meet in Houston, Texas not less than
quarterly to identify and discuss potential and existing Opportunities. The
appropriate PACs from either Party may agree to alter the location of any such
meeting.
3.7 DISPUTE RESOLUTION. ECI and CPC shall promptly resolve any dispute between
ECI and CPC arising out of this MPSA, including without limitation disputes
regarding ECI's Re-Entry Right and ECI's compensation for causing a benefit or
savings, in accordance with the procedures providing for dispute resolution in
the Master Alliance Agreement.
IV.
REPORTING AND CONFIDENTIALITY
4.1 REPORTING. In connection with fulfilling the purposes of this MPSA, CPC and
ECI may be required by certain governmental entities to supply information
regarding ownership, operation, purchases, and sales of Power and/or assets for
the generation, transmission, and distribution of such. Each Party shall
cooperate with the other in the compilation and supply of such data.
4.2 CONFIDENTIALITY. Each Party and its Affiliates possesses confidential and
secret technical and business information pertaining to the Opportunities that
are the subject of this MPSA, which information, if designated in writing as
confidential shall be referred to as "Confidential Information."
8
A. Each Party will use Confidential Information only for evaluation of
Opportunities as defined above. Confidential Information, which may have
been provided as part of an evaluation process, but which is not necessary
to provide continuing service under an arrangement, shall be returned to
the Party that originally submitted it. Confidential Information that is in
electronic form or converted by the receiving party into electronic form
shall be destroyed and certified as destroyed by the receiving party.
B. Each Party shall keep Confidential Information confidential during the
term of this MPSA, unless otherwise agreed with respect to a particular
transaction. Notwithstanding the foregoing, either Party may disclose the
Confidential Information to (i) those of its officers, directors,
employees, legal advisors, Affiliates, consultants, or financing entities
who, in the receiving party's reasonable judgment, need access to the
Confidential Information to further the purposes of this MPSA and (ii) any
governmental authorities as may be legally required by such authority.
Notwithstanding the foregoing, prior to either Party's disclosure of
Confidential Information to any Affiliates, consultants or financing
entities, the party desiring to disclose the Confidential Information will
first obtain the other Party's prior written consent. Each Party
understands that with regard to such consent, the other Party will
generally require that the proposed recipient of Confidential Information
enter into a separate confidentiality agreement directly with the Party
whose Confidential Information is being disclosed before such consent is
given. Such an agreement shall be substantially in the form attached hereto
as Exhibit B. If either Party is required by a governmental authority to
disclose Confidential Information (a) to the extent possible, all proposed
disclosures shall be provided to the other Party in advance for review and
approval, such approval not to be unreasonably withheld, and (b) if such
public or permitting agency is subject to laws and regulations by which the
agency can keep information disclosed to it secret and confidential, each
Party, as appropriate, shall take all reasonable steps necessary to obtain
the protection of such laws and regulations so as to maintain the secrecy
and confidentiality of the information disclosed.
9
C. If either Party becomes compelled by administrative action or court
order to disclose any of the Confidential Information or if either Party is
notified that any Confidential Information is the subject of a Freedom of
Information Act request, the receiving Party shall provide the disclosing
Party with notice of that requirement or request in a timely manner so that
the disclosing Party may seek a protective order or other appropriate
remedy at its own risk and expense. The disclosing Party will cooperate
with the receiving Party's counsel to enable the receiving Party (at the
receiving Party's expense) to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information required to be disclosed. If such protective order or other
remedy is not obtained, the receiving Party will furnish only that portion
of the Confidential Information that is required to comply with the
administrative action or court order.
D. The provisions of paragraphs A, B, and C above shall not apply to any
portion of Confidential Information:
(i) that was developed by the receiving Party and was in its possession
prior to the receiving Party's first receipt of the same, either
directly or indirectly, from the disclosing Party,
(ii) that is acquired by the receiving Party from persons that are not
known by the receiving Party to be under an obligation of secrecy
(whether legal or contractual) to the disclosing Party or an Affiliate
and that are not affiliated companies of the disclosing Party;
(iii) that is now, or hereafter becomes, through no act or failure to
act on the receiving Party's part, part of the public domain; and
provided, however, that the occurrence of (i), (ii), or (iii) above
shall not be construed to grant to either Party any rights, express or
implied, under any patents, trade secrets, or copyrights licensable by
the other Party or its Affiliates.
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V.
REPRESENTATIONS AND WARRANTIES
5.1 Each Party represents and warrants to the other Party as of the date hereof
as follows:
(A) STATUS AND AUTHORITY. Each Party has full power and authority to
execute and be bound by this MPSA, to carry out its obligations in accordance
with the terms and provisions hereof, and to enter into the necessary agreements
to fulfill each Party's obligations hereunder. The execution, delivery and
performance of this MPSA have been duly authorized by all requisite corporate
actions on the part of such Party or such Party's corporate parents. This MPSA
constitutes the valid and legally binding obligation of such Party, enforceable
against it and its Affiliates in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and other similar laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (whether enforced
at law or in equity).
(B) NO BREACH OR DEFAULT. The execution, delivery and performance by each
Party of this MPSA and the transactions contemplated hereby will not constitute
a breach of any term or provision of, or a default under (i) any outstanding
indenture, mortgage, loan agreement or other contract or agreement to which such
Party is a party or its property is bound, (ii) its organizational documents,
(iii) any law, rule or regulation, or (iv) any order, writ, judgment or decree
having applicability to it.
(C) COMPLIANCE WITH APPLICABLE LAWS. This Agreement is made expressly
subject to, and each Party expressly agrees to comply with and abide by, all of
the laws of the United States and of the State and any political subdivision
insofar as the same may be applicable to such Party's performance under this
MPSA, including all rules and regulations now existing or that may be hereafter
promulgated under and in accordance with any such law or laws.
11
(D) GOVERNMENT APPROVALS. There is no proceeding pending, or to the best of
each Party's knowledge, threatened against it that seeks, or may be reasonably
expected to rescind, terminate, modify or suspend any government approval
necessary for the performance of any obligation by such Party hereunder.
(E) LITIGATION. There are no pending or, to the best of its knowledge,
threatened legal actions, suits or arbitration or other proceedings before any
governmental authority against or affecting such Party or any of its Affiliates
with respect to the subject matter of this Agreement or its ability to perform
any of its obligations hereunder.
VI.
MISCELLANEOUS
6.1 INDEMNITY: Each Party hereby agrees to defend, indemnify and hold the other
Party, its subsidiaries, Affiliates, directors, officers, employees and agents
of each of them harmless from any and all liabilities, claims, penalties,
demands, fines, forfeitures, suits, causes of action or damages, which may arise
or accrue because of failure or neglect of such Party or its subcontractors to
comply, either directly or indirectly, with any laws and/or regulations
applicable to such Party's performance under this Agreement.
6.2 ASSIGNMENT. This MPSA shall be binding upon and shall inure to the benefit
of the Parties hereto and their respective successors and assigns. This MPSA
shall not be assignable by either Party without the prior written consent of the
other.
6.3 RECORDS. Each Party shall maintain a true and correct set of records
pertaining to all activities relating to its performance of this MPSA and all
transactions related thereto for a period of not less than two (2) years after
termination of this MPSA. Any Party, at is own expense, may audit the records of
the other Party during reasonable business hours during the Term of this MPSA
and during the two (2) year period after termination.
12
6.4 NOTICE. Whenever a provision is made in this MPSA for the giving of any
notice, such notice shall be deemed to have been given if faxed, personally
delivered or if mailed by United States mail, addressed to the Party entitled to
receive same at the address indicated below, or at such other address as shall
be provided from time to time. Notice shall be deemed to have been received when
sent, if faxed, and three (3) business days after the date on which such notice
was mailed.
NOTICE TO ECI:
Electric Clearinghouse, Inc.
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Telephone: 713/507-6500
Facsimile: 713/507-6505
NOTICE TO CPC:
Chevron U.S.A. Inc. Midstream Unit
1301 McKinney
P.O. Box 2100
Houston, Texas 77252
6.5 PRESS RELEASES. No publicity or public announcement regarding the
transactions contemplated by this MPSA may be released without the prior consent
of the Parties. This provision will be understood to allow discussion by the
Parties in advance of public announcements.
6.6 COUNTERPARTS. This MPSA may be executed by the Parties in any number of
counterparts, which, taken together, shall constitute one and the same legally
binding instrument.
6.7 ENTIRE AGREEMENT. This MPSA sets forth the entire agreement between the
Parties as to the subject matter of this MPSA and any and all prior or
contemporaneous proposals, negotiation, agreements, commitments and
representations, oral and written are merged herein. This MPSA may not be
modified or amended except by means of a writing duly executed by the Parties
subsequent to the date hereof that states its intent to amend this MPSA.
13
6.8 WAIVER. The right of any Party to require strict performance by the other
Party of any or all obligations imposed upon such other Party by this MPSA shall
not in any way be affected by previous waiver, forbearance or course of dealing.
6.9 RELATIONSHIP. Notwithstanding any implication herein to the contrary, this
MPSA does not create and shall not be deemed to create a partnership, company,
joint venture or any other entity or similar legal relationship between the
Parties. No Party is or shall act as or be deemed or represent themselves to be
the agent or representative of the other except as permitted in under a specific
agreement.
6.10 GOVERNING LAW AND VENUE. THIS MPSA SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. THE EXCLUSIVE JURISDICTION FOR ANY ACTION
ARISING HEREUNDER SHALL BE IN THE COURTS OF HARRIS COUNTY, TEXAS.
6.11 HEADINGS. The headings contained in this MPSA are for reference purposes
only and shall not effect in any way the meaning or interpretation of this MPSA.
6.12 NO RECOURSE. Notwithstanding any of the terms or provisions of this MPSA to
the contrary, each of the Parties hereto agrees that neither it nor any person
acting on its behalf may assert any claim or cause of action against any officer
or director of any other Party hereto in connection with or arising out of this
MPSA or any of the transactions contemplated hereby.
6.13 LIMITATION OF DAMAGES. In no event shall either Party be liable for
punitive, exemplary, consequential or incidental damages arising from any breach
or default under this MPSA or from any act or omission under or in connection
with this MPSA or any of the transactions contemplated hereunder.
14
6.14 REGULATORY AUTHORITY. Each Party shall obtain and maintain all regulatory
orders and authorizations necessary for it to perform its obligations hereunder.
Each Party further agrees to perform its respective obligations hereunder in
compliance with all applicable laws, regulations and orders of governmental
entities having proper jurisdiction.
6.15 NON-UTILITY STATUS. Each Party agrees that it will not cause the other
Party to become regulated as a public utility or similar entity pursuant to
state or federal laws. To the extent this Agreement contemplates transactions
involving assets, such transactions shall not be construed as a dedication of
any part of either Party's assets to the public. If any third party brings an
action before any regulatory body seeking a decision that transactions
contemplated hereunder subjects either Party to regulation as a public utility
or similar entity, CPC and ECI shall promptly restructure any transactions
arising out of this MPSA in a mutually satisfactory manner to the extent
necessary to avoid implementation of such regulation.
IN WITNESS WHEREOF, this MPSA is executed on the ____ day of ________,
1996.
"ECI" "CPC"
ELECTRIC CLEARINGHOUSE, INC. CHEVRON PRODUCTS COMPANY,
A DIVISION OF CHEVRON U.S.A. INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
15
EXHIBIT A
As of the Effective Date, Chevron Products Company has not made an internal
commitment to pursue any Opportunities.
16
EXHIBIT B
[BRACKETED SECTIONS ARE OPTIONAL, ALTERNATIVE, OR TO BE FILLED IN]
[DATE]
[ADDRESSEE]
Confidentiality Agreement
[NAME OR BRIEF DESCRIPTION OF OPPORTUNITY]
[LOCATION OF OPPORTUNITY]
[DEAR ____;.]:
[THE DISCLOSING PARTY] (the "Disclosing Party") possesses certain confidential
and proprietary ideas, information and data ("Data and Information") relating to
a certain business opportunity involving the potential purchase, sale,
transmission, distribution, and/or generation of electric power ("Opportunity"),
which Data and Information is considered by the Disclosing Party to be secret
and confidential and to constitute a valuable commercial asset. You wish to
[STATE PURPOSE OF DISCLOSURE, E.G., PROVIDE SERVICES RELATED TO THE OPPORTUNITY]
and the Disclosing Party is willing, subject to the terms and conditions hereof,
to disclose the Data and Information to you for that Purpose. In consideration
for the Disclosing Party's willingness to disclose to you such Data and
Information, you hereby agree that such disclosure shall be subject to the
following terms and conditions:
1. Data and Information shall include any and all confidential or proprietary
ideas, information and data supplied by the Disclosing Party to you in writing,
orally or by observation, including, but not limited to, [COPIES OR ORIGINALS
DATA, MODELS, ANALYSES, ESTIMATES OF POTENTIAL RETURNS, INTERPRETATIONS AND
CONTRACTUAL AND FINANCIAL INFORMATION] confidential to the Disclosing Party, and
any other information relating to the Purpose.
2. Data and Information shall not include any ideas, data or information which:
(a) was or becomes generally available to the public other than as a result of
an act or failure to act by you, or your employees or representatives; or (b)
was known to you on a non-confidential basis prior to disclosure to you by
Chevron; or (c) becomes available to you on a non-confidential basis from a
source (other than the Disclosing Party) which is permitted to disclose the
same; or (d) was already in your possession or to which you were otherwise
entitled at the time of disclosure. It is understood and agreed that data and
information referred to in this Section 2 are not subject to the terms of this
Agreement and may be used and/or disclosed to third parties by you.
17
3. You shall receive and maintain such Data and Information in confidence and
you shall make all reasonable efforts to prevent disclosure to others. You shall
not use the Data or Information
18
except for the Purpose set out above. You shall not disclose, show or otherwise
release such Data and Information to any third party, including consultants or
advisors, without the Disclosing Party's prior written consent. Should your
evaluation require you to disclose Data and Information to outside agents,
consultants, representatives or advisors, then you must seek the Disclosing
Party's prior consent for such disclosure, which consent shall be at the
Disclosing Party's sole discretion. If consent to such disclosure is granted,
you shall ensure that each such third party agrees in writing prior to such
disclosure to keep the Data and Information confidential to the same extent as
you are obliged to under this Agreement.
4. You agree to keep all such Data and Information strictly secret and
confidential, and, to that end, without limiting the generality of the
foregoing, to prevent unauthorized use or reproduction of the Data and
Information, and to take all precautions to preserve the secrecy and
confidentiality of such Data and Information among your employees having access
to any portion of such Data and Information, and to assume the responsibility
that such employees will preserve the secrecy and confidentiality of such Data
and Information with respect to third parties. Such Data and Information shall
only be revealed to your employees who have a need to know such Data and
Information for the Purpose specified above.
5. You shall not make any copies, excerpts or in any way reproduce any of the
Data and Information without the Disclosing Party's prior written consent. If
reproductions are permitted in accordance with this Section, each reproduction
shall be appropriately marked to show that it contains the Disclosing Party's
proprietary information.
6. You shall promptly return to the Disclosing Party all Data and Information,
as well as any reproductions or excerpts therefrom and any notes, summaries or
compilations thereof without retaining any copies thereof.
7. If you, or your representatives, are required by any court or legislative or
administrative body (by oral questions, depositions, interrogatories, requests
for information or documents, subpoena, Civil Investigation Demand, or any
similar process) to disclose any Data and Information, you shall provide the
Disclosing Party with prompt notice of such requirement in order to afford the
Disclosing Party an opportunity to seek a protective order or other appropriate
remedy and/or to waive compliance with the terms of this Agreement. However, if
the Disclosing Party is unable to obtain or does not seek such protective order,
or if the Disclosing Party waives compliance with the terms hereof, you or your
representatives agree to provide only that limited portion of the Data and
Information that you are advised by written opinion of counsel is legally
required and to exercise your best efforts to obtain assurance that confidential
treatment will be accorded such Data and Information.
8. The Disclosing Party makes no representations or warranties, express or
implied, statutory or otherwise, as to, or in any way with respect to, validity,
accuracy or completeness of, any data and information (whether Data and
Information or other data and information) imparted or otherwise obtained by you
during the course of any review or thereafter, or any condition or aspect
thereof, whether such data and information/Data and Information is acquired in
conversation with the Disclosing Party's employees or as a result of viewing
written materials
2
and documents covering or affecting, directly or indirectly, the Opportunity.
Neither the Disclosing Party, nor any of its affiliates, directors, officers,
employees, agents or consultants shall have any liability whatsoever with
respect to the use of any data and information (whether Data and Information or
other data and information) furnished under this Agreement. Any decision or
action taken by you with respect to your evaluation of Data and Information
shall be based solely on your independent judgment.
9. You shall release and forever defend, indemnify and hold the Disclosing
Party, its parent corporations, subsidiaries and affiliates, directors,
officers, employees, agents and consultants, harmless from and against any claim
as to the lack of completeness or accuracy of any data and information disclosed
(whether Data and Information or other data and information), and you shall
further release and forever defend, indemnify and hold the Disclosing Party, its
parent corporations, subsidiaries and affiliates, directors, officers,
employees, agents and consultants harmless from and against all responsibility
and/or liability for any conclusions that are derived from any such disclosed
data and information (whether Data and Information or other data and
information). "Affiliate" in relation to a Party to this Agreement means
[Chevron Products Company or Electric Clearinghouse, Inc., as appropriate] and
any person, partnership or corporation which (i) is controlled by that Party;
(ii) is controlled by another corporation which also controls that Party; or
(iii) controls that Party, where "control" and "controlled" mean direct or
indirect ownership of 50% or more of the stock having a right to vote for
directors.
10. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, permitted assigns,
affiliates, officers and employees for a period of ____ years from the effective
date hereof.
11. This Agreement comprises our full and complete agreement with respect to
disclosure of the Data and Information and replaces and supersedes all prior
communications, understandings and agreements between us, whether written,
express or implied. Any purported modification or amendment hereto shall be
binding on the Parties only if same is in writing, is executed by an authorized
representative of each party hereto and expressly refers to this Agreement.
12. Your rights hereunder may not be assigned without the Disclosing Party's
prior written consent.
13. This Agreement is effective as of the date set out at the top of this
Agreement.
If the foregoing correctly sets forth your understanding of our agreement,
please so indicate by signing in the space below and returning both executed
copies for our signature.
Very truly yours,
3
[THE DISCLOSING PARTY]
4
EXHIBIT 10.54
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
El Paso
FEEDSTOCK SALE AND REFINERY
PRODUCT PURCHASE AGREEMENT
THIS FEEDSTOCK SALE AND REFINERY PRODUCT PURCHASE AGREEMENT (the
"Agreement") is made and entered into this day of , 1996, by and between WARREN
PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership with
offices at 13430 Northwest Freeway, Suite 1200, Houston, TX 77040-6095
(hereinafter referred to as "WPC"), and CHEVRON PRODUCTS COMPANY, A DIVISION OF
CHEVRON U.S.A. INC., a Pennsylvania corporation with offices at 6501 Trowbridge,
El Paso, Texas 79905 (hereinafter referred to as "CPC").
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and natural gas business unit division to a corporation to be formed which NGC
would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously sold to CPC and CPC purchased from Warren
all of CPC's Feedstock needs and Warren previously purchased from CPC and CPC
sold to Warren all of the Refinery Products and certain Offspec Refinery
Products produced at CPC's Refinery and both CPC and WPC desire that such
relationship continue;
WHEREAS, WPC desires to sell to CPC, and CPC desires to purchase from
WPC quantities of Feedstocks;
-1-
WHEREAS, CPC has quantities of Refinery Products available for sale
from its Refinery (as defined in Article I, below) that it desires to sell to
WPC, and WPC desires to purchase such Refinery Products from CPC; and
WHEREAS, CPC desires that WPC maintain the same level of service that
was previously provided to it by Warren and WPC desires to continue such level
of service.
NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the parties as well as for other good and valuable consideration, WPC
and CPC agree as follows:
ARTICLE I
DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
following meanings:
ACCOUNTING PERIOD shall mean a period of one (1) Month commencing at
12:01 a.m. local time on the first Day of a calendar Month and ending
at 12:01 a.m. local time on the first Day of the next succeeding Month.
AFFILIATE shall mean any Person that directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term "control" (including the
terms "controlled by" or "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise. Any Person shall be deemed to be
an Affiliate of any specified Person if such Person owns fifty percent
(50%) or more of the voting securities of the specified Person, if the
specified Person owns fifty percent (50%) or more of the voting
securities of such Person, or if fifty percent (50%) or more of the
voting securities of the specified Person and such Person are under
common control.
ALTERNATE INDEX shall have the meaning specified in Section 5.3
hereinafter.
ARBITRATION NOTICE shall have the meaning specified in Section 13.1(d)
hereinafter.
BANKRUPTCY EVENT shall mean the occurrence of one or more of the
following events with respect to a Party: (A) the entry of a decree or
order for relief against a Party by a court of competent jurisdiction
in any involuntary case brought against a Party under any bankruptcy
insolvency or other similar law (collectively, "Debtor Relief Laws")
generally affecting the rights of creditors and relief of debtors now
or hereafter in effect, (B) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator, or other similar agent
under applicable Debtor Relief Laws for a Party or for any substantial
part of its assets or property, (C) the ordering of the winding up or
liquidation of a Party's affairs, (D) the filing of a petition in any
such involuntary bankruptcy case, which petition remains
-2-
undismissed for a period of 180 Days or which is not dismissed or
suspended pursuant to Section 305 of the Federal Bankruptcy Code (or
any corresponding provision of any future United States bankruptcy
law), (E) the commencement by a Party of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable
Debtor Relief Laws for a Party or for any substantial part of its
assets or property, or (G) the making by a Party of any general
assignment for the benefit of its creditors.
BARREL shall mean forty-two (42) U. S. Gallons.
BASE RATE shall mean the lesser of (i) two percent (2%) above the per
annum rate of interest announced from time to time as the "prime rate"
for commercial loans by First National Bank of Chicago, as such "prime
rate" may change from time to time, or (ii) the maximum applicable
non-usurious rate of interest.
BUSINESS DAY shall mean a Day on which Federal Reserve member banks in
New York City are open for business.
Contract Quantity means, for any Delivery Month, a quantity of
Feedstocks nominated by CPC that (a) is not less than ninety-five
percent (95%) of the Nominated Volumes nor (b) more than one hundred
and five percent (105%) of the Nominated Volumes. By way of
illustration, if the Nominated Volumes for a Delivery Month equal 100,
then the Contract Quantity shall be not less than ninety-five (95) nor
more than one hundred and five (105).
CPC DEFICIENCY QUANTITY shall have the meaning specified in Section 4.7
hereinafter.
DAY OR DAILY shall mean a twenty-four (24) hour period commencing 12:01
a.m. local time and extending until 12:01 a.m. local time on the
following Day.
DELIVERY MONTH shall mean the Month in which Feedstocks are to be
delivered to CPC as provided herein.
DELIVERY POINT(S) shall have the meaning specified in Section 6.2
hereinafter.
EFFECTIVE DATE shall mean __________________, 1996.
EMERGENCY SUPPLIES shall mean any Feedstocks or volumes of a particular
Feedstock that CPC may need during a particular Month above the
Nominated Volumes applicable during such Month.
-3-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
FEEDSTOCK shall mean Isobutane, Normal Butane, Mixed Butane, and any
other Feedstocks mutually agreed to in writing by the Parties.
Feedstock shall also mean, where applicable (but excluding Articles IV
and V hereunder), Offspec Feedstock, but such will in no way prevent,
preclude, or otherwise affect the right of CPC to reject Offspec
Feedstock in accordance with Section 7.3 hereinafter.
FORCE MAJEURE shall have the meaning specified in Section 12.2
hereinafter.
GALLON shall mean the unit of volume used for the purpose of
measurement of liquid. One (1) U.S. liquid Gallon contains two hundred
thirty-one (231) cubic inches when the liquid is at a temperature of
sixty degrees Fahrenheit (60(degree) F) and at the vapor pressure of
the liquid being measured.
ISOBUTANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
KEEP WHOLE ACQUISITION PRICE shall mean the price paid by WPC to
acquire Feedstocks for resale to CPC plus all Transportation Costs
* incurred in connection therewith plus [REDACTED] per Gallon. If WPC
uses Feedstock that is owned and stored by WPC to satisfy the Feedstock
needs of the Refinery in the situation where a Keep Whole Acquisition
Price is applicable, the "price paid by WPC to acquire Feedstock for
* resale to CPC" as used above shall be [REDACTED] as quoted by OPIS for
Mont Belvieu, Texas (Non-TET) on the Day the transportation of the
Feedstock to CPC commences. For the purpose of this Agreement,
transportation of Feedstock shall be deemed to have commenced on the
Day (i) the loading of the Feedstock onto trucks, rail cars, or barges
initially commences or (ii) the delivery of such Feedstock into the
transporting pipeline commences. In obtaining Feedstock for CPC in the
situation where a Keep Whole Acquisition Price is applicable, WPC will
use every reasonable effort to purchase such Feedstock at the lowest
possible spot price taking into consideration the location of the
Refinery, the prior notice given by CPC to WPC and other factors beyond
WPC's control.
KEEP WHOLE DISPOSITION AMOUNT shall have the meaning specified in
Section 4.7 hereinafter.
MONTH OR MONTHLY shall mean a period commencing at 12:01 a.m. local
time on the first Day of a calendar Month and extending until 12:01
a.m. local time on the first Day of the next succeeding calendar Month.
MIXED BUTANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
-4-
NETBACK PRICE shall mean the price obtained by WPC in an arm's length
sale of Refinery Products to a third Person who is not an Affiliate of
WPC less Transportation Costs and/or T&F Costs that are reasonably
incurred in connection therewith.
WPC DEFICIENCY AMOUNT shall have the meaning specified in Section 14.1
hereinafter.
WPC DEFICIENCY QUANTITY shall have the meaning specified in Section
14.1 hereinafter.
NEW TAXES shall mean any Taxes enacted and effective after the
Effective Date, including that portion of any Taxes or New Taxes that
constitutes an increase either in rate or breadth of coverage.
NOMINATED VOLUMES shall have the meaning specified in Section 4.3
hereinafter.
NORMAL BUTANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
OFFSPEC FEEDSTOCKS shall have the meaning specified in Section 7.1
hereinafter.
OFFSPEC REFINERY PRODUCTS shall have the meaning specified in Section
7.2 hereinafter.
PARTY shall mean individually either CPC or WPC (including their
respective successors and permitted assigns); collectively, the
"PARTIES."
PERSON shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other
organization of any nature or kind.
PP MIX shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "B".
PROPANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "B".
REFINERY shall mean the refinery owned by CPC and situated in El Paso,
Texas.
REFINERY PRODUCTS shall mean Propane, PP Mix, Normal Butane, Mixed
Butane, and those other light end streams identified on Exhibit "B" and
produced from the Refinery. Refinery Products shall also mean, where
applicable (but excluding Articles IV and V hereunder), Type A Offspec
Refinery Products, but such will in no way prevent, preclude, or
otherwise affect the right of WPC to reject Type A Offspec Refinery
Products in accordance with Section 7.4 hereinafter.
-5-
TAXES shall mean any and all ad valorem, property, occupation,
severance, production, extraction, first use, conservation, Btu or
energy, gathering, transport, pipeline, utility, gross receipts, gas or
oil revenue, gas or oil import, privilege, sales, use, consumption,
excise, lease, transaction, environmental, and other taxes,
governmental charges, duties, licenses, fees, permits, and assessments.
T&F COSTS shall mean all Transportation Costs and all costs and
expenses reasonably incurred in connection with the receipt,
fractionation and sale or resale of Refinery Products received by WPC
from CPC. It is understood and agreed that any fractionation costs that
are incurred at a facility owned and/or controlled by WPC or any of its
Affiliates shall not exceed the lesser of (i) the fair market value for
such fractionation services or (ii) the fees charged by WPC or its
Affiliates to CUSA in connection with the fractionation of natural gas
liquids (other than Refinery Products) owned by CUSA and purchased by
WPC.
TRANSPORTATION COSTS shall mean all costs and expenses reasonably
incurred in connection with the transportation of Feedstock(s) and/or
Refinery Product(s) hereunder, including, without limitation, rail car,
barges, and truck costs, Feedstock and/or Refinery Product losses that
occur during transportation for reasons other than the negligence or
willful misconduct of WPC and all costs and expenses reasonably
incurred in loading, unloading, transporting, terminaling, storing (if
required), and handling such Feedstock(s) and/or Refinery Products. It
is understood and agreed that Transportation Costs shall not include
any portion of WPC's general and administrative costs and expenses, but
will include amounts paid by WPC to CPC in connection with the Propane
rail cars owned or leased by CPC but operated by WPC in connection with
the services rendered by WPC to CPC pursuant to the Feedstock and
Refinery Products Master Services Agreement of even date herewith
between CPC and WPC. With respect to barges and trucks owned by WPC or
its Affiliates, the applicable Transportation Costs shall not exceed
the fair market value of the use of such barges and trucks in
transporting Feedstocks and/or Refinery Products hereunder. When WPC
purchases Feedstocks for resale to the Refinery at a delivered price
(i.e., which includes the price for such Feedstock and Transportation
Costs), the Transportation Costs charged to CPC shall not exceed the
fair market value for such transportation services, which shall be
determined with reference to transportation services rendered to
non-affiliated third Persons that are comparable in time, quality,
distance transported and type of Feedstock transported.
TYPE A OFFSPEC REFINERY PRODUCT shall have the meaning specified in
Section 7.2 hereinafter.
TYPE B OFFSPEC REFINERY PRODUCT shall have the meaning specified in
Section 7.2 hereinafter.
YEAR shall mean a period of twelve (12) consecutive Months commencing
from the Effective Date.
-6-
1.2 Other Definitions. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meanings indicated throughout this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 CPC hereby represents and warrants to WPC that on and as of the
date hereof:
(a) It has all requisite power and authority to carry on the
business in which it is engaged and to perform its respective
obligations under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action;
(c) It has all requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which CPC or its
properties are bound or, to its knowledge, any material laws
applicable to CPC; and
(e) This Agreement is valid, binding, and enforceable against it
in accordance with its terms, subject to bankruptcy,
moratorium, insolvency, and other laws generally affecting
creditors' rights and general principles of equity (whether
applied in a proceeding in a court of law or equity).
2.2 WPC hereby represents and warrants to CPC that on and as of the
date hereof:
(a) It has all requisite power and authority to carry on the
business in which it is engaged and to perform its respective
obligations under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite partnership action;
(c) It has all requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement
-7-
pursuant to which WPC or its properties are bound or, to its knowledge,
any material laws applicable to WPC; and
-8-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
(e) This Agreement is valid, binding, and enforceable against it
in accordance with its terms, subject to bankruptcy,
moratorium, insolvency, and other laws generally affecting
creditors' rights and general principles of equity (whether
applied in a proceeding in a court of law or equity).
ARTICLE III
TERM
3.1 Unless otherwise provided herein, this Agreement shall
* remain in full force and effect for a period of [REDACTED] Years from
the Effective Date hereof and shall continue from Year to Year
thereafter unless terminated by either Party hereto at the end of such
* [REDACTED] Year period or any Yearly anniversary thereafter by giving
the other Party at least ninety (90) Days, but not more than one
hundred eighty (180) Days, advance written notice of its intention to
so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be terminated
as follows:
(a) By the non-defaulting Party, upon thirty (30) Days written
notice to the other Party, after it has been determined
through the alternative dispute resolution procedures of
Article XIII that a Material Default has occurred in the
performance of a Party's obligations hereunder (it being
understood that, for purposes of the foregoing, "Material
Default" shall mean that the arbitrators have determined that
(i) in consequence of such default, the objectives of this
Agreement (as expressed in the Master Alliance Agreement of
even date herewith by and among CUSA, CPC, WPC and others) are
not being met and (ii) the defaulting Party failed to take the
steps necessary to accomplish such objectives);
(b) By a Party, in the event the other Party is dissolved (unless
the successor to such dissolved Party or its assets is an
Affiliate of CPC or WPC);
(c) By a Party, if a Bankruptcy Event occurs with respect to the
other Party; or
(d) By CPC, upon the occurrence of a Refinery Closure Event as
provided in Section 3.3.
In the event the Refinery is sold to a third Person not affiliated with CPC, the
reference to the Master Alliance Agreement set forth in Section 3.2(a), above,
shall be inapplicable.
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3.3 A Refinery Closure Event (as hereinafter defined) shall be presumed
to be a Material Default, and the provisions of this Section 3.3 shall apply,
notwithstanding any other provisions of this Agreement to the contrary
(including but not limited to the provisions of Section 3.2 and the alternative
dispute resolution provisions of Article XIII). Within fifteen (15) Days after
the receipt by WPC of written notice that a Refinery Closure Event has occurred,
senior executives of both Parties shall meet in person and attempt in good
faith, through the process of discussion and negotiation, to resolve all
disputes and claims arising from the Refinery Closure Event. If, within fifteen
(15) Days after such meeting, such senior executives cannot so resolve all such
disputes and claims, either Party shall have the right to submit such disputes
and claims to arbitration. The Party exercising such right shall submit an
Arbitration Notice to the other Party in accordance with Section 13.1(d) within
sixty (60) Days after the date of the initial meeting of the Parties' senior
executives. Unless the Parties otherwise agree in writing, the failure of either
Party to make such submission within such sixty (60) Days period shall waive all
rights of both Parties in respect of such disputes and claims arising from such
Refinery Closure Event. It is understood and agreed that the provisions of
Sections 13.1(a) through 13.1(c) shall not apply to any dispute arising from a
Refinery Closure Event. If the arbitrators determine that a Refinery Closure
Event has occurred, CPC shall have the right to terminate this Agreement upon
thirty (30) Days written notice to WPC. "Refinery Closure Event" shall mean a
shutdown of the Refinery or any operating unit thereof for more than twenty-four
(24) consecutive hours that occurs more than one time during any twelve (12)
Month period as a result of WPC's unexcused failure to deliver Feedstock or
purchase Refinery Products in accordance with this Agreement.
3.4 It is agreed and understood that CPC, in its sole discretion, may
permanently close the Refinery at any time during the term of this Agreement.
Upon such permanent closure, CPC and WPC shall be relieved of any further
obligations under this Agreement, if CPC has provided WPC with written notice of
such closure at least one hundred and eighty (180) Days prior to the date of
such closure.
3.5 Upon the termination of this Agreement, any monies due and owing
either Party shall be paid to the other Party pursuant to the terms hereof and
any refunds due either Party shall be made at the earliest possible time, and in
any event no later than sixty (60) Days after the expiration or termination of
this Agreement. All audit rights shall survive for the period prescribed by
Section 11.8.
3.6 Termination of this Agreement hereunder shall be cumulative of any
other rights or remedies that the terminating Party may have in connection with
such termination, including, but not limited to, damages and injunctive relief.
ARTICLE IV
QUANTITY AND FEEDSTOCK NOMINATIONS
4.1 During the term of this Agreement, unless WPC is excused from
supplying Feedstock, or CPC is excused from purchasing Feedstock pursuant to the
terms and provisions hereof, WPC agrees to sell, or cause to be sold, to CPC,
and CPC agrees to purchase from WPC, the Nominated Volumes of each Feedstock
nominated by CPC. All Feedstock sold by WPC and
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delivered to CPC shall be used solely by CPC as feedstock or fuel in the
Refinery. Unless mutually agreed to by the Parties, CPC's nominations, and WPC's
obligation to sell, shall not exceed (i) four thousand five hundred Barrels per
Day (4,500 BPD) of Isobutane and (ii) two thousand Barrels per Day (2,000 BPD)
of Normal Butane or Mixed Butane (the Required Volumes). Every six (6) Months
after the Effective Date, CPC and WPC shall meet to discuss the appropriate
levels of Required Volumes, after which CPC shall have the right to make
reasonable adjustments to said Required Volumes as necessary and appropriate
after taking into consideration CPC's good faith estimate of the volumes that
will be needed during the subsequent six (6) Month period. However, WPC shall
have no obligation to sell volumes in excess of the previously established
Required Volumes until ninety (90) Days after its receipt of written notice from
CPC of any such adjustment. During any Delivery Month in no event shall (i) WPC
be obligated to sell more than the Nominated Volumes and (ii) CPC be obligated
to purchase more than ninety-five percent (95%) of the Nominated Volumes. To the
extent that Section 2.306 of the Texas Business and Commerce Code, or any
provision of any other law with similar provisions (collectively, "Output
Contract Laws") are held to apply to this Agreement and the transactions hereby
contemplated, the Parties agree that, so long as the Contract Quantity does not
exceed the Required Volumes, such Contract Quantity shall not be deemed
unreasonably disproportionate to any stated estimate or to any normal or
otherwise comparable prior requirements of CPC. Notwithstanding the foregoing,
if CPC needs Emergency Supplies of Feedstock(s), WPC will use every reasonable
effort to obtain such Feedstocks on behalf of CPC, but will have no liability to
CPC if, through WPC's exercise of every reasonable effort, it is unable to
supply such Emergency Supplies. In addition to any applicable Transportation
Costs reasonably incurred in connection therewith, all out of pocket costs and
expenses reasonably incurred by WPC in obtaining and delivering Emergency
Supplies of Feedstocks in excess of one hundred and five percent (105%) of the
Nominated Volumes shall be paid by CPC or, as applicable, reimbursed to WPC by
CPC through the billing and payment procedures of Article XI.
4.2 Subject to the terms and provisions hereof, including, without
limitation, the provisions respecting the Required Volumes set forth in Section
4.1, above, CPC agrees to purchase from WPC and WPC agrees to sell to CPC, one
hundred percent (100%) of CPC's Feedstock requirements. However, in the event
WPC is unable to provide Feedstocks in excess of the Nominated Volumes or
Required Volumes, as applicable, CPC shall have the right to purchase from third
Persons volumes in excess of such Nominated Volumes or Required Volumes. In
addition, WPC agrees to purchase from CPC and CPC agrees to sell to WPC all
Refinery Products. The foregoing, however, shall not be construed as limiting
CPC's right to transfer, from time to time, Feedstocks and Refinery Products (i)
from the Refinery to one or more other refineries owned by CPC as of the
Effective Date (such refineries being collectively called the "Refineries"), or
(ii) to the Refinery from one or more of the Refineries.
4.3 Solely for planning purposes, CPC shall provide WPC with a three
(3) Month rolling estimate of Feedstock volume needs and expected Refinery
Product availability on the first Business Day of each Month during the term of
this Agreement. In addition, CPC shall nominate to WPC by the first Business Day
of the prior Month all volumes of each Feedstock to be purchased by CPC each Day
during the next succeeding Month (the "Nominated Volumes"). No later than the
tenth Day of the Month immediately preceding the Delivery Month, CPC shall have
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the right to increase the Nominated Volumes for each Feedstock to be purchased
in the immediately succeeding Delivery Month. If CPC increases the Nominated
Volumes after the tenth (10th) Day of the Month prior to the Delivery Month so
as to exceed the Contract Quantity, such excess shall be deemed Emergency
Supplies.
4.4 To minimize the costs and expenses associated with Emergency
Supplies and variances between Nominated Volumes and the volumes of Feedstock
actually taken, CPC and WPC agree to establish a scheduling committee (the
"Scheduling Committee") to perform the duties as outlined below. The Scheduling
Committee shall be comprised of members from both CPC and WPC and where
appropriate, shall include a representative of CPC's Transportation Planning &
Services Group (also referred to as "TP&S"). CPC and WPC each shall bear their
own costs and expenses associated with the Scheduling Committee and its
activities. The duties of the Scheduling Committee will include, but will not be
limited to, the following:
(a) administering and coordinating the routine business of the
Scheduling Committee including forecasting, planning, and
scheduling of Feedstock and Refinery Product deliveries and
movements;
(b) determining and developing strategies with respect to
Scheduling Committee activities;
(c) developing, monitoring, and communicating mutually agreed to
standards of performance;
(d) monitoring the nomination procedures, deliveries of Feedstocks
and Refinery Products, and adjustments to Required Volumes;
(e) reviewing all significant equipment, design, process, and
operating changes affecting the volumes of Feedstocks needed
by the Refinery and/or the volumes of Refinery Products
produced at the Refinery;
(f) conducting regularly scheduled planning, problem solving, and
expense review meetings;
(g) participating in the alternative dispute resolution procedures
and set forth in Article XIII hereinafter;
(h) developing procedures for handling Offspec Feedstock and
Offspec Refinery Products; and
(i) developing procedures for making the Parties' performance
hereunder more efficient and cost-effective.
4.5 The Parties shall use every reasonable effort to nominate, deliver,
and receive, as applicable, Feedstock and Refinery Products on a ratable Daily
basis; however, variations between
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the volumes nominated, taken, or delivered may occur. The Scheduling Committee
shall meet periodically to allocate between the Parties, on a fair and equitable
basis, any costs and expenses resulting from Monthly variations in excess of
those permitted in determining the Contract Quantity, including, but not limited
to, storage costs for Feedstocks and Refinery Products, rail, tank car, or barge
rental costs, demurrage charges, and any other costs and expenses incurred in
connection with such Monthly variations. If the Scheduling Committee cannot
agree on a fair and equitable allocation of expenses within forty-five (45) Days
after the Submission Date (as defined in Section 13.1(b)), the dispute
resolution provisions of Article XIII shall apply. In addition to the foregoing,
CPC shall pay to WPC the Keep Whole Acquisition Price for Emergency Supplies,
but only to the extent such Emergency Supplies exceed one hundred and five
percent (105%) of the Nominated Volumes.
4.6 With respect to any CPC Deficiency Quantity (as defined in Section
4.7) which exceeds five percent (5%) of the Nominated Volumes, CPC agrees to pay
to WPC the arithmetic product of (i) such CPC Deficiency Quantity in excess of
five percent (5%) of the Nominated Volumes and (ii) one (1) cent per Gallon. CPC
shall pay such amount in accordance with Article XI. In addition, any Keep Whole
Disposition Amount (as defined in Section 4.7) payable in connection with such
CPC Deficiency Quantity in excess of five percent (5%) of the Nominated Volumes
shall be determined in accordance with Section 4.7 and shall be paid by CPC or
WPC, as applicable, in accordance with Article XI.
4.7 (a) KEEP WHOLE DISPOSITION AMOUNT shall mean the following:
KWDA=[(A-B) x (C-D)] + E
where
KWDA = the Keep Whole Disposition Amount;
A-B = the CPC Deficiency Quantity;
C-D = the Price Differential; and
E = EITHER the Third Party Costs OR
the Storage Costs, as applicable.
For purposes of the foregoing, the variables and
terms set forth below have the following meanings:
A = the total Nominated Volumes for
each Feedstock nominated by CPC for
delivery during the applicable
Delivery Month
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that are available by WPC for
delivery to CPC, MINUS the total
quantities of each Feedstock that
CPC is excused from purchasing
hereunder during the applicable
Delivery Month;
B = the quantities of each Feedstock
actually accepted by CPC during the
applicable Delivery Month;
C = the price per Gallon of each
Feedstock payable by CPC to WPC for
the applicable Delivery Month in
accordance with Section 5.1 (the
"Contract Price");
D = EITHER (i) if WPC sells the CPC
Deficiency Quantity, the price per
------ Gallon obtained by WPC for
such CPC Deficiency Quantity in an
arm's length sale made during such
Delivery Month to a third Person who
is not an Affiliate of WPC, OR (ii)
if WPC stores the CPC Deficiency --
Quantity, a price per Gallon equal
to the Monthly average, during the
applicable Delivery Month, of the
Daily high and low prices per GALLON
quoted by OPIS for Mont Belvieu,
Texas (Non-TET) for each Feedstock
for which there is a CPC Deficiency
Quantity during such Delivery Month
((i) or (ii), as applicable, being
herein called the "Alternate
Price").
"Third Party Costs" shall mean, if WPC sells
the CPC Deficiency Quantity, all
Transportation Costs and fractionation
costs, if applicable, reasonably incurred by
WPC in connection with the sale of the CPC
Deficiency Quantity (without duplication of
any Transportation Costs or fractionation
costs previously paid by CPC under Section
4.5).
"Storage Costs" shall mean, if WPC stores
the CPC Deficiency Quantity, Transportation
Costs and fractionation costs, if
applicable, reasonably incurred by WPC to
and at the storage facility of the CPC
Deficiency Quantity (without duplication of
any Transportation Costs or fractionation
costs previously paid by
CPC under Section 4.5), which Transportation
Costs and fractionation costs shall not
exceed the Transportation Costs and
fractionation costs, if applicable,
reasonably incurred in connection with such
CPC Deficiency Quantity if it were
transported to and at Mont Belvieu, Texas.
(b) If the Alternate Price exceeds the Contract Price by
more than one (1) cent ($0.01) per Gallon, the amount
computed in accordance with the first grammatical
sentence of Section 4.6 shall not be paid, and
instead WPC shall pay CPC, in accordance with Article
XI, an amount calculated as follows:
[[(D-C) - $0.01/Gallon] x (A-B)] - E]
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CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
(c) It is understood and agreed that the CPC Deficiency
Quantity shall always be equal to or greater than
zero (0) and shall never exceed the Nominated Volumes
for the applicable Delivery Month.
(d) In disposing of Feedstock in a situation where a Keep
Whole Disposition Amount is applicable, WPC shall use
every reasonable effort to dispose of same at the
highest possible spot purchase price, taking into
consideration the location of the Refinery, the prior
notice given by CPC to WPC, and other factors beyond
WPC's control.
ARTICLE V
PRICE
5.1 Except as otherwise provided herein, CPC shall pay WPC for
* the Feedstock(s) purchased hereunder a price equal to [REDACTED] as
quoted by the Oil Price Information Service ("OPIS") for Mont Belvieu,
Texas (Non-TET) on the last five (5) Business Days of the Month prior
* to the Delivery Month plus Transportation Costs plus [REDACTED] per
Gallon.
5.2 Except as otherwise provided herein, WPC shall pay CPC for
* the Refinery Products purchased hereunder [REDACTED] (the "Netback
Percentage") of (i) the Netback Price, if such Refinery Products are
immediately sold by WPC, or (ii) a price equal to the Monthly average
of the Daily high and low prices of each Refinery Product delivered
during the Delivery Month as quoted by OPIS for Mont Belvieu, Texas
(Non-TET), less Transportation Costs or T&F Costs to and at Mont
Belvieu, Texas, if such Refinery Products are stored by WPC for its own
account during the applicable Delivery Month. WPC shall use
every reasonable effort to obtain the highest Netback Price for
Refinery Products. Notwithstanding the foregoing, it is understood and
agreed that WPC's share of the Netback Price received from the
* disposition of Refinery Products (i.e., the [REDACTED], shall never be
* less than [REDACTED] per Gallon of the Refinery Products delivered to
WPC at the Delivery Point. WPC agrees to use commercially reasonable
efforts to maximize the value to CPC in connection with the disposition
of Refinery Products.
5.3 With respect to any Mixed Butanes or other mixed Feedstocks or
Refinery Products delivered hereunder, the price paid shall be based on the
primary components of each Feedstock or Refinery Product which meet the
specifications set forth in Exhibits A or B, as applicable, contained in such
Mixed Butanes or other mixed Feedstocks or Refinery Products.
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5.4 If for any reason the OPIS index for a particular Feedstock or
Refinery Product should cease to be published, the Parties agree promptly and in
good faith to negotiate a mutually satisfactory Alternate Index or substitute
methodology for calculating the price for such Feedstock or Refinery Product
(the "Alternate Index"). If, on or before thirty (30) Days after the index used
to determine the price ceases to be published, the Parties are unable to agree
on an Alternate Index upon which to base the calculation of the price, the
Parties shall submit such determination to the alternative dispute resolution
procedures in accordance with the provisions of Article XIII hereinafter, which
alternative dispute resolution procedures will determine the Alternate Index.
From the date on which the index price used to determine the price for a
particular Feedstock or Refinery Product ceases to be available until the
Alternate Index is determined, the price for such Feedstock or Refinery Product
shall be the average of the prices in effect (or that would have been in effect)
during the twelve (12) Months preceding the Month in which the index upon which
the price was based ceased to be available, which price shall be effective until
the effective date of the Alternate Index determined as set forth in this
Section 5.4. Upon the determination of an Alternate Index, the price will be
adjusted retroactively to the date on which the index upon which the price
previously was based ceased to be available, plus interest thereon at the Base
Rate.
5.5 Every five (5) Years after the Effective Date of this Agreement,
either Party shall have the option to open this Agreement solely for the purpose
of renegotiating the pricing provisions hereof. To exercise such option, a Party
at least ninety (90) Days before the expiration of such five (5) Year period
must provide to the other Party written notification (the "Renegotiation
Notice") of its desire to renegotiate the price for the Feedstocks or Refinery
Products sold and purchased hereunder. In any such renegotiations, the Parties
shall continue to recognize that the price for Feedstocks and/or Refinery
Products must reflect market prices for Feedstocks and/or Refinery Products in
El Paso, Texas. If, after negotiating in good faith for a period of ninety (90)
Days following the date of the Renegotiation Notice, the Parties are unable to
agree upon a mutually acceptable price for such Feedstock(s) or Refinery
Product(s), the matter shall be submitted to the alternative dispute resolution
procedures as provided in Article XIII hereof. During the period while
negotiations are ongoing until (i) a new price is agreed to or (ii) a new price
is established as provided herein, the price for the Feedstock or the Refinery
Product sold and purchased hereunder shall be determined in accordance with the
pricing formula that was applicable immediately prior to the date of the
Renegotiation Notice. If a new price is established under this Section 5.5,
whether by renegotiation, arbitration, or otherwise, such new price shall be
effective as of, and shall, if necessary, be made retroactive to, the first Day
of the applicable five (5) Year period immediately following the Renegotiation
Notice, plus interest thereon at the Base Rate.
5.6 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CPC and WPC shall meet to renegotiate in good faith such burdensome terms and
provisions so as to make them fair and equitable. Such renegotiations shall
occur within thirty (30) Days of the date of the non-requesting Party's receipt
of such written request for such renegotiations. If the parties are unable to
agree on new provisions to replace such burdensome terms and provisions within
ninety (90) Days of the non-
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requesting Party's receipt of such written request, the matter shall be
submitted to the alternative dispute resolution procedures set forth in Article
XIII hereof. It is understood and agreed that the rights granted in this Section
5.6 can only be used by a Party to commence good faith renegotiations once
during each Year during the term hereof. If new provisions are agreed upon under
this Section 5.6, whether by renegotiation, arbitration, or otherwise, such new
provisions shall be effective as of, and shall, if necessary, be made
retroactive to, the date on which the notice commencing renegotiations under
this Section 5.6 was given, plus interest thereon at the Base Rate.
ARTICLE VI
DELIVERIES
6.1 The Feedstock to be sold by WPC hereunder shall be delivered by WPC
(or at WPC's direction) to CPC or to CPC's designated representative for the
account of CPC, at the Delivery Points (as defined in Section 6.2). The Refinery
Products to be sold hereunder by CPC to WPC shall be delivered by CPC at the
Delivery Points in Section 6.2.
6.2 The point(s) of delivery for Feedstock and Refinery Product sold
and delivered hereunder (hereinafter the "Delivery Point(s)") shall be
determined as follows:
(a) In the event delivery is to be to or from a pipeline, the
Delivery Point shall be located, and delivery of Feedstock or
Refinery Product shall be deemed to occur, at the point at
which Feedstock or Refinery Product passes the pipeline meter.
If pipeline delivery is by in-line inventory transfer,
delivery shall be deemed to occur on the date and time that
the relevant pipeline carrier advises CPC and WPC, by product
transfer order, book transfer, or letter of transfer, that
Feedstock or Refinery Product shall be transferred to CPC's
account, and the Delivery Point shall be the location of the
Feedstock or Refinery Product in the pipeline of the pipeline
carrier on the Day and time that such in-line transfer of
Feedstock or Refinery Product is deemed to occur. The Parties
hereto understand and agree that WPC has no control over the
operations of the pipeline carrier and therefore cannot
control when Feedstock transfer to CPC's account or Refinery
Product transfer to WPC's account by the pipeline carrier
will, in fact, occur.
(b) In the event delivery is to be by a rail car, truck, or barge
owned, operated, leased, or hired by WPC or CPC, the Delivery
Point shall be located, and delivery of Feedstock or Refinery
Product shall be deemed to occur, at the point at which the
Feedstock or Refinery Product passes from the flange
connecting WPC's or CPC's owned, operated, leased, or hired
rail car, truck, or barge to the receiving facility equipment
of CPC or WPC, whether said rail car, truck, or barge is
unloaded by CPC or WPC directly or on behalf of CPC or WPC
through CPC's or WPC's agent.
(c) In the event delivery is into or from a storage facility,
except as provided below in this Section 6.1, the Delivery
Point shall be located, and delivery of Feedstock shall
-17-
be deemed to occur, at the point at which the Feedstock passes
the flange between the delivering or receiving line of the
storage facility and the receiving or delivering equipment, as
applicable. If delivery is by in-storage transfer, delivery of
Feedstock shall be deemed to occur on the date and time that
the operator of the storage facility advises WPC and CPC by
product transfer order, book transfer, or letter of transfer,
that Feedstock shall be transferred to CPC's account, and the
Delivery Point shall be the storage facility in which the
Feedstock is then located; provided, however, that in the case
of an in-storage transfer of Feedstock located in a storage
facility wholly owned by WPC or leased by WPC and in which CPC
owns no interest (leased or otherwise), for purposes of
determining when possession and control of the Feedstock in
storage and the risk of loss, damage, and liability associated
therewith passes from WPC to CPC the Delivery Point shall be
the point at which the Feedstock passes the discharge flange
of WPC's owned or leased storage facility connecting the
delivering line to the receiving line. To the extent that WPC
does not operate the storage facility, the parties hereto
understand and agree that WPC cannot control when the
Feedstock transfer to CPC's account by the storage facility
will, in fact, occur.
6.3 Title to and risk of loss associated with the Feedstocks delivered
hereunder shall pass from WPC to CPC upon the commencement of the delivery of
such Feedstocks at the Delivery Point unless such Feedstock is rejected in
accordance with Article VII. CPC shall be responsible for all risk of loss,
damage, or liability to the extent that any such loss, liability, or damage
arises from acts or omissions occurring after the commencement of physical
delivery of the Feedstock at and downstream of the Delivery Point(s), unless
such Feedstock is rejected in accordance with Article VII. In the event delivery
of the Feedstock sold hereunder is by in-storage transfer of Feedstock, title to
the Feedstock shall pass from WPC to CPC at the point in time when such
in-storage transfer shall be deemed to have occurred as provided in Section 6.2,
above.
6.4 Except for Type B Offspec Refinery Products, title to and risk of
loss associated with the Refinery Products delivered hereunder shall pass from
CPC to WPC upon the commencement of the delivery of such Refinery Products at
the Delivery Points, unless such Refinery Products are rejected in accordance
with Article VII. WPC shall be responsible for all risk of loss, damage, or
liability to the extent that any such loss, liability, or damage arises from
acts or omissions occurring after the commencement of physical delivery of the
Refinery Product at and downstream of the Delivery Point(s), unless such
Refinery Products are rejected in accordance with Article VII. Except for Type A
Offspec Refinery Product, title to and risk of loss associated with Offspec
Refinery Products delivered hereunder shall remain with CPC until such Offspec
Refinery Products meet the specifications set forth in Section 7.2 hereinafter.
6.5 The following rules shall be applicable to the transportation,
loading, and unloading of Feedstocks or Refinery Products at the Delivery Point:
(a) If rail cars subject to payment of demurrage or any other
similar charges to a third Person not affiliated with either Party are used to
deliver Feedstock to the Delivery Point
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or to transport Refinery Products from the Delivery Point, CPC agrees to unload
or load, as the case may be, and start the relevant cars on the return trip in
accordance with the detention policy of the owner or operator of such rail car
equipment and CPC further agrees to pay any and all such charges that may be due
thereunder.
(b) CPC shall be liable for the payment of invoices from
the railroad for demurrage and hazardous materials
storage charges incurred by WPC as the prepaid
shipper due to CPC's inability to receive a rail car
and/or have a rail car placed on CPC's siding; and
(c) Rail cars shall not be diverted while in transit
except upon prior written authorization of WPC. Any
charge incurred by WPC for the diversion of rail cars
by CPC shall be for the account of CPC.
(d) If WPC's owned or leased trucks are used to deliver
Feedstock to the Delivery Point or to transport
Refinery Products from the Delivery Point, CPC agrees
to unload or load, as the case may be, immediately
upon arrival at the Delivery Point, and CPC's failure
to do so shall render CPC liable to WPC for damages
incurred as a result of such delay.
(e) For Feedstock sold hereunder, WPC will be liable for
all rail car shortages claimed by CPC in excess of
one percent (1%) of the net Gallons reflected on the
bill of lading and acknowledged by the railroad
agent's signature prior to unloading; provided,
however, that such shortages, if any, are reported in
writing to WPC within twenty-four (24) hours after
delivery by the carrier and prior to the unloading of
the shipment in which the relevant shortage occurs.
CPC shall ask WPC for permission to unload, and WPC,
at its expense, shall have the right to inspect each
car at its destination within forty-eight (48) hours
after receipt of written notice of such shortage. All
demurrage charges arising from the failure of WPC to
release the car for unloading within such forty-eight
(48) hour period shall be paid by WPC. Similarly, WPC
shall be liable for all truck shortages claimed by
CPC in excess of three percent (3%) of the net
Gallons reflected on the bill of lading; provided,
however, that such shortages, if any, are noted on
the delivery ticket and acknowledged by the truck
driver's signature prior to unloading. The failure of
CPC to observe this provision or any action by CPC
which impedes identification of an alleged defect
shall operate as a waiver of CPC's rights to make any
such claim.
(f) For Refinery Products purchased hereunder, CPC will
be liable for all rail car shortages claimed by WPC
in excess of one percent (1%) of the net Gallons
reflected on the bill of lading and acknowledged by
the railroad agent's signature prior to unloading;
provided, however, that such shortages, if any, are
reported in writing to CPC within twenty-four (24)
hours after delivery by the carrier and prior to the
unloading of the
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shipment in which the relevant shortage occurs. WPC
shall ask CPC for permission to unload, and CPC, at
its expense, shall have the right to inspect each car
at its destination within forty-eight (48) hours
after receipt of written notice of such shortage. All
demurrage charges arising from the failure of CPC to
release the car for unloading within such forty-eight
(48) hour period shall be paid by CPC. Similarly, CPC
shall be liable for all truck shortages claimed by
WPC in excess of three percent (3%) of the net
Gallons reflected on the bill of lading; provided,
however, that such shortages, if any, are noted on
the delivery ticket and acknowledged by the truck
driver's signature prior to unloading. The failure of
WPC to observe this provision or any action by WPC
which impedes identification of an alleged defect
shall operate as a waiver of WPC's rights to make any
such claim.
Notwithstanding the foregoing, if the detention and/or demurrage charges set
forth above are insufficient to cover any such charges paid by WPC to such third
Person not affiliated with WPC, CPC shall reimburse WPC for such amounts.
6.6 If, CPC uses a rail car, truck, or barge leased by WPC for purposes
other than those contemplated by WPC's lease, CPC shall be responsible for, and
agrees to indemnify and hold WPC harmless from and against, all costs,
liabilities, and expenses arising out of, or in any way associated with, CPC's
use of such equipment, including, but not limited to, cleaning and inspection
costs and additional rental fees for such equipment and/or for other equipment
required to be leased as a result of CPC's use.
ARTICLE VII
QUALITY
7.1 All Feedstocks sold by WPC and purchased by CPC hereunder shall
meet the specifications set forth in Exhibit A, attached hereto and made a part
hereof. CPC shall have the right to reject Feedstock which fails to meet such
quality specifications ("Offspec Feedstock"). All costs associated with the
return of Offspec Feedstock shall be borne by WPC.
7.2 All Refinery Products sold by CPC and purchased by WPC hereunder
shall meet the specifications set forth in Exhibit B, attached hereto and made a
part hereof. WPC shall have the right to reject any Refinery Product which fails
to meet such quality specifications ("Offspec Refinery Product"). All Offspec
Refinery Products shall be deemed to be either Type A Offspec Refinery Products
or Type B Refinery Products. "Type A Refinery Products" are Offspec Refinery
Products of sufficient quality to permit them to be sold to a third Person not
Affiliated with CPC or WPC at a discount off the price provided for Refinery
Products in Article V and which do not contain any of the materials listed in
Exhibit C above the limits specified therein. "Type B Offspec Refinery Products"
are all Offspec Refinery Products that contain any of the materials listed in
Exhibit C above the limits for such materials specified therein. All costs
associated with the return and/or disposal of Offspec Refinery Product shall be
borne by CPC.
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7.3 Should the Feedstock delivered hereunder to CPC, or to CPC's
designated representative for the account of CPC, fail at any time to conform to
the specifications set forth in Exhibit A, either Party shall notify the other
Party of any such failure, and WPC immediately shall undertake and diligently
pursue such acts as may be necessary to correct such failure, including
treatment to the extent such treatment is economical in WPC's opinion, so as to
deliver Feedstock conforming to the specifications set forth above; but nothing
contained in this Article VII or any other part of this Agreement shall be
construed to affect CPC's right, at any time and from time to time, to reject
any Feedstock not conforming to said specifications and to refuse or suspend
receipt until it is established to CPC's reasonable satisfaction that subsequent
deliveries of Feedstock will conform to said specifications. The term of this
Agreement shall not be extended by the length of time of any period or periods
when deliveries have been rejected, refused, or suspended as provided for
herein. Notwithstanding the foregoing, the knowing acceptance by CPC of any
Offspec Feedstock shall constitute a waiver by CPC of any and all other rights
and remedies available to CPC under this Agreement or otherwise with respect to
WPC's tender of such Offspec Feedstock and all risk of loss, damage, or
liability arising out of CPC's ownership, control, possession, or use of such
Offspec Feedstock shall pass to and be borne by CPC. If it is subsequently
determined that CPC unknowingly accepted Offspec Feedstock, the Parties will
mutually agree upon a discounted price for such Offspec Feedstock to reflect its
diminution in value from Feedstock meeting the specifications hereof. If the
Parties are unable to agree on a mutually acceptable discount price for such
Offspec Feedstock, the matter shall be subjected to the alternative dispute
resolution procedures set forth in Article XIII hereinafter.
7.4 Should the Refinery Products delivered hereunder to WPC, or to
WPC's designated representative for the account of WPC, fail at any time to
conform to the specifications set forth in Exhibit B, either Party shall notify
the other Party of any such failure, and CPC immediately shall undertake and
diligently pursue such acts as may be necessary to correct such failure,
including treatment to the extent such treatment is economical in CPC's opinion,
so as to deliver Refinery Product conforming to the specifications set forth
above; but nothing contained in this Article VII or any other part of this
Agreement shall be construed to affect WPC's right, at any time and from time to
time, to reject any Refinery Product not conforming to said specifications and
to refuse or suspend receipt until it is established to WPC's reasonable
satisfaction that subsequent deliveries of Refinery Product will conform to said
specifications. The term of this Agreement shall not be extended by the length
of time of any period or periods when deliveries have been rejected, refused, or
suspended as provided for herein. Notwithstanding the foregoing, the knowing
acceptance by WPC of any Type A Offspec Refinery Product shall constitute a
waiver by WPC of any and all other rights and remedies available to WPC under
this Agreement or otherwise with respect to CPC's tender of such Type A Offspec
Refinery Product, and all risk of loss, damage or liability arising out of WPC's
ownership, control , possession, or use of such Type A Offspec Refinery Product
shall pass to and be borne by WPC. If it is subsequently determined that WPC
unknowingly accepted Offspec Refinery Products, the Parties will mutually agree
upon a discounted price for such Offspec Refinery Products to reflect their
diminution in value from Refinery Products meeting the specifications hereof. If
the Parties are unable to agree on a mutually acceptable discount price for such
Offspec Refinery Products, the matter shall be subjected to the alternative
dispute resolution procedures set forth in Article XIII hereunder. CPC agrees to
INDEMNIFY and HOLD HARMLESS WPC, its Affiliates, and
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their respective officers, directors, employees, agents, and contractors, from
all actual losses, costs, expenses, claims (including, without limitation,
personal injury or property damage claims), damages, and causes of action,
including, without limitation, reasonable attorneys' fees and costs of court
(collectively, the "Losses") incurred by WPC, such Persons, or such Affiliates
arising out of, or in any way associated with, the delivery to WPC of Propane
that fails to meet the specifications set forth in Exhibit B and is unknowingly
accepted by WPC.
ARTICLE VIII
WARRANTY OF TITLE
8.1 WPC warrants title to all Feedstocks sold and delivered by it to
CPC, and further warrants that WPC has the right to sell such Feedstocks and
that such Feedstocks meet the quality specifications as set forth herein and are
free from all liens, claims, or other charges. THERE ARE, HOWEVER, NO OTHER
WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY PATENT,
TRADEMARK, COPYRIGHT, OR OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED BY WPC AND EXCLUDED FROM THIS AGREEMENT.
8.2 CPC warrants title to all Refinery Products sold and delivered by
it to WPC, and further warrants that CPC has the right to sell such Refinery
Products and that such Refinery Products meet the quality specifications as set
forth herein and are free from all liens, claims or other charges. THERE ARE,
HOWEVER, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY
PATENT, TRADEMARK, COPYRIGHT, OR OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED BY CPC AND EXCLUDED FROM THIS AGREEMENT.
ARTICLE IX
TAXES
9.1 WPC shall be liable for and shall pay, or cause to be paid, or
reimburse CPC, if CPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the Feedstock sold hereunder upstream of the
Delivery Point(s). If CPC is required to remit such Tax, the amount thereof
shall be deducted from any sums becoming due to WPC hereunder. CPC shall be
liable for and shall pay, cause to be paid, or reimburse WPC, if WPC has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
Feedstock hereunder at and downstream of the Delivery Point(s) including any
Taxes imposed or collected by a taxing authority with jurisdiction over CPC,
provided, however, when laws, ordinances or regulations permit or impose upon
WPC the
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obligation to collect or pay Taxes applicable to the sale and/or delivery of
Feedstock hereunder at the Delivery Point, WPC shall collect all such Taxes from
CPC, which shall be in addition to the applicable Price, and remit the same to
the appropriate governmental authority, unless CPC furnishes a certificate of
exemption. WPC SHALL INDEMNIFY, DEFEND, AND HOLD CPC HARMLESS FROM AND AGAINST
ANY LIABILITY WITH RESPECT TO THE TAXES FOR WHICH WPC IS LIABLE.
9.2 CPC shall be liable for and shall pay, or cause to be paid, or
reimburse WPC, if WPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the Refinery Product sold hereunder upstream of the
Delivery Point(s). If WPC is required to remit such Tax, the amount thereof
shall be deducted from any sums becoming due to CPC hereunder. WPC shall be
liable for and shall pay, cause to be paid, or reimburse CPC, if CPC has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
Refinery Product hereunder at and downstream of the Delivery Point(s) including
any Taxes imposed or collected by a taxing authority with jurisdiction over WPC,
provided, however, when laws, ordinances or regulations permit or impose upon
CPC the obligation to collect or pay Taxes applicable to the sale and/or
delivery of Refinery Product hereunder at the Delivery Point, CPC shall collect
all such Taxes from WPC, which shall be in addition to the applicable Price, and
remit the same to the appropriate governmental authority, unless WPC furnishes a
certificate of exemption. CPC SHALL INDEMNIFY, DEFEND, AND HOLD WPC HARMLESS
FROM AND AGAINST ANY LIABILITY WITH RESPECT TO THE TAXES FOR WHICH CPC IS
LIABLE.
9.3 While this Agreement remains in effect, CPC shall pay to WPC on
demand, from time to time, all amounts necessary to compensate WPC for any New
Taxes incurred by WPC after the Effective Date of this Agreement applicable to
the sale and/or delivery of Feedstock at and downstream of the Delivery
Point(s), and CPC SHALL INDEMNIFY, DEFEND, AND HOLD WPC FREE AND HARMLESS FROM
AND AGAINST ANY LIABILITY WITH RESPECT TO ALL SUCH NEW TAXES. WPC will notify
CPC of the enactment of any New Taxes as promptly as practical after it obtains
knowledge thereof. WPC will furnish CPC with a statement setting forth the basis
and amount of each request by WPC for compensation under this Section 9.3. It is
understood and agreed that the enactment of any material New Taxes shall
constitute a hardship under the provisions of Section 5.6, above.
9.4 To claim an exemption from payment of a Tax, a Party shall provide
a certificate of exemption or other reasonably satisfactory evidence of
exemption from any Tax, and each Party agrees to cooperate with the other Party
in obtaining any such exemption. In addition, WPC has provided CPC with, and CPC
acknowledges receipt of, the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986).
ARTICLE X
MEASUREMENT AND ANALYSES
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10.1 On all deliveries into or out of rail cars, the quantity shall be
determined by official tank car capacity tables or slip tube gauges in
accordance with GAS PROCESSORS ASSOCIATION ("GPA") PUBLICATION 8162, latest
revision. On all deliveries into or out of truck equipment, quantities shall be
determined by meter, rotary gauge or weighing, in accordance with GPA
PUBLICATIONS 8162 AND 8186, latest revision. On all deliveries into or out of
pipelines, quantities shall be determined by pipeline meter in accordance with
the America Petroleum Institute ("API") Manual of Petroleum Measurement
Standards. For raw make mixtures, volumes of the component products shall be
determined (where practical) on a mass (pound) measurement basis in accordance
with the latest edition of GPA PUBLICATIONS 8173 AND 8182. On all deliveries
into or out of shore tanks, quantities shall be determined either meter or gauge
from a static tank in accordance with the API Manual of Petroleum Measurement
Standards and based upon the practice of the relevant terminal. All quantities
shall be corrected to standard conditions of sixty degrees Fahrenheit
(60(degree)F) and equilibrium vapor pressure in accordance with the API Manual
of Petroleum Measurement Standards, Chapter 14, Section B. The quantity and
quality of Feedstock and Refinery Product covered by this Agreement shall be
measured according to the current versions of the applicable standards of API
and the American Society for Testing Materials, if available. Each Party shall
be entitled to have its representatives present during all loadings, unloadings,
tests, and measurements involving Feedstock or Refinery Product delivered
hereunder. If the Parties cannot agree on measurement or quality tests results,
the measurements and quality tests required to determine the volume of receipts
or shipments or the conformity of the Feedstock or Refinery Product delivered to
the specifications set forth herein shall be made by an independent inspector
selected jointly by the Parties, the cost of which shall be shared equally by
the Parties.
ARTICLE XI
BILLING AND PAYMENT
11.1 After delivery of Feedstock(s) hereunder, WPC shall submit an
invoice to CPC by facsimile transmission setting forth the quantity of each
Feedstock delivered, the price for such Feedstock, the amount due hereunder for
such quantities, and such other information and detail as may be mutually
agreeable to the Parties. CPC shall remit by wire transfer of funds, into an
account designated by WPC, any amounts due no later than ten (10) Days after
CPC's receipt of WPC's invoice. If the Day on which any payment is due is not a
Business Day, then the relevant payment shall be due upon the immediately
preceding Business Day, except if such payment due date is a Sunday or Monday,
then the relevant payment shall be due upon the immediately succeeding Business
Day.
11.2 After delivery of Refinery Products hereunder, CPC shall submit a
statement to WPC by facsimile transmission setting forth the quantity of each
Refinery Product delivered to WPC. By not later than thirty (30) Days after the
receipt of CPC's statement, WPC shall provide CPC with a statement setting forth
the price or Netback Price, as applicable, of such Refinery Products, the amount
due CPC for such Refinery Products, and such other information and detail as may
be mutually agreeable to the Parties, along with payment for such Refinery
Products, which shall be remitted by wire transfer of funds into an account
designated by CPC. If the Day on which any payment is due is not a Business Day,
then the relevant payment shall be due upon
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the immediately preceding Business Day, except if such payment due date is a
Sunday or Monday, then the relevant payment shall be due upon the immediately
succeeding Business Day.
11.3 If CPC or WPC should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such accrued
interest shall be added to the amount reflected as being owed hereunder by
either CPC or WPC, as the case may be, on the next invoice or by separate
invoice.
11.4 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of such good faith dispute,
the withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance with
the alternative dispute resolution procedures of Article XIII. The performance
of both Parties under this Agreement shall continue pending the outcome of such
procedures. If it is subsequently determined, whether by mutual agreement of the
Parties or otherwise, that the withholding Party is required to pay all or any
portion of the disputed amounts to the other Party, the withholding Party, in
addition to paying over such amounts, shall also pay interest accrued on such
amounts from the original due date until paid, at the Base Rate.
11.5 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the Feedstock or Refinery Product invoice or statement forming
the basis of the overcharge or undercharge was delivered or not delivered, as
the case may be, unless a claim for such adjustment shall have been presented
prior to the end of such period. Any payment with respect to a retroactive
adjustment shall include an amount equal to interest on all amounts past due
from the date of the initial payment at the Base Rate, except in instances where
neither Party knew or could have known that the overcharge or undercharge
occurred, in which case interest shall run from the date of demand for payment.
11.6 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
11.7 All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the defaulting Party) failure to make
payment of undisputed amounts on the due date, the other Party (the
non-defaulting Party) may, at its option and in its discretion, setoff
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against any amounts owed to the defaulting Party any amounts owed by the
defaulting Party under this Agreement or otherwise. The obligations of the
non-defaulting Party and the defaulting Party under this Agreement in respect of
such amounts shall be deemed satisfied and discharged to the extent of any such
setoff. The non-defaulting Party will give the defaulting Party notice of any
setoff made under this Section 11.7 as soon as practicable after the setoff is
made provided that failure to give such notice shall not offset the validity of
the setoff.
11.8 ALL DISPUTES ARISING UNDER THIS ARTICLE XI THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XIII HEREOF. TO THE EXTENT THAT
ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND
ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
ARTICLE XII
FORCE MAJEURE
12.1 In the event either Party is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
12.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of the Refinery or any operating units thereof, or modes of transportation used
by WPC to supply Feedstocks to the Refinery, or transport Refinery Products from
the Refinery, floods, washouts, arrests or restraints of the government, either
federal or state, civil or military, civil disturbances, explosions, sabotage,
breakage or accident to equipment, machinery or lines of pipe, freezing of
machinery, equipment or lines of pipe, electric power shortages, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), shutdowns of the Refinery or any operating units thereof or modes of
transportation used by WPC to supply Feedstocks to the Refinery, or transport
Refinery Products from the Refinery, due to explosion or other extraordinary
incident, or any other causes, whether of the kind herein enumerated or
otherwise, which were not reasonably foreseeable on the Effective Date, and
which are not within the control
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of the Party claiming suspension and which such Party is unable to overcome by
the exercise of due diligence. It is understood and agreed that the settlement
of strikes or lockouts shall be entirely within the discretion of the Party
having the difficulty, and that the above requirement that any Force Majeure
shall be remedied with all reasonable dispatch shall not require the settlement
of strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The term
"Force Majeure" shall also include any event of Force Majeure occurring with
respect to the facilities or services of either CPC's or WPC's third Party
suppliers or customers delivering or receiving any product, fuel, feedstock, or
other substance necessary to the performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third Party suppliers or customers as a result of an event of Force Majeure. It
is expressly agreed by the Parties that neither (i) CPC's inability economically
to use Feedstock purchased under this Agreement nor (ii) WPC's ability to sell
Feedstock to a market at a more advantageous price shall constitute an event of
Force Majeure.
ARTICLE XIII
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
13.1 Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach or performance hereof, including, but not limited
to, any disputes concerning the interpretation of the terms and provisions
hereof, shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to
resolve any disputes, controversy or claim arising
out of or relating to this Agreement.
(b) Should the Parties directly involved in any dispute,
controversy or claim be unable to resolve same within
a reasonable period of time, such dispute,
controversy or claim shall be submitted to the
Scheduling Committee with such explanation or
documentation as the Parties deem appropriate to aid
the Scheduling Committee in their consideration of
the issues presented. The date the matter is first
submitted to the Scheduling Committee shall be
referred to as the "Submission Date." The Scheduling
Committee representatives shall attempt in good
faith, through the process of discussion and
negotiation, to resolve any dispute, controversy, or
claim presented to it within forty-five (45) Days
after the Submission Date.
(c) If the Scheduling Committee representatives cannot so
resolve any dispute, controversy, or claim submitted
to it within forty-five (45) Days after the
Submission Date, the Parties shall attempt in good
faith to settle the matter by submitting the dispute,
controversy or claim to mediation within sixty (60)
Days after the Submission Date using any mediator
upon which they mutually agree. If the Parties are
unable to mutually agree upon a mediator within
seventy-five (75) Days after the Submission Date, the
case shall be referred for mediation to the office of
Judicial Arbitration and Mediation
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Services, Inc. ("JAMS") in Houston, Texas. The cost
of the mediator will be split equally between the
Parties unless they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the
aforesaid mediation procedure within thirty (30) Days
of the initiation of such procedure, or if either
Party will not participate in such mediation, either
Party may request that the matter be resolved through
arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration
that is conducted hereunder shall be governed by the
Federal Arbitration Act, 9 U.S.C. ss. 1 ET SEQ., and
will not be governed by the arbitration acts,
statutes, or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing
Party's arbitrator and shall contain a statement of
the issue(s) presented for arbitration. Within
fifteen (15) Days of receipt of an Arbitration
Notice, the other Party shall name its arbitrator by
written notice to the other and may designate any
additional issue(s) for arbitration. The two named
arbitrators shall select the third arbitrator within
fifteen (15) Days after the date on which the second
arbitrator was named. Should the two arbitrators fail
to agree on the selection of the third arbitrator,
either Party shall be entitled to request the Senior
Judge of the United States District Court for the
Southern District of Texas to select the third
arbitrator. All arbitrators shall be qualified by
education or experience within the liquefied
petroleum gas, natural gas liquids, or petroleum
refining industry to decide the issues presented for
arbitration. No arbitrator shall be: a current or
former director, officer, or employee of either Party
or its Affiliates; an attorney (or member of a law
firm) who has rendered legal services to either Party
or its Affiliates within the preceding three Years;
or an owner of any of the common stock of either
Party, or its Affiliates.
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(f) The three arbitrators shall commence the arbitration
proceedings within twenty-five (25) Days following
the appointment of the third arbitrator. The
arbitration proceedings shall be held at a mutually
acceptable site and if the Parties are unable to
agree on a site, the arbitrators shall select the
site. The arbitrators shall have the authority to
establish rules and procedures governing the
arbitration proceedings. Each Party shall have the
opportunity to present its evidence at the hearing.
The arbitrators may call for the submission of
pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be
submitted. The arbitration panel shall not have the
authority to award (i) punitive or exemplary damages
or (ii) consequential damages, except as expressly
provided herein. The arbitrators' decision must be
rendered within thirty (30) Days following the
conclusion of the hearing or submission of evidence,
but no later than ninety (90) Days after appointment
of the third arbitrator. With respect to disputes
regarding price or any redeterminations thereof under
Article V or the selection of an Alternate Index
under Section 5.3, each Party shall submit to the
arbitration panel a final offer of its proposed
resolution of the dispute. A majority of the
arbitrators shall approve the final offer of one
Party without modification, and reject the offer of
the other Party.
(g) The decision of the arbitrators or a majority of
them, shall be in writing and shall be final and
binding upon the Parties as to the issue(s)
submitted. The cost of the hearing shall be shared
equally by the Parties, and each Party shall be
responsible for its own expenses and those of its
counsel or other representatives. Each Party hereby
irrevocably waives, to the fullest extent permitted
by law, any objection it may have to the
arbitrability of any such disputes, controversies or
claims and further agrees that a final determination
in any such arbitration proceeding shall be
conclusive and binding upon each Party. Judgment on
the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The
prevailing Party shall be entitled to recover
reasonable attorneys' fees and court costs in any
court proceeding relating to the enforcement or
collection of any award or judgment rendered by the
arbitration panel under this Agreement.
(h) All deadlines specified herein may be extended by
mutual written agreement of the Parties. The
procedures specified herein shall be the sole and
exclusive procedures for the resolution of disputes
between the parties arising out of or relating to
this Agreement; provided, however, that a Party may
seek a preliminary injunction or other preliminary
judicial relief if in its judgment such action is
necessary to avoid irreparable damage. Despite such
action, the Parties will continue to participate in
good faith in the procedures specified herein. All
applicable statutes of limitation, including, without
limitation, contractual limitation periods provided
for in this Agreement, shall be tolled while the
procedures specified in this
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Section are pending. The Parties will take all
actions, if any, necessary to effectuate the tolling
of any applicable statutes of limitation.
ARTICLE XIV
LIMITATION OF DAMAGES
14.1 Unless performance is excused by another provision of this
Agreement, if WPC fails to deliver the Nominated Volumes of Feedstock during a
Delivery Month during the term of this Agreement, WPC shall pay CPC the WPC
Deficiency Amount. "WPC Deficiency Amount" shall mean the following:
[(F-G) x (H-I)] + J + K
where
F-G= the WPC Deficiency Quantity which shall always be
equal to or greater than zero (0);
H-I= the CPC Alternate Price which shall never be less
than zero (0);
J= the costs reasonably incurred by CPC in replacing the
WPC Deficiency Quantity pursuant to an arm's length
purchase of such WPC Deficiency Quantity from a third
Person, including, but not limited to, CPC's
transportation and storage costs; and
K= CPC's administrative and operational costs associated
with the WPC Deficiency Quantity, which shall equal
[$0.0025/Gallon X (F-G)], and which shall constitute
liquidated damages hereunder.
For purposes of the foregoing, the variables and terms set
forth below have the following meanings:
F= the total Nominated Volumes for each Feedstock
nominated by CPC for delivery during the applicable
Delivery Month, MINUS the total quantities of each
Feedstock that WPC is excused from delivering
hereunder during the applicable Delivery Month;
G= the quantities of each Feedstock actually delivered
by WPC during the applicable Delivery Month;
H= the price obtained by CPC for the WPC Deficiency
Quantity in an arm's length purchase of such WPC
Deficiency Quantity from a third Person; and
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I= the price of each Feedstock payable by CPC to WPC for
the applicable Delivery Month in accordance with
Section 5.1.
14.2 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE
OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
REMEDIES OR DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY
PROVISION HEREOF) FOR PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT
AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
UNDER ANY PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT
DAMAGES. THE PRECEDING SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE
OBLIGATION OF EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST CLAIMS
ASSERTED BY THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD PARTY CLAIMS FOR
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, BUT EXCLUDING CLAIMS FOR SUCH
DAMAGES UNDER ARTICLE IX. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT
TO ANY PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE
LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE
APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
ARTICLE XV
MISCELLANEOUS
15.1 This Agreement and the operations hereunder shall be subject to
the valid and applicable federal and state laws and the valid and applicable
orders, laws, local ordinances, rules, and regulations of any local, state or
federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, laws,
rules, or regulations in any forum having jurisdiction in the premises. If any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under the present or future laws effective during the term of this Agreement,
(i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Agreement, and (iii) the remaining provisions
of this Agreement will remain in full force and effect and will not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable
-31-
provision as may be possible and as may be legal, valid, and enforceable. If a
provision of this Agreement is or becomes illegal, invalid, or unenforceable in
any jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
15.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING
OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF
LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
15.3 This Agreement, including, without limitation, all exhibits
hereto, integrates the entire understanding between the Parties with respect to
the subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CPC or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided. No waiver shall be effective
unless made in writing and signed by the Party to be charged with such wavier.
15.4 (a) Subject in all respects to Section 15.4(b), the
terms, covenants, and conditions of this Agreement
shall inure to and be binding upon the Parties and
their respective successors and permitted assigns,
including, but not limited to, any and all subsequent
owners of the Refinery, but (i) neither Party may
assign all or any part of its rights under this
Agreement without the prior written consent of the
other Party, such consent not to be unreasonably
withheld, (ii) either Party may assign its rights
hereunder to any Affiliate of such Party without the
approval of the other Party (but such assignment
shall in no way relieve or release the assigning
Party from any obligations hereunder, whether accrued
or unaccrued, unless agreed to in writing by the non
assigning Party and (iii) either Party may, for
collateral purposes, mortgage, pledge, encumber, or
grant a security interest in or a lien on its
interest in this Agreement and/or its rights
hereunder to any commercial bank, trustee, or other
Person acting on behalf of any such commercial bank,
but only with the prior written consent of the other
Party, such consent not to be unreasonably withheld.
Any transfer or assignment in violation of this
Section 15.4 shall be void.
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(b) It is understood and agreed that CPC may assign all
(but not less than all) its rights under this
Agreement in connection with the assignment, sale,
transfer, or other disposition (collectively, a
"Disposition") of the Refinery to a third Person who
is not an Affiliate of either Party (such third
Person being herein called the "Transferee"), but
only with the prior written consent of WPC, such
consent not to be unreasonably withheld. CPC shall
provide WPC with written notice of the Disposition
prior to its consummation, including in such notice
the name of the proposed Transferee. Within thirty
(30) Days after WPC's receipt of such notice, WPC
shall deliver to CPC a written notice (the
"Assignment Notice") that (i) WPC consents to the
assignment of this Agreement to the proposed
Transferee or (ii) WPC does not consent to such
assignment, together with a statement of WPC's
reasons for withholding its consent If WPC fails to
deliver such Assignment Notice within such thirty
(30) Day period, WPC shall be deemed to have
consented to such assignment. If WPC consents to such
assignment, the Transferee shall assume all
obligations of CPC under this Agreement upon
consummation of the Disposition, and CPC shall have
no further liability hereunder.
If WPC withholds its consent hereunder, then, within
thirty (30) Days after CPC's receipt of WPC's
Assignment Notice, either Party may terminate this
Agreement, effective upon consummation of the
Disposition.
15.5 With the other documents required hereunder, WPC shall provide to
CPC a Material Safety Data Sheet for each Feedstock delivered hereunder. CPC
acknowledges that there may be hazards associated with the loading, unloading,
transporting, handling or use of the Feedstock sold hereunder, which may require
that warning be communicated to or other precautionary action taken with all
Persons handling, coming into contact with, or in any way concerned with the
Feedstock sold hereunder. CPC assumes as to its employees, independent
contractors, and subsequent purchasers of the Feedstock sold hereunder all
responsibility for all such necessary warnings or other precautionary measures
relating to hazards to person and property associated with the Feedstock sold
hereunder and, furthermore, CPC shall defend at its own expense, indemnify fully
and hold harmless WPC and its parents, subsidiaries and Affiliates and its and
their agents, officers, directors, employees, representatives, successors and
assigns from and against any and all liabilities; losses; damages; demands;
claims; penalties; fines; actions; suits; legal, administrative or arbitration
or alternative dispute resolution proceedings; judgments, orders, directives,
injunctions, decrees or awards of any jurisdiction; costs, and expenses
(including, but not limited to, attorneys' fees and related costs) arising out
of or in any manner related to CPC's failure to provide necessary warnings or
other precautionary measures in connection with the Feedstock sold hereunder.
15.6 With the other documents required hereunder, CPC shall provide to
WPC a Material Safety Data Sheet for each Refinery Product and Type A Offspec
Refinery Product delivered hereunder. WPC acknowledges that there may be hazards
associated with the loading, unloading, transporting, handling, or use of the
Refinery Product and Type A Offspec Refinery Product sold hereunder, which may
require that warning be communicated to or other precautionary action taken with
all Persons handling, coming into contact with, or in any way concerned with the
Refinery Product and Type A Offspec Refinery
-33-
Product sold hereunder. WPC assumes as to its employees, independent
contractors, and subsequent purchasers of the Refinery Product and Type A
Offspec Refinery Product sold hereunder all responsibility for all such
necessary warnings or other precautionary measures relating to hazards to Person
and property associated with the Refinery Product and Type A Offspec Refinery
Product sold hereunder and, furthermore, WPC shall defend at its own expense,
indemnify fully and hold harmless CPC and its parents, subsidiaries and
Affiliates and its and their agents, officers, directors, employees,
representatives, successors and assigns from and against any and all
liabilities; losses; damages; demands; claims; penalties; fines; actions; suits;
legal, administrative or arbitration or alternative dispute resolution
proceedings; judgments, orders, directives, injunctions, decrees or awards of
any jurisdiction; costs and expenses (including, but not limited to, attorneys'
fees and related costs) arising out of or in any manner related to WPC's failure
to provide necessary warnings or other precautionary measures in connection with
the Refinery Product and Type A Offspec Refinery Product sold hereunder.
15.7 Except as otherwise provided herein, each Party reserves to itself
all rights, set-offs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
15.8 (a) Each Party agrees that it will maintain this
Agreement, all terms and conditions of this
Agreement, and all other Confidential Information (as
hereinafter defined) in strictest confidence, and
that it will not cause or permit disclosure of
Confidential Information to any third Person without
the express written consent of the other Party
hereto. Disclosures of Confidential Information
otherwise prohibited by this Section 15.8 may be made
by either Party: (i) to the extent necessary for such
Party to enforce its rights hereunder against the
other Party; (ii) to the extent a Party is
contractually or legally bound to disclose
information to a third Person (such as a shareholder
or commercial lender); (iii) only to the extent to
which a Party hereto is required to disclose all or
part of this Agreement by a statute or by the order
of a court, agency, or other governmental body
exercising jurisdiction over the subject matter
hereof, by order, by regulations, or by other
compulsory process (including, but not limited to,
deposition, subpoena, interrogatory, or request for
production of documents); (iv) to the extent required
by the applicable regulations of a securities or
commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the
provisions of this Section). In addition to the
foregoing, CPC may disclose the terms of this
Agreement to any prospective purchaser of the
Refinery. "Confidential Information" shall mean any
information, proprietary to either Party and
maintained by it in confidence or as a trade secret,
including, without limitation, business plans and
strategies, proprietary software, financial
statements, customer or client lists, personnel
records, analysis of general energy market
conditions,
-34-
sales, transportation, and service contracts and the
commercial terms thereof, relationships with current
and potential business partners, suppliers,
customers, service providers and financial sources,
data base contents and valuable information of a like
nature relating to the business of such Party. It is
understood and agreed that Confidential Information
shall not include information of a Party that (w)
becomes generally available to the public at the time
of disclosure to the other Party, or (x) after the
time of disclosure to the other Party, was generally
made available to the public without breach of this
Agreement, or (y) the Person receiving the
information can show was rightfully in its possession
at the time of disclosure, or (z) was rightfully
acquired by the recipient from third Persons who did
not themselves obtain such information under a
confidentiality or other similar agreement with the
Party whose information was disclosed.
(b) If either Party is or becomes aware of a fact,
obligation, or circumstance that has resulted or may
result in a disclosure of Confidential Information
authorized by this Section 15.8, it shall so notify
the other Party promptly and shall provide
documentation or an explanation of such disclosure as
soon as it is available. Each Party further agrees to
cooperate to the fullest extent in seeking
confidential status to protect any Confidential
Information so disclosed.
(c) The Parties hereto acknowledge that independent legal
counsel, certified public accountants, or other
consultants or independent contractors of a Party
(collectively, "Outside Consultants") may, from time
to time, be provided with a copy of this Agreement
if, in the judgment of the disclosing Party, the
information contained in this Agreement is necessary
to the performance of such Outside Consultants'
duties. Accordingly, the Parties agree that such
disclosure does not require consent by the other
Party, provided that any such Outside Consultants
agree to be bound by the provisions of this Section
15.8.
(d) Each Party will be deemed solely responsible and
liable for the actions of its employees, Outside
Consultants, officers, and agents for maintaining the
confidentiality commitments of this Section 15.8, but
will be required in that regard only to exercise such
care in maintaining the confidentiality of the
Confidential Information as such Party normally
exercises in preserving the confidentiality of its
other commercially sensitive information.
15.9 Nothing contained in this Agreement shall be construed to create
an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
15.10 In construing this Agreement, the following principles shall be
followed:
-35-
(a) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser
hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding
syntactical variant expressions; and
(d) the plural shall be deemed to include the singular
and vice versa, as applicable.
15.11 EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF
ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY CONSENTS TO
THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT HEREBY REPRESENTS
AND WARRANTS TO THE OTHER PARTY THAT (I) SUCH PARTY'S LEGAL COUNSEL WAS NOT
DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER PARTY OR
BY AN AGENT OF SUCH OTHER PARTY, AND (II) NEITHER PARTY EXECUTING THIS AGREEMENT
IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.12 Any notice or other communication provided for in this Agreement
or any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand; or, if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail, or certified
mail, with all postage fully prepaid; or, if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the parties at the
following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Telephone: (713) 507-6408
Telecopy: (713) 507-3715
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with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
If to CPC: CHEVRON PRODUCTS COMPANY
6501 Trowbridge
El Paso, Texas 79905
Attention: Refinery Manager
Phone: (915) 775-3411
Telecopy: (713) 775-5568
with a copy to:
Vice President & General Counsel
CHEVRON PRODUCTS COMPANY
575 Market Street - Suite 2182
San Francisco, California 94105-2854
Telephone: (415) 894-3232
Telecopy: (415) 894-5489
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the Day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
15.13 No director, employee, or agent of either Party shall give or
receive any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement.
15.14 Each Party shall provide the other Party with such reports as may
be mutually agreeable to both Parties. Each Party shall maintain such records
and accounts as may be necessary to the performance of its respective duties and
obligations hereunder, in accordance with good business practices.
-37-
15.15 This Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever, it being the intention of the Parties that no
third Person shall be deemed a third Party beneficiary of this Agreement.
15.16 Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to each of them, in
order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
Day and Year first above written.
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G. P., INC.
By: ______________________________
Name: ______________________________
Title: _________________________
CHEVRON PRODUCTS COMPANY,
a division of CHEVRON U.S.A. INC.
By: ______________________________
Name: ______________________________
Title: ______________________________
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EXHIBIT A
SPECIFICATIONS FOR FEEDSTOCKS
PURCHASED BY CPC
[TO BE AGREED TO BY THE PARTIES PRIOR TO THE EFFECTIVE DATE]
-39-
EXHIBIT B
SPECIFICATIONS FOR REFINERY PRODUCTS
PURCHASED BY WPC
[TO BE AGREED TO BY THE PARTIES PRIOR TO THE EFFECTIVE DATE]
<PAGE>
-40-
EXHIBIT C
CONTAMINANTS THAT CREATE TYPE B OFFSPEC REFINERY PRODUCT
[TO BE AGREED TO BY THE PARTIES PRIOR TO THE EFFECTIVE DATE]
-41-
EXHIBIT 10.54 SUPP
The following agreements, in accordance with Instruction 2 of Item 601, are
substantially identical in all material respects to the agreement filed as
Exhibit 10.54 to the Registration Statement:
1. Feedstock Sale and Refinery Product Purchase Agreement dated
as of _________, 1996, among Chevron and Warren Petroleum
Company Limited Partnership (El Segundo).
2. Feedstock Sale and Refinery Product Purchase Agreement dated
as of _________, 1996, among Chevron and Warren Petroleum
Company Limited Partnership (Pascagoula).
3. Feedstock Sale and Refinery Product Purchase Agreement dated
as of _________, 1996, among Chevron and Warren Petroleum
Company Limited Partnership (Richmond).
4. Feedstock Sale and Refinery Product Purchase Agreement dated
as of _________, 1996, among Chevron and Warren Petroleum
Company Limited Partnership (Salt Lake City).
The following is a list of material details in which such agreements differ from
Exhibit 10.54:
1. The pricing terms for each of the agreements differs
slightly depending on the product sold.
2. The location of the pipe line facilities through which the
product is transported is different for each agreement.
3. The location of the plant covered by each agreement is
different.
EXHIBIT 10.55
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
Hawaii
REFINERY PRODUCT SALE AGREEMENT
THIS REFINERY PRODUCT SALE AGREEMENT (the "Agreement") is made and
entered into this day of , 1996, by and between WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP, a Delaware limited
partnership with offices at 13430 Northwest Freeway, Suite 1200, Houston, Texas
77040-6095 (hereinafter referred to as "WPC"), and CHEVRON PRODUCTS COMPANY, A
DIVISION OF CHEVRON U.S.A. INC., a Pennsylvania corporation with offices at
91-480 Malakole Street, Kapolei, Hawaii (hereinafter referred to as "CPC").
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and natural gas business unit division to a corporation to be formed which NGC
would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously purchased from CPC and CPC sold to Warren
all of the Refinery Products and certain Offspec Refinery Products produced at
CPC's Refinery and both CPC and WPC desire that such relationship continue;
WHEREAS, CPC has quantities of Refinery Products available for sale
from its Refinery (as defined in Article I, below) that it desires to sell to
WPC, and WPC desires to purchase such Refinery Products from CPC; and
WHEREAS, CPC desires that WPC maintain the same level of service that
was previously provided to it by Warren and WPC desires to continue such level
of service.
-1-
NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the parties as well as for other good and valuable consideration, WPC
and CPC agree as follows:
ARTICLE I
DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
following meanings:
ACCOUNTING PERIOD shall mean a period of one (1) Month commencing at
12:01 a.m. local time on the first Day of a calendar Month and ending
at 12:01 a.m. local time on the first Day of the next succeeding Month.
AFFILIATE shall mean any Person that directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term "control" (including the
terms "controlled by" or "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise. Any Person shall be deemed to be
an Affiliate of any specified Person if such Person owns fifty percent
(50%) or more of the voting securities of the specified Person, if the
specified Person owns fifty percent (50%) or more of the voting
securities of such Person, or if fifty percent (50%) or more of the
voting securities of the specified Person and such Person are under
common control.
ARBITRATION NOTICE shall have the meaning specified in Section 13.1(d)
hereinafter.
BANKRUPTCY EVENT shall mean the occurrence of one or more of the
following events with respect to a Party: (A) the entry of a decree or
order for relief against a Party by a court of competent jurisdiction
in any involuntary case brought against a Party under any bankruptcy
insolvency or other similar law (collectively, "Debtor Relief Laws")
generally affecting the rights of creditors and relief of debtors now
or hereafter in effect, (B) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator, or other similar agent
under applicable Debtor Relief Laws for a Party or for any substantial
part of its assets or property, (C) the ordering of the winding up or
liquidation of a Party's affairs, (D) the filing of a petition in any
such involuntary bankruptcy case, which petition remains undismissed
for a period of 180 Days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy law),
(E) the commencement by a Party of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable
Debtor Relief Laws for a Party or for any substantial part of its
assets or property, or (G) the making by a Party of any general
assignment for the benefit of its creditors.
-2-
BARREL shall mean forty-two (42) U. S. Gallons.
BASE RATE shall mean the lesser of (i) two percent (2%) above the per
annum rate of interest announced from time to time as the "prime rate"
for commercial loans by First National Bank of Chicago, as such "prime
rate" may change from time to time, or (ii) the maximum applicable
non-usurious rate of interest.
BUSINESS DAY shall mean a Day on which Federal Reserve member banks in
New York City are open for business.
DAY OR DAILY shall mean a twenty-four (24) hour period commencing 12:01
a.m. local time and extending until 12:01 a.m. local time on the
following Day.
DELIVERY POINT(S) shall have the meaning specified in Section 6.2
hereinafter.
EFFECTIVE DATE shall mean __________________, 1996.
FORCE MAJEURE shall have the meaning specified in Section 12.2
hereinafter.
GALLON shall mean the unit of volume used for the purpose of
measurement of liquid. One (1) U.S. liquid Gallon contains two hundred
thirty-one (231) cubic inches when the liquid is at a temperature of
sixty degrees Fahrenheit (60(degree) F) and at the vapor pressure of
the liquid being measured.
MONTH OR MONTHLY shall mean a period commencing at 12:01 a.m. local
time on the first Day of a calendar Month and extending until 12:01
a.m. local time on the first Day of the next succeeding calendar Month.
NETBACK PRICE shall mean the price obtained by WPC in an arm's length
sale of Refinery Products to a third Person who is not an Affiliate of
WPC less Transportation Costs that are reasonably incurred in
connection therewith.
NEW TAXES shall mean any Taxes enacted and effective after the
Effective Date, including that portion of any Taxes or New Taxes that
constitutes an increase either in rate or breadth of coverage.
OFFSPEC REFINERY PRODUCTS shall have the meaning specified in Section
7.1 hereinafter.
PARTY shall mean individually either CPC or WPC (including their
respective successors and permitted assigns); collectively, the
"PARTIES."
PERSON shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other
organization of any nature or kind.
-3-
PROPANE shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
REFINERY shall mean the refinery owned by CPC and situated in Hawaii.
REFINERY PRODUCTS shall mean Propane and those other light end streams
identified on Exhibit "A" and produced from the Refinery.
TAXES shall mean any and all ad valorem, property, occupation,
severance, production, extraction, first use, conservation, Btu or
energy, gathering, transport, pipeline, utility, gross receipts, gas or
oil revenue, gas or oil import, privilege, sales, use, consumption,
excise, lease, transaction, environmental, and other taxes,
governmental charges, duties, licenses, fees, permits, and assessments.
TRANSPORTATION COSTS shall mean all costs and expenses reasonably
incurred in connection with the transportation of Refinery Product(s)
hereunder, including, without limitation, rail car, barges, and truck
costs, Refinery Product losses that occur during transportation for
reasons other than the negligence or willful misconduct of WPC and all
costs and expenses reasonably incurred in loading, unloading,
transporting, terminaling, storing (if required), and handling such
Refinery Products. It is understood and agreed that Transportation
Costs shall not include any portion of WPC's general and administrative
costs and expenses.
YEAR shall mean a period of twelve (12) consecutive Months commencing
from the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meanings indicated throughout this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 CPC hereby represents and warrants to WPC that on and as of the
date hereof:2.1CPC hereby represents and warrants to NEWCO that on and as of the
date hereof:
(a) It has all requisite power and authority to carry on
the business in which it is engaged and to perform
its respective obligations under this Agreement;
(b) The execution and delivery of this Agreement have
been duly authorized and approved by all requisite
corporate action;
(c) It has all requisite power and authority to enter
into this Agreement and perform its obligations
hereunder;
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(d) The execution and delivery of this Agreement does
not, and consummation of the transactions
contemplated herein will not, violate any of the
material provisions of its organizational documents,
any material agreement pursuant to which CPC or its
properties are bound or, to its knowledge, any
material laws applicable to CPC; and
(e) This Agreement is valid, binding, and enforceable
against it in accordance with its terms, subject to
bankruptcy, moratorium, insolvency, and other laws
generally affecting creditors' rights and general
principles of equity (whether applied in a proceeding
in a court of law or equity).
2.2 WPC hereby represents and warrants to CPC that on and as of the
date hereof:2.2Newco hereby represents and warrants to CPC that on and as of the
date hereof:
(a) It has all requisite power and authority to carry on
the business in which it is engaged and to perform
its respective obligations under this Agreement;
(b) The execution and delivery of this Agreement have
been duly authorized and approved by all requisite
partnership action;
(c) It has all requisite power and authority to enter
into this Agreement and perform its obligations
hereunder;
(d) The execution and delivery of this Agreement does
not, and consummation of the transactions
contemplated herein will not, violate any of the
material provisions of its organizational documents,
any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any
material laws applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable
against it in accordance with its terms, subject to
bankruptcy, moratorium, insolvency, and other laws
generally affecting creditors' rights and general
principles of equity (whether applied in a proceeding
in a court of law or equity).
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CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
ARTICLE III
TERM
3.1 Unless otherwise provided herein, this Agreement shall
* remain in full force and effect for a period of [REDACTED] effective
Date hereof and shall continue from Year to Year thereafter unless
* terminated by either Party hereto at the end of such [REDACTED] Year
period or any Yearly anniversary thereafter by giving the other Party
at least ninety (90) Days, but not more than one hundred eighty (180)
Days, advance written notice of its intention to so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be terminated
as follows:
(a) By the non-defaulting Party, upon thirty (30) Days
written notice to the other Party, after it has been
determined through the alternative dispute resolution
procedures of Article XIII that a Material Default
has occurred in the performance of a Party's
obligations hereunder (it being understood that, for
purposes of the foregoing, "Material Default" shall
mean that the arbitrators have determined that (i) in
consequence of such default, the objectives of this
Agreement (as expressed in the Master Alliance
Agreement of even date herewith by and among CUSA,
WPC and others) are not being met and (ii) the
defaulting Party failed to take the steps necessary
to accomplish such objectives);
(b) By a Party, in the event the other Party is dissolved
(unless the successor to such dissolved Party or its
assets is an Affiliate of CUSA or WPC.); or
(c) By a Party, if a Bankruptcy Event occurs with respect
to the other Party.
In the event the Refinery is sold to a third Person not affiliated with
CPC, the reference to the Master Alliance Agreement set forth in Section 3.2(a),
above, shall be inapplicable.
3.3 It is agreed and understood that CPC, in its sole discretion, may
permanently close the Refinery at any time during the term of this Agreement.
Upon such permanent closure, CPC and WPC shall be relieved of any further
obligations under this Agreement, if CPC has provided WPC with written notice of
such closure at least one hundred and eighty (180) Days prior to the date of
such closure.
3.4 Upon the termination of this Agreement, any monies due and owing
either Party shall be paid to the other Party pursuant to the terms hereof and
any refunds due either Party shall be made at the earliest possible time, and in
any event no later than sixty (60) Days after the
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CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
expiration or termination of this Agreement. All audit rights shall survive for
the period prescribed by Section 11.7.
3.5 Termination of this Agreement hereunder shall be cumulative of any
other rights or remedies that the terminating Party may have in connection with
such termination, including, but not limited to, damages and injunctive relief.
ARTICLE IV
QUANTITY
4.1 Subject to the terms and provisions hereof, WPC agrees to purchase
from CPC and CPC agrees to sell to WPC all Refinery Products.
4.2 Solely for planning purposes, on the first Business Day of each
Month during the term of this Agreement, CPC shall provide WPC with a three (3)
Month rolling estimate of the volumes of Refinery Products that it will have
available for sale. The Parties shall use every reasonable effort to deliver and
receive, as applicable, Refinery Products on a ratable Daily basis.
ARTICLE V
PRICE
5.1 Except as otherwise provided herein, WPC shall pay CPC for
* the Refinery Products purchased hereunder [REDACTED] of the Netback
Price. WPC shall use every reasonable effort to obtain the highest
Netback Price for Refinery Products. Notwithstanding the foregoing, it
is understood and agreed that WPC's share of the Netback Price received
* from the disposition of Refinery Products (i.e., the [REDACTED], shall
never be less than [REDACTED] per Gallon of the Refinery Products
delivered to WPC at the Delivery Point.
5.2 Every five (5) Years after the Effective Date of this Agreement,
either Party shall have the option to open this Agreement solely for the purpose
of renegotiating the pricing provisions hereof. To exercise such option, a Party
at least ninety (90) Days before the expiration of such five (5) Year period
must provide to the other Party written notification (the "Renegotiation
Notice") of its desire to renegotiate the price for the Refinery Products sold
and purchased hereunder. In any such renegotiations, the Parties shall continue
to recognize that the price for Refinery Products must reflect market prices for
Refinery Products in Hawaii. If, after negotiating in good faith for a period of
ninety (90) Days following the date of the Renegotiation Notice, the Parties are
unable to agree upon a mutually acceptable price for such Refinery Product(s),
the matter shall be submitted to the alternative dispute resolution procedures
as provided in Article XIII hereof. During the period while negotiations are
ongoing until (i) a new price is agreed to or (ii) a new price is established as
provided herein, the price for the Refinery
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Product sold and purchased hereunder shall be determined in accordance with the
pricing formula that was applicable immediately prior to the date of the
Renegotiation Notice. If a new price is established under this Section 5.2,
whether by renegotiation, arbitration, or otherwise, such new price shall be
effective as of, and shall, if necessary, be made retroactive to, the first Day
of the applicable five (5) Year period immediately following the Renegotiation
Notice, plus interest thereon at the Base Rate.
5.3 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CPC and WPC shall meet to renegotiate in good faith such burdensome terms and
provisions so as to make them fair and equitable. Such renegotiations shall
occur within thirty (30) Days of the date of the non-requesting Party's receipt
of such written request for such renegotiations. If the parties are unable to
agree on new provisions to replace such burdensome terms and provisions within
ninety (90) Days of the non-requesting Party's receipt of such written request,
the matter shall be submitted to the alternative dispute resolution procedures
set forth in Article XIII hereof. It is understood and agreed that the rights
granted in this Section 5.3 can only be used by a Party to commence good faith
renegotiations once during each Year during the term hereof. If new provisions
are agreed upon under this Section 5.3, whether by renegotiation, arbitration,
or otherwise, such new provisions shall be effective as of, and shall, if
necessary, be made retroactive to, the date on which the notice commencing
renegotiations under this Section 5.3 was given, plus interest thereon at the
Base Rate.
ARTICLE VI
DELIVERIES
6.1 The Refinery Products to be sold hereunder by CPC to WPC shall be
delivered by CPC at the Delivery Points in Section 6.2.
6.2 The point(s) of delivery for Refinery Product sold and delivered
hereunder (hereinafter the "Delivery Point(s)") shall be determined as follows:
(a) In the event delivery is to be to or from a pipeline,
the Delivery Point shall be located, and delivery of
Refinery Product shall be deemed to occur, at the
point at which Refinery Product passes the pipeline
meter. If pipeline delivery is by in-line inventory
transfer, delivery shall be deemed to occur on the
date and time that the relevant pipeline carrier
advises CPC and WPC, by product transfer order, book
transfer, or letter of transfer, that Refinery
Product shall be transferred to CPC's account, and
the Delivery Point shall be the location of the
Refinery Product in the pipeline of the pipeline
carrier on the Day and time that such in-line
transfer of Refinery Product is deemed to occur. The
Parties hereto understand and agree that WPC has no
control over the operations of the pipeline carrier
and therefore cannot control when Refinery Product
transfer to WPC's account by the pipeline carrier
will, in fact, occur.
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(b) In the event delivery is to be by a rail car, truck,
or barge owned, operated, leased, or hired by WPC,
the Delivery Point shall be located, and delivery of
Refinery Product shall be deemed to occur, at the
point at which the Refinery Product passes from the
flange connecting WPC's owned, operated, leased, or
hired rail car, truck, or barge to the delivering
facility equipment of CPC, whether said rail car,
truck, or barge is loaded by CPC or WPC directly or
on behalf of CPC or WPC through CPC's or WPC's agent.
6.3 Title to and risk of loss associated with the Refinery Products
delivered hereunder shall pass from CPC to WPC upon the commencement of the
delivery of such Refinery Products at the Delivery Points, unless such Refinery
Products are rejected in accordance with Article VII. WPC shall be responsible
for all risk of loss, damage, or liability to the extent that any such loss,
liability, or damage arises from acts or omissions occurring after the
commencement of physical delivery of the Refinery Product at and downstream of
the Delivery Point(s), unless such Refinery Products are rejected in accordance
with Article VII.
6.4 The following rules shall be applicable to the transportation and
loading of Refinery Products at the Delivery Point:
(a) If rail cars subject to payment of demurrage or any
other similar charges to a third Person not
affiliated with either Party are used to transport
Refinery Products from the Delivery Point, CPC agrees
to load and start the relevant cars on the return
trip in accordance with the detention policy of the
owner or operator of such rail car equipment and CPC
further agrees to pay any and all such charges that
may be due thereunder.
(b) CPC shall be liable for the payment of invoices from
the railroad for demurrage and hazardous materials
storage charges incurred by WPC as the prepaid
shipper due to CPC's inability to receive a rail car
and/or have a rail car placed on CPC's siding; and
(c) Rail cars shall not be diverted while in transit
except upon prior written authorization of WPC. Any
charge incurred by WPC for the diversion of rail cars
by CPC shall be for the account of CPC.
(d) If WPC's owned or leased trucks are used to transport
Refinery Products from the Delivery Point, CPC agrees
to load immediately upon arrival at the Delivery
Point, and CPC's failure to do so shall render CPC
liable to WPC for damages incurred as a result of
such delay.
(e) For Refinery Products purchased hereunder, CPC will
be liable for all rail car shortages claimed by WPC
in excess of one percent (1%) of the net Gallons
reflected on the bill of lading and acknowledged by
the railroad
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agent's signature prior to unloading; provided,
however, that such shortages, if any, are reported in
writing to CPC within twenty-four (24) hours after
delivery by the carrier and prior to the unloading of
the shipment in which the relevant shortage occurs.
WPC shall ask CPC for permission to unload, and CPC,
at its expense, shall have the right to inspect each
car at its destination within forty-eight (48) hours
after receipt of written notice of such shortage. All
demurrage charges arising from the failure of CPC to
release the car for unloading within such forty-eight
(48) hour period shall be paid by CPC. Similarly, CPC
shall be liable for all truck shortages claimed by
WPC in excess of three percent (3%) of the net
Gallons reflected on the bill of lading; provided,
however, that such shortages, if any, are noted on
the delivery ticket and acknowledged by the truck
driver's signature prior to unloading. The failure of
WPC to observe this provision or any action by WPC
which impedes identification of an alleged defect
shall operate as a waiver of WPC's rights to make any
such claim.
Notwithstanding the foregoing, if the detention and/or demurrage
charges set forth above are insufficient to cover any such charges paid
by WPC to such third Person not affiliated with WPC, CPC shall
reimburse WPC for such amounts.
6.5 If, CPC uses a rail car, truck, or barge leased by WPC for purposes
other than those contemplated by WPC's lease, CPC shall be responsible for, and
agrees to indemnify and hold WPC harmless from and against, all costs,
liabilities, and expenses arising out of, or in any way associated with, CPC's
use of such equipment, including, but not limited to, cleaning and inspection
costs and additional rental fees for such equipment and/or for other equipment
required to be leased as a result of CPC's use.
ARTICLE VII
QUALITY
7.1 All Refinery Products sold by CPC and purchased by WPC hereunder
shall meet the specifications set forth in Exhibit A, attached hereto and made a
part hereof. WPC shall have the right to reject any Refinery Product which fails
to meet such quality specifications ("Offspec Refinery Product"). All costs
associated with the return and/or disposal of Offspec Refinery Product shall be
borne by CPC.
7.2 Should the Refinery Products delivered hereunder to WPC, or to
WPC's designated representative for the account of WPC, fail at any time to
conform to the specifications set forth in Exhibit A, either Party shall notify
the other Party of any such failure, and CPC immediately shall undertake and
diligently pursue such acts as may be necessary to correct such failure,
including treatment to the extent such treatment is economical in CPC's opinion,
so as to deliver Refinery Product conforming to the specifications set forth
above; but nothing contained in this Article VII or any other part of this
Agreement shall be construed to affect WPC's right, at any time and from time to
time, to reject any Refinery Product not conforming to said
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specifications and to refuse or suspend receipt until it is established to WPC's
reasonable satisfaction that subsequent deliveries of Refinery Product will
conform to said specifications. The term of this Agreement shall not be extended
by the length of time of any period or periods when deliveries have been
rejected, refused, or suspended as provided for herein. Notwithstanding the
foregoing, the knowing acceptance by WPC of any Offspec Refinery Product shall
constitute a waiver by WPC of any and all other rights and remedies available to
WPC under this Agreement or otherwise with respect to CPC's tender of such
Offspec Refinery Product, and all risk of loss, damage or liability arising out
of WPC's ownership, control , possession, or use of such Offspec Refinery
Product shall pass to and be borne by WPC. If it is subsequently determined that
WPC unknowingly accepted Offspec Refinery Products, the Parties will mutually
agree upon a discounted price for such Offspec Refinery Products to reflect
their diminution in value from Refinery Products meeting the specifications
hereof. If the Parties are unable to agree on a mutually acceptable discount
price for such Offspec Refinery Products, the matter shall be subjected to the
alternative dispute resolution procedures set forth in Article XIII hereunder.
CPC agrees to INDEMNIFY and HOLD HARMLESS WPC, its Affiliates, and their
respective officers, directors, employees, agents, and contractors, from all
actual losses, costs, expenses, claims (including, without limitation, personal
injury or property damage claims), damages, and causes of action, including,
without limitation, reasonable attorneys' fees and costs of court (collectively,
the "Losses") incurred by WPC, such Persons, or such Affiliates arising out of,
or in any way associated with, the delivery to WPC of Propane that fails to meet
the specifications set forth in Exhibit A and is unknowingly accepted by WPC.
ARTICLE VIII
WARRANTY OF TITLE
8.1 CPC warrants title to all Refinery Products sold and delivered by
it to WPC, and further warrants that CPC has the right to sell such Refinery
Products and that such Refinery Products meet the quality specifications as set
forth herein and are free from all liens, claims or other charges. THERE ARE,
HOWEVER, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY
PATENT, TRADEMARK, COPYRIGHT, OR OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED BY CPC AND EXCLUDED FROM THIS AGREEMENT.
ARTICLE IX
TAXES
9.1 CPC shall be liable for and shall pay, or cause to be paid, or
reimburse WPC, if WPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the Refinery Product sold hereunder upstream of the
Delivery Point(s). If WPC is required to remit such Tax, the amount thereof
shall be deducted from any sums becoming due to CPC hereunder. WPC shall be
liable
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for and shall pay, cause to be paid, or reimburse CPC, if CPC has paid, all
environmental Taxes and all Taxes applicable to the sale and/or delivery of
Refinery Product hereunder at and downstream of the Delivery Point(s) including
any Taxes imposed or collected by a taxing authority with jurisdiction over WPC,
provided, however, when laws, ordinances or regulations permit or impose upon
CPC the obligation to collect or pay Taxes applicable to the sale and/or
delivery of Refinery Product hereunder at the Delivery Point, CPC shall collect
all such Taxes from WPC, which shall be in addition to the applicable Price, and
remit the same to the appropriate governmental authority, unless WPC furnishes a
certificate of exemption. CPC SHALL INDEMNIFY, DEFEND, AND HOLD WPC HARMLESS
FROM AND AGAINST ANY LIABILITY WITH RESPECT TO THE TAXES FOR WHICH CPC IS
LIABLE.
9.2 To claim an exemption from payment of a Tax, a Party shall provide
a certificate of exemption or other reasonably satisfactory evidence of
exemption from any Tax, and each Party agrees to cooperate with the other Party
in obtaining any such exemption. In addition, WPC has provided CPC with, and CPC
acknowledges receipt of, the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986).
ARTICLE X
MEASUREMENT AND ANALYSES
10.1 On all deliveries into or out of rail cars, the quantity shall be
determined by official tank car capacity tables or slip tube gauges in
accordance with GAS PROCESSORS ASSOCIATION ("GPA") PUBLICATION 8162, latest
revision. On all deliveries into or out of truck equipment, quantities shall be
determined by meter, rotary gauge or weighing, in accordance with GPA
PUBLICATIONS 8162 AND 8186, latest revision. On all deliveries into or out of
pipelines, quantities shall be determined by pipeline meter in accordance with
the America Petroleum Institute ("API") Manual of Petroleum Measurement
Standards. For raw make mixtures, volumes of the component products shall be
determined (where practical) on a mass (pound) measurement basis in accordance
with the latest edition of GPA PUBLICATIONS 8173 AND 8182. On all deliveries
into or out of shore tanks, quantities shall be determined either meter or gauge
from a static tank in accordance with the API Manual of Petroleum Measurement
Standards and based upon the practice of the relevant terminal. All quantities
shall be corrected to standard conditions of sixty degrees Fahrenheit
(60(degree)F) and equilibrium vapor pressure in accordance with the API Manual
of Petroleum Measurement Standards, Chapter 14, Section B. The quantity and
quality of Refinery Product covered by this Agreement shall be measured
according to the current versions of the applicable standards of API and the
American Society for Testing Materials, if available. Each Party shall be
entitled to have its representatives present during all loadings, unloadings,
tests, and measurements involving Refinery Product delivered hereunder. If the
Parties cannot agree on measurement or quality tests results, the measurements
and quality tests required to determine the volume of receipts or shipments or
the conformity of the Refinery Product delivered to the specifications set forth
herein shall be made by an independent inspector selected jointly by the
Parties, the cost of which shall be shared equally by the Parties.
ARTICLE XI
BILLING AND PAYMENT
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11.1 After delivery of Refinery Products hereunder, CPC shall submit a
statement to WPC by facsimile transmission setting forth the quantity of each
Refinery Product delivered to WPC. By not later than thirty (30) Days after the
receipt of CPC's statement, WPC shall provide CPC with a statement setting forth
the price or Netback Price, as applicable, of such Refinery Products, the amount
due CPC for such Refinery Products, and such other information and detail as may
be mutually agreeable to the Parties, along with payment for such Refinery
Products, which shall be remitted by wire transfer of funds into an account
designated by CPC. If the Day on which any payment is due is not a Business Day,
then the relevant payment shall be due upon the immediately preceding Business
Day, except if such payment due date is a Sunday or Monday, then the relevant
payment shall be due upon the immediately succeeding Business Day.
11.2 If CPC or WPC should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such accrued
interest shall be added to the amount reflected as being owed hereunder by
either CPC or WPC, as the case may be, on the next invoice or by separate
invoice.
11.3 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of the good faith dispute,
the withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance with
the alternative dispute resolution procedures of Article XIII. The performance
of both Parties under this Agreement shall continue pending the outcome of such
procedures. If it is subsequently determined, whether by mutual agreement of the
Parties or otherwise, that the withholding Party is required to pay all or any
portion of the disputed amounts to the other Party, the withholding Party, in
addition to paying over such amounts, shall also pay interest accrued on such
amounts from the original due date until paid, at the Base Rate.
11.4 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the Refinery Product invoice or statement forming the basis of
the overcharge or undercharge was delivered or not delivered, as the case may
be, unless a claim for such adjustment shall have been presented prior to the
end of such period. Any payment with respect to a retroactive adjustment shall
include an amount equal to interest on all amounts past due from the date of the
initial payment at the Base Rate, except in instances where neither Party knew
or could have known that the overcharge or undercharge occurred, in which case
interest shall run from the date of demand for payment.
11.5 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to
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and make claim upon the other Party for all discrepancies disclosed by said
audit within twenty-four (24) Months of the rendition of any statement or
invoice forming the basis of such claim. Such audit shall be conducted by the
auditing Party's representative or auditor at the auditing Party's expense.
11.6 All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the defaulting Party) failure to make
payment of undisputed amounts on the due date, the other Party (the
non-defaulting Party) may, at its option and in its discretion, setoff against
any amounts owed to the defaulting Party any amounts owed by the defaulting
Party under this Agreement or otherwise. The obligations of the non-defaulting
Party and the defaulting Party under this Agreement in respect of such amounts
shall be deemed satisfied and discharged to the extent of any such setoff. The
non-defaulting Party will give the defaulting Party notice of any setoff made
under this Section 11.6 as soon as practicable after the setoff is made provided
that failure to give such notice shall not offset the validity of the setoff.
11.7 ALL DISPUTES ARISING UNDER THIS ARTICLE XI THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XIII HEREOF. TO THE EXTENT THAT
ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND
ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
ARTICLE XII
FORCE MAJEURE
12.1 In the event either Party is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
12.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of the Refinery or any operating units thereof, or modes of transportation used
by WPC to transport Refinery Products, floods, washouts, arrests or restraints
of the government, either federal or state, civil or military, civil
disturbances, explosions, sabotage, breakage or accident to
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equipment, machinery or lines of pipe, freezing of machinery, equipment or lines
of pipe, electric power shortages, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules, orders, laws or
governmental authorities (both federal, state and local), shutdowns of the
Refinery or any operating units thereof or modes of transportation used by WPC
to transport Refinery Products from the Refinery, due to explosion or other
extraordinary incident, or any other causes, whether of the kind herein
enumerated or otherwise, which were not reasonably foreseeable on the Effective
Date, and which are not within the control of the Party claiming suspension and
which such Party is unable to overcome by the exercise of due diligence. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty, and that the
above requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of opposing parties when such course is inadvisable in the
discretion of the Party having difficulty. The term "Force Majeure" shall also
include any event of Force Majeure occurring with respect to the facilities or
services of either CPC's or WPC's third Party suppliers or customers delivering
or receiving any product, fuel, feedstock, or other substance necessary to the
performance of such Party's obligations, and shall also include curtailment or
interruption of deliveries or service by such third Party suppliers or customers
as a result of an event of Force Majeure.
ARTICLE XIII
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
13.1 Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach or performance hereof, including, but not limited
to, any disputes concerning the interpretation of the terms and provisions
hereof, shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to
resolve any disputes, controversy or claim arising
out of or relating to this Agreement.
(b) Should the Parties directly involved in any dispute,
controversy or claim be unable to resolve same within
a reasonable period of time, such dispute,
controversy or claim shall be submitted to the senior
executives of the Parties (the "Senior Executives")
with such explanation or documentation as the Parties
deem appropriate to aid the Senior Executives in
their consideration of the issues presented. The date
the matter is first submitted to the Senior
Executives shall be referred to as the "Submission
Date." The Senior Executives shall attempt in good
faith, through the process of discussion and
negotiation, to resolve any dispute, controversy, or
claim presented to it within forty-five (45) Days
after the Submission Date.
(c) If the Senior Executives cannot so resolve any
dispute, controversy, or claim submitted to it within
forty-five (45) Days after the Submission Date, the
Parties shall attempt in good faith to settle the
matter by submitting the dispute, controversy or
claim to mediation within sixty (60) Days after the
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Submission Date using any mediator upon which they
mutually agree. If the Parties are unable to mutually
agree upon a mediator within seventy-five (75) Days
after the Submission Date, the case shall be referred
for mediation to the office of Judicial Arbitration
and Mediation Services, Inc. ("JAMS") in Houston,
Texas. The cost of the mediator will be split equally
between the Parties unless they agree otherwise in
writing.
(d) If the matter has not been resolved pursuant to the
aforesaid mediation procedure within thirty (30) Days
of the initiation of such procedure, or if either
Party will not participate in such mediation, either
Party may request that the matter be resolved through
arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration
that is conducted hereunder shall be governed by the
Federal Arbitration Act, 9 U.S.C. ss. 1 ET SEQ., and
will not be governed by the arbitration acts,
statutes, or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing
Party's arbitrator and shall contain a statement of
the issue(s) presented for arbitration. Within
fifteen (15) Days of receipt of an Arbitration
Notice, the other Party shall name its arbitrator by
written notice to the other and may designate any
additional issue(s) for arbitration. The two named
arbitrators shall select the third arbitrator within
fifteen (15) Days after the date on which the second
arbitrator was named. Should the two arbitrators fail
to agree on the selection of the third arbitrator,
either Party shall be entitled to request the Senior
Judge of the United States District Court for the
Southern District of Texas to select the third
arbitrator. All arbitrators shall be qualified by
education or experience within the liquefied
petroleum gas, natural gas liquids, or petroleum
refining industry to decide the issues presented for
arbitration. No arbitrator shall be: a current or
former director, officer, or employee of either Party
or its Affiliates; an attorney (or member of a law
firm) who has rendered legal services to either Party
or its Affiliates within the preceding three Years;
or an owner of any of the common stock of either
Party, or its Affiliates.
(f) The three arbitrators shall commence the arbitration
proceedings within twenty-five (25) Days following
the appointment of the third arbitrator. The
arbitration proceedings shall be held at a mutually
acceptable site and if the Parties are unable to
agree on a site, the arbitrators shall select the
site. The arbitrators shall have the authority to
establish rules and procedures governing the
arbitration proceedings. Each Party shall have the
opportunity to present its evidence at the hearing.
The arbitrators may call for the submission of
pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be
submitted. The arbitration panel shall not have the
authority to award (i) punitive or exemplary damages
or (ii) consequential damages, except as expressly
provided herein. The arbitrators'
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decision must be rendered within thirty (30) Days
following the conclusion of the hearing or submission
of evidence, but no later than ninety (90) Days after
appointment of the third arbitrator. With respect to
disputes regarding price or any redeterminations
thereof under Article V, each Party shall submit to
the arbitration panel a final offer of its proposed
resolution of the dispute. A majority of the
arbitrators shall approve the final offer of one
Party without modification, and reject the offer of
the other Party.
(g) The decision of the arbitrators or a majority of
them, shall be in writing and shall be final and
binding upon the Parties as to the issue(s)
submitted. The cost of the hearing shall be shared
equally by the Parties, and each Party shall be
responsible for its own expenses and those of its
counsel or other representatives. Each Party hereby
irrevocably waives, to the fullest extent permitted
by law, any objection it may have to the
arbitrability of any such disputes, controversies or
claims and further agrees that a final determination
in any such arbitration proceeding shall be
conclusive and binding upon each Party. Judgment on
the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The
prevailing Party shall be entitled to recover
reasonable attorneys' fees and court costs in any
court proceeding relating to the enforcement or
collection of any award or judgment rendered by the
arbitration panel under this agreement.
(h) All deadlines specified herein may be extended by
mutual written agreement of the Parties. The
procedures specified herein shall be the sole and
exclusive procedures for the resolution of disputes
between the parties arising out of or relating to
this Agreement; provided, however, that a Party may
seek a preliminary injunction or other preliminary
judicial relief if in its judgment such action is
necessary to avoid irreparable damage. Despite such
action, the Parties will continue to participate in
good faith in the procedures specified herein. All
applicable statutes of limitation, including, without
limitation, contractual limitation periods provided
for in this Agreement, shall be tolled while the
procedures specified in this Section are pending. The
Parties will take all actions, if any, necessary to
effectuate the tolling of any applicable statutes of
limitation.
ARTICLE XIV
LIMITATION OF DAMAGES
14.1 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE
OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
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REMEDIES OR DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY
PROVISION HEREOF) FOR PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT
AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
UNDER ANY PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT
DAMAGES. THE PRECEDING SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE
OBLIGATION OF EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST CLAIMS
ASSERTED BY THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD PARTY CLAIMS FOR
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, BUT EXCLUDING CLAIMS FOR SUCH
DAMAGES UNDER ARTICLE IX. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT
TO ANY PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE
LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE
APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
ARTICLE XV
MISCELLANEOUS
15.1 This Agreement and the operations hereunder shall be subject to
the valid and applicable federal and state laws and the valid and applicable
orders, laws, local ordinances, rules, and regulations of any local, state or
federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, laws,
rules, or regulations in any forum having jurisdiction in the premises. If any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under the present or future laws effective during the term of this Agreement,
(i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Agreement, and (iii) the remaining provisions
of this Agreement will remain in full force and effect and will not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
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15.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING
OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF
LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
15.3 This Agreement, including, without limitation, all exhibits
hereto, integrates the entire understanding between the Parties with respect to
the subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CPC or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided. No waiver shall be effective
unless made in writing and signed by the Party to be charged with such wavier.
15.4 The terms, covenants, and conditions of this Agreement shall inure
to and be binding upon the Parties and their respective successors and permitted
assigns, including, but not limited to, any and all subsequent owners of the
Refinery, but (i) neither Party may assign all or any part of its rights under
this Agreement without the prior written consent of the other Party, such
consent not to be unreasonably withheld, (ii) either Party may assign its rights
hereunder to any Affiliate of such Party without the approval of the other Party
(but such assignment shall in no way relieve or release the assigning Party from
any obligations hereunder, whether accrued or unaccrued, unless agreed to in
writing by the non assigning Party and (iii) either Party may, for collateral
purposes, mortgage, pledge, encumber, or grant a security interest in or a lien
on its interest in this Agreement and/or its rights hereunder to any commercial
bank, trustee, or other Person acting on behalf of any such commercial bank, but
only with the prior written consent of the other Party, such consent not to be
unreasonably withheld. Any transfer or assignment in violation of this Section
15.4 shall be void.
15.5 With the other documents required hereunder, CPC shall provide to
WPC a Material Safety Data Sheet for each Refinery Product delivered hereunder.
WPC acknowledges that there may be hazards associated with the loading,
unloading, transporting, handling, or use of the Refinery Product sold
hereunder, which may require that warning be communicated to or other
precautionary action taken with all Persons handling, coming into contact with,
or in any way concerned with the Refinery Product sold hereunder. WPC assumes as
to its employees, independent contractors, and subsequent purchasers of the
Refinery Product sold hereunder all responsibility for all such necessary
warnings or other precautionary measures relating to hazards to Person and
property associated with the Refinery Product and, furthermore, WPC shall defend
at its own expense, indemnify fully and hold harmless CPC and its parents,
subsidiaries and Affiliates and its and their agents, officers, directors,
employees, representatives, successors and assigns from and against any and all
liabilities; losses; damages; demands; claims; penalties; fines; actions; suits;
legal, administrative or arbitration or alternative dispute resolution
proceedings;
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judgments, orders, directives, injunctions, decrees or awards of any
jurisdiction; costs and expenses (including, but not limited to, attorneys' fees
and related costs) arising out of or in any manner related to WPC's failure to
provide necessary warnings or other precautionary measures in connection with
the Refinery Product sold hereunder.
15.6 Except as otherwise provided herein, each Party reserves to itself
all rights, set-offs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
15.7 (a) Each Party agrees that it will maintain this
Agreement, all terms and conditions of this
Agreement, and all other Confidential Information (as
hereinafter defined) in strictest confidence, and
that it will not cause or permit disclosure of
Confidential Information to any third Person without
the express written consent of the other Party
hereto. Disclosures of Confidential Information
otherwise prohibited by this Section 15.7 may be made
by either Party: (i) to the extent necessary for such
Party to enforce its rights hereunder against the
other Party; (ii) to the extent a Party is
contractually or legally bound to disclose
information to a third Person (such as a shareholder
or commercial lender); (iii) only to the extent to
which a Party hereto is required to disclose all or
part of this Agreement by a statute or by the order
of a court, agency, or other governmental body
exercising jurisdiction over the subject matter
hereof, by order, by regulations, or by other
compulsory process (including, but not limited to,
deposition, subpoena, interrogatory, or request for
production of documents); (iv) to the extent required
by the applicable regulations of a securities or
commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the
provisions of this Section). In addition to the
foregoing, CPC may disclose the terms of this
Agreement to any prospective purchaser of the
Refinery. "Confidential Information" shall mean any
information, proprietary to either Party and
maintained by it in confidence or as a trade secret,
including, without limitation, business plans and
strategies, proprietary software, financial
statements, customer or client lists, personnel
records, analysis of general energy market
conditions, sales, transportation, and service
contracts and the commercial terms thereof,
relationships with current and potential business
partners, suppliers, customers, service providers and
financial sources, data base contents and valuable
information of a like nature relating to the business
of such Party. It is understood and agreed that
Confidential Information shall not include
information of a Party that (w) becomes generally
available to the public at the time of disclosure to
the other Party, or (x) after the time of disclosure
to the other Party, was generally made available to
the public without breach of this Agreement, or (y)
the Person receiving the information can show was
rightfully in its possession at the time of
disclosure, or (z) was rightfully acquired by the
recipient from third Persons who did not themselves
obtain such information under a
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confidentiality or other similar agreement with the
Party whose information was disclosed.
(b) If either Party is or becomes aware of a fact,
obligation, or circumstance that has resulted or may
result in a disclosure of Confidential Information
authorized by this Section 15.7, it shall so notify
the other Party promptly and shall provide
documentation or an explanation of such disclosure as
soon as it is available. Each Party further agrees to
cooperate to the fullest extent in seeking
confidential status to protect any Confidential
Information so disclosed.
(c) The Parties hereto acknowledge that independent legal
counsel, certified public accountants, or other
consultants or independent contractors of a Party
(collectively, "Outside Consultants") may, from time
to time, be provided with a copy of this Agreement
if, in the judgment of the disclosing Party, the
information contained in this Agreement is necessary
to the performance of such Outside Consultants'
duties. Accordingly, the Parties agree that such
disclosure does not require consent by the other
Party, provided that any such Outside Consultants
agree to be bound by the provisions of this Section
15.7.
(d) Each Party will be deemed solely responsible and
liable for the actions of its employees, Outside
Consultants, officers, and agents for maintaining the
confidentiality commitments of this Section 15.7, but
will be required in that regard only to exercise such
care in maintaining the confidentiality of the
Confidential Information as such Party normally
exercises in preserving the confidentiality of its
other commercially sensitive information.
15.8 Nothing contained in this Agreement shall be construed to create
an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
15.9 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser
hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding
syntactical variant expressions; and
(d) the plural shall be deemed to include the singular
and vice versa, as applicable.
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15.10 EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF
ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY CONSENTS TO
THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT HEREBY REPRESENTS
AND WARRANTS TO THE OTHER PARTY THAT (I) SUCH PARTY'S LEGAL COUNSEL WAS NOT
DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER PARTY OR
BY AN AGENT OF SUCH OTHER PARTY, AND (II) NEITHER PARTY EXECUTING THIS AGREEMENT
IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.11 Any notice or other communication provided for in this Agreement
or any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand; or, if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail, or certified
mail, with all postage fully prepaid; or, if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the parties at the
following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Phone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel WARREN
PETROLEUM COMPANY, LIMITED PARTNERSHIP 13430
Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
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If to CPC: CHEVRON PRODUCTS COMPANY
91-480 Malakole Street,
Kapolei, Hawaii 96707-1807
Attention: Refinery Manager
Telephone: (808) 682-2215
Telecopy: (808) 682-2214
with a copy to:
Vice President & General Counsel
CHEVRON PRODUCTS COMPANY
575 Market Street - Suite 2182
San Francisco, California 94105-2854
Telephone: (415) 894-3232
Telecopy: (415) 894-5489
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the Day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
15.12 No director, employee, or agent of either Party shall give or
receive any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement.
15.13 Each Party shall provide the other Party with such reports as may
be mutually agreeable to both Parties. Each Party shall maintain such records
and accounts as may be necessary to the performance of its respective duties and
obligations hereunder, in accordance with good business practices.
15.14 This Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever, it being the intention of the Parties that no
third Person shall be deemed a third Party beneficiary of this Agreement.
15.15 Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to each of them, in
order to effectuate the purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
Day and Year first above written.
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G.P., INC.
By: _____________________________
Name: ________________________________
Title: _____________________________
CHEVRON PRODUCTS COMPANY,
a division of CHEVRON U.S.A. INC.
By: __________________________________
Name: ________________________________
Title: _____________________________
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EXHIBIT A
SPECIFICATIONS FOR REFINERY PRODUCTS
PURCHASED BY WPC
[TO BE AGREED TO BY THE PARTIES PRIOR TO THE EFFECTIVE DATE]
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Exhibit 10.56
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
This FEEDSTOCK AND REFINERY PRODUCT MASTER SERVICES AGREEMENT (the
"Agreement") is made and entered into this _____ day of _________ 1996, by and
between Chevron Products Company, a Division of Chevron U.S.A. Inc., a
Pennsylvania corporation (hereinafter referred to as "CPC") and Warren Petroleum
Company, Limited Partnership, a Delaware limited partnership (hereinafter
referred to as "WPC").
WHEREAS, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and natural gas business unit division to a corporation to be formed which NGC
would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously sold to CPC and CPC purchased from Warren
all of CPC's Feedstock needs and Warren previously purchased from CPC and CPC
sold to Warren all of the Refinery Products and certain Offspec Refinery
Products produced at CPC's Refineries (hereinafter defined) and both CPC and WPC
desire that such relationship continue;
WHEREAS, Warren previously provided certain services to CPC and CPC
provided certain services to Warren, in connection with (a) Warren's sale to CPC
of Feedstock and (b) Warren's purchase from CPC of Refinery Products and certain
Offspec Products produced at CPC's refineries (collectively, the "Refineries",
and each, a "Refinery");
WHEREAS, contemporaneously with the consummation of the Merger
Agreements, CPC and WPC have entered into certain Feedstock Sale and Refinery
Product Purchase Agreements with each of the Refineries (as such Agreements may
be amended from time to time, the "Feedstock
- 1 -
Agreements"), pursuant to which WPC shall sell Feedstock to CPC and WPC shall
purchase Refinery Products and certain Offspec Refinery Products produced by the
Refineries;
WHEREAS, CPC desires WPC to perform certain services described on
EXHIBITS A-1, A-2, A-3 AND A-4 attached hereto ("WPC Services"), and WPC desires
CPC to perform certain services described on EXHIBITS B-1, B-1A AND B-2 attached
hereto ("CPC Services"; WPC Services and CPC Services being collectively
referred to as "Services");
WHEREAS, CPC desires that WPC maintain the same level of service that
was previously provided to it by Warren and WPC desires to continue such level
of service; and
WHEREAS, WPC and CPC desire to perform such Services for each other in
accordance with and subject to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the Parties, as well as for other good and valuable consideration,
WPC and CPC agree as follows:
ARTICLE 1
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"AAR" means American Association of Railroads.
"AGREEMENT" means this Agreement, including all Exhibits and the
Schedule attached hereto and all amendments hereof that may be made from time to
time.
"AFFILIATE" means any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified. The term "control" (including the terms "controlled
by" or "under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership, by contract, or otherwise. Any
Person shall be deemed to be an Affiliate of any specified Person if such Person
owns fifty percent (50%) or more of the voting securities of the specified
Person, if the specified Person owns fifty percent (50%) or more of the voting
securities of such Person, or if fifty percent (50%) or more of the voting
securities of the specified Person and such Person are under common control.
"BANKRUPTCY EVENT" means the occurrence of one or more of the following
events with respect to a Party: (A) the entry of a decree or order for relief
against a Party by a court of competent jurisdiction in any involuntary case
brought against a Party under any bankruptcy, insolvency or other similar law
(collectively, "Debtor Relief Laws") generally affecting the rights of creditors
and relief of debtors now or hereafter in effect; (B) the appointment of a
receiver, liquidator, assignee, custodian,
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trustee, sequestrator or other similar agent under applicable Debtor Relief Laws
for a Party or for any substantial part of its assets or property; (C) the
ordering of the winding up or liquidation of a Party's affairs; (D) the filing
of a petition in any such involuntary bankruptcy case, which petition remains
undismissed for a period of 180 Days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy law); (E) the commencement by a
Party of a voluntary case under any applicable Debtor Relief Law now or
hereafter in effect; (F) the consent by a Party to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar agent under any applicable Debtor Relief Laws for
a Party or for any substantial part of its assets or property; or (G) the making
by a Party of any general assignment for the benefit of its creditors.
"BASE RATE" means the lesser of (i) two percent (2%) above the per
annum rate of interest announced from time to time as the "prime rate" for
commercial loans by First National Bank of Chicago, as such "prime rate" may
change from time to time, or (ii) the maximum applicable non-usurious rate of
interest.
"BLS" means CPC's Bill of Lading System, including all enhancements and
replacements thereof.
"BUSINESS DAY" means a Day on which Federal Reserve member banks in New
York City are open for business.
"BUTANE CARS" means pressure rail cars assigned from time to time to
CPC's 1052 (Butane) fleet.
"CLM" means Car Location Message.
"CPC CARS" means the LPG Cars and all other rail cars owned or Leased
by CPC from time to time.
"CPC DATABASES" means BLS, CPS, RAS and RMS, including all enhancements
and replacements of any of them.
"CPS" means Chevron Products Systems, including all enhancements and
replacements thereof.
"DAY" OR "DAILY" means a twenty-four (24) hour period commencing at
12:01 a.m. local time and extending until 12:01 a.m. local time on the following
Day.
"DISPOSITION" means the assignment, sale, transfer, or other
disposition of a Refinery to a Transferee.
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"DOT" means the United States Department of Transportation and any
successor agency thereof.
"EFFECTIVE DATE" means ____________, 1996.
"EMERGENCY USE RIGHTS" means CPC's rights, exercisable only in
situations reasonably believed by CPC to be emergencies (excluding planned
Refinery turnarounds), to temporarily use Propane Cars that are within the
Refinery premises in accordance with the terms of this Agreement.
"FEEDSTOCK" shall have the meaning given such term in the Feedstock
Agreement for the applicable Refinery.
"FEEDSTOCK PRODUCTS" means Feedstock and Offspec Feedstock.
"FIS" means TP&S's Freight Information Services group.
"FORCE MAJEURE" shall have the meaning given such term in Section 10.2.
"GAAP" means generally accepted accounting principles, as in effect
from time to time.
"GALLON" means the unit volume used for the purpose of measurement of
liquid. One (1) U.S. liquid gallon contains two hundred thirty-one (231) cubic
inches when the liquid is at a temperature of sixty degrees Fahrenheit (60/F)
and at the vapor pressure of the liquid being measured.
"ISOBUTANE" shall have the meaning given such term in the Feedstock
Agreement for the applicable Refinery.
"ISOMERIZATION AGREEMENT" means the Isomerization Agreement dated as of
July 14, 1995 between Warren and Lone Star Gas Liquids Processing, Inc.
"LEASE" means, with respect to a rail car (including, but not limited
to, the LPG Cars), a time charter arrangement between the owner of the rail car
and the Person entitled to use such rail car, a lease in which the owner of the
rail car retains legal and beneficial title to such rail car, or any other
contractual arrangement of similar effect.
"LPG CARS" means pressure rail cars assigned from time to time to CPC's
1030 (Propane) and 1052 (Butane) fleets.
"MIXED BUTANES" shall have the meaning given such term in the Feedstock
Agreement for the applicable Refinery.
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"MONTH" OR "MONTHLY" means a period commencing at 12:01 a.m. local time
on the first Day of a calendar month and extending until 12:01 a.m. local time
on the first Day of the next succeeding calendar month.
"WPC LOCATIONS" means locations where WPC personnel have access,
through computer terminals or otherwise, to any of the CPC Databases.
"OFFSPEC FEEDSTOCK" shall have the meaning given such term in the
Feedstock Agreement for the applicable Refinery.
"OFFSPEC REFINERY PRODUCTS" and "TYPE A OFFSPEC REFINERY PRODUCTS"
shall have the meanings given such terms in the Feedstock Agreement for the
applicable Refinery.
"OPERATING COMMITTEE" shall have the meaning given such term in Section
8.1.
"PARTY" means individually either CPC or WPC (including their
respective successors and permitted assigns); collectively, the "PARTIES."
"PERSON" means any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other organization of
any nature or kind.
"PRODUCTS" means Feedstock, Offspec Feedstock, Refinery Products and
Type A Offspec Refinery Products.
"PROPANE CARS" means pressure rail cars assigned from time to time to
CPC's 1030 (Propane) fleet.
"RAS" means CPC's Rail Car Accounting System, including all
enhancements and replacements thereof.
"REFINERY" and "REFINERIES" shall have the meanings set forth in the
recitals to this Agreement and shall refer to the Refineries in the following
locations: El Paso, Texas; El Segundo, California; Hawaii; Pascagoula,
Mississippi; Richmond, California; and Salt Lake City, Utah.
"REFINERY PRODUCTS" shall have the meaning given such term in the
Feedstock Agreements for the applicable Refinery.
"RELAM" refers to a third Person, unaffiliated with either Party, that
provides mileage credit auditing services.
"RMS" means CPC's Rail Car Management System, including all
enhancements and replacements thereof.
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"T&F COSTS" means all Transportation Costs and all costs and expenses
reasonably incurred in connection with the receipt, fractionation and sale or
resale of Refinery Products received by WPC from CPC. It is understood and
agreed that any fractionation costs that are incurred at a facility owned and/or
controlled by WPC or any of its Affiliates shall not exceed the lesser of (i)
the fair market value for such fractionation services or (ii) the fees charged
by WPC or its Affiliates to CUSA in connection with the fractionation of natural
gas liquids (other than Refinery Products) owned by CUSA and purchased by WPC.
"TP&S" shall have the meaning given such term in Section 8.1.
"THIRD PARTY LPG" means liquefied petroleum gas transported by WPC for
its own account or the account of its Affiliates or for third Persons not
Affiliated with CPC.
"TRANSFEREE" means a third Person who acquires a Refinery pursuant to a
Disposition, and who is not an Affiliate of either Party.
"TRANSPORTATION COSTS" means all costs and expenses reasonably incurred
in connection with the transportation of Feedstock(s) and/or Refinery Product(s)
hereunder, including, without limitation, rail car, barges and truck costs,
Feedstock and/or Refinery Product losses that occur during transportation for
reasons other than the negligence or willful misconduct of WPC and all costs and
expenses reasonably incurred in loading, unloading, transporting, terminaling,
storing (if required) and handling such Feedstock(s) and/or Refinery Products.
It is understood and agreed that Transportation Costs shall not include any
portion of WPC's general and administrative costs and expenses, but will include
amounts paid by WPC to CPC in connection with the Propane Cars owned or Leased
by CPC but operated by WPC in connection with the Services rendered by WPC to
CPC pursuant to this Agreement. With respect to barges and trucks owned by WPC
or its Affiliates, the applicable Transportation Costs shall not exceed the fair
market value of the use of such barges and trucks in transporting Feedstocks
and/or Refinery Products hereunder.
"UMLER" means the Uniform Machine Language Equipment Register, a
database provided by the AAR in connection with the monitoring of rail car
mileage credit rating records.
"YEAR" means a period of twelve (12) consecutive months commencing from
the Effective Date.
1.2 OTHER DEFINITIONS. Other terms may be defined
elsewhere in the text of this Agreement (including
but not limited to the Exhibits hereto) and shall
have the meanings indicated throughout this
Agreement.
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CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
ARTICLE 2
TERM
*
*
2.1 GENERALLY. Unless otherwise provided herein, this Agreement shall
remain in full force and effect for a period of [REDACTED] Years from the
Effective Date hereof and shall continue from Year to Year thereafter unless
terminated by either Party hereto at the end of such [REDACTED] Year period or
any Yearly anniversary thereafter by giving the other Party at least ninety (90)
Days, but not more than one hundred and eighty (180) Days, advance written
notice of its intention to so terminate. Notwithstanding the foregoing, it is
understood and agreed that shorter terms may be applicable to certain Services
described in Exhibit A and Exhibit B (as such terms are hereafter defined), as
more particularly set forth in such Exhibits.
2.2 TERMINATION. Notwithstanding Section 2.1 above, this Agreement may
be terminated as follows:
(a) By the non-defaulting Party, upon thirty (30) Days written
notice to the other Party, after it has been determined through the alternative
dispute resolution procedures of Article 11 that a Material Default has occurred
in the Performance of a Party's obligations hereunder (it being understood that,
for purposes of the foregoing, "Material Default" shall mean that the
arbitrators have determined that (i) in consequence of such Default, the
objectives of this Agreement (as expressed in the Master Alliance Agreement of
even date herewith by and among CUSA, CPC, WPC and others) are not being met and
(ii) the defaulting Party failed to take the steps necessary to accomplish such
objectives);
(b) By a Party, in the event the other Party is dissolved
(unless the successor to such dissolved Party or its assets is an Affiliate of
CPC or WPC);
(c) By a Party, if a Bankruptcy Event occurs with respect to
the other Party; or
(d) By either Party, with respect to each Refinery, if either
Party has terminated the Feedstock Agreement applicable to such Refinery in
accordance with the terms and provisions thereof.
In the event the Refinery is sold to a third Person not affiliated with CPC, the
reference to the Master Alliance Agreement set forth in Section 2.2(a), above,
shall be inapplicable.
2.3 CLOSURE OF REFINERY. It is agreed and understood that CPC, in its
sole discretion, may permanently close any Refinery at any time during the term
of this Agreement. Upon such permanent closure, CPC and WPC shall be relieved of
any further obligations under this Agreement with regard to
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such Refinery, if CPC has provided WPC with written notice of such closure at
least one hundred and eighty (180) Days prior to the date of such closure.
2.4 PARTIAL TERMINATION OF AGREEMENT. Except as otherwise provided in
this Agreement, this Agreement shall terminate as to any Refinery (a) that has
terminated its Feedstock Agreement with WPC in accordance with the terms and
provisions thereof or (b) that has been the subject of a Disposition. Except as
otherwise provided in this Agreement, the Parties' obligations hereunder shall
terminate as to the Refinery affected by such termination or Disposition subject
to the provisions of Sections 2.5, (i) in the case of termination of its
Feedstock Agreement with a Refinery, upon the effective date of such termination
and (ii) in the case of a Disposition, upon the consummation of such
Disposition.
2.5 POST-TERMINATION ITEMS. Upon the termination of this Agreement, any
monies due and owing either Party shall be paid to the other Party pursuant to
the terms hereof and any refunds due either Party shall be made at the earliest
possible time, and, in any event, no later than sixty (60) Days after the
expiration or termination of this Agreement. All audit rights shall survive for
the period prescribed by Section 7.2(g).
2.6 REMEDIES CUMULATIVE. Termination of this Agreement hereunder shall
be cumulative of any other rights or remedies that the terminating Party may
have in connection with such termination (subject to any limitations set forth
herein), including, but not limited to, damages and injunctive relief.
ARTICLE 3
SERVICES
3.1 AGREEMENT TO PROVIDE SERVICES.
(a) WPC shall perform the WPC Services described on Exhibits
A-1 through A-4 attached hereto (such Exhibits being collectively sometimes
hereinafter referred to as "Exhibit A"), and CPC shall perform the CPC Services
described on Exhibits B-1 and B-2 attached hereto (such Exhibits, together with
Exhibit B-1a, being collectively sometimes hereinafter referred to as "Exhibit
B"), all such Services to be provided subject to and in accordance with the
terms and provisions of this Agreement.
(b) To request Services not generally described in Exhibit A
or Exhibit B, the Party desiring such additional services ("Non-Exhibit
Services") shall complete a Request for Services (the "Request for Services" or
"RFS"), substantially in the form attached hereto as "Exhibit C," describing
with specificity the scope and type of Non-Exhibit Services to be performed, and
the fee to be paid for them. The RFS shall be binding when signed by both
Parties. If there is a conflict between the terms of this Agreement and the
terms of the RFS, the terms of the RFS shall control.
(c) In connection with the rendering of Services that relate
to transportation (including, without limitation, the transportation of
Products), it is understood and agreed that the
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Party providing such Services shall provide rail car, motor vehicle or other
transportation equipment that (i) complies with the requirements of all
applicable federal and state statutes, all applicable local government
ordinances and all applicable rules, regulations orders and other mandatory
directives of any applicable federal, state or local tribunal or agency
(including but not limited to those of the U.S. Department of Transportation)
and (ii) is safe, complete and efficient for the performance of such Party's
obligations under this Agreement.
3.2 RELATIONSHIP BETWEEN THE PARTIES.
(a) The relationship between the Parties is purely
contractual. Nothing set forth herein shall constitute, or be construed as
creating, an employment relationship, a partnership, a joint venture, a
relationship of lessor and lessee or bailor and bailee, or any other kind of
relationship or association between the Parties. Except as otherwise expressly
provided herein, neither Party hereto has any authority, expressed or implied,
to bind or to incur liabilities on behalf or in the name of, the other Party.
(b) All Services to be provided by either Party under this
Agreement may be furnished by any officer, employee or contractor of such Party.
Each Party shall devote such time in providing its respective Services hereunder
as is reasonably necessary to fully provide the same. Each Party shall use
qualified and properly trained personnel as are necessary to perform the
Services in accordance with the terms of this Agreement and in compliance with
applicable law.
(c) The Parties agree to cooperate with each other in
effectuating the purposes of this Agreement. Without limiting the generality of
the foregoing, (i) the Parties shall promptly notify each other of any matter,
or the occurrence of any event, which matter or event could reasonably be
expected to materially and adversely affect the Services provided hereunder and
(ii) the Party for whom Services are being provided shall give the Party
providing Services all information necessary for such Party to perform the
Services required of it under this Agreement.
3.3 LICENSE FOR WPC USE OF CPC SOFTWARE AND DATABASES.
The Parties acknowledge that performance of the WPC Services
will require CPC to give WPC limited access to, and a limited right to use, the
CPC Databases so that WPC can perform its obligations and exercise its rights
under this Agreement. Accordingly, CPC agrees to grant WPC, on or before the
Effective Date, a non-exclusive license for such access and use in respect of
the CPC Databases for the term of this Agreement, subject in all respects to the
terms of this Section 3.3 and the other terms and conditions of this Agreement.
WPC's license shall be evidenced by one or more agreements (the "Database
Agreements") setting forth the conditions of WPC's access to and right to use
the CPC Databases, and containing (i) provisions for identifying WPC personnel
authorized to use the CPC Databases, (ii) provisions limiting WPC's access to
information in the CPC Databases to information necessary to perform WPC's
obligations and exercise its rights under this Agreement, (iii) procedures
required by CPC to ensure the confidentiality of information in the CPC
Databases and to maintain the operating integrity of such CPC Databases, and
(iv) such other fair and equitable
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provisions as may be mutually satisfactory to the Parties. Without limiting or
modifying the generality of the foregoing, WPC's access to the CPC Databases
shall also be limited in accordance with the "Other Provisions" section of
Exhibit B-1. Until the Database Agreements have been executed and delivered by
the Parties, (x) WPC's obligations hereunder that require access to the CPC
Databases shall be suspended and (y) the rights and obligations of both Parties
with respect to the CPC Databases shall be suspended.
3.4 AUTHORIZATION OF WPC'S USE AND OPERATION OF CPC RAIL CARS; GRANT OF
OPERATING RIGHTS. The Parties acknowledge that the performance of the WPC
Services will (i) require CPC to give WPC the rights to use, operate, schedule,
dispatch and generally control the LPG Cars in accordance with and subject to
the terms of this Agreement (such rights to be referred to as the "Operating
Rights"), (ii) require the Parties to designate, from time to time and for the
purposes hereinafter set forth, such LPG Cars as either Butane Cars or Propane
Cars, with such designations to vary from time to time according to the use of
such LPG Cars and (iii) require the Parties to allocate depreciation, operating
costs and other costs and expenses among the LPG Cars generally and between
Propane Cars and Butane Cars, depending on the relevant business circumstances.
Accordingly, in connection with the foregoing and related matters, the Parties
agree as follows:
(a) CPC hereby assigns the Operating Rights to WPC, subject to
(i) the terms and conditions of all Leases applicable to the LPG Cars, (ii)
minor encumbrances that, individually and in the aggregate, do not and will not
materially affect WPC's use of the Operating Rights, (iii) CPC's right,
exercisable in its sole discretion, to use Butane Cars while situated on
Refinery premises at any time and (iv) the terms and conditions of this
Agreement, including, but not limited to, CPC's Emergency Use Rights (the
matters in clauses (i) , (ii), (iii) and (iv) being herein referred to as the
"Permitted Encumbrances");
(b) the Parties, in consultation with the Operating Committee,
shall designate the LPG Cars as either Butane Cars or Propane Cars, and shall
allocate depreciation, operating costs and other costs and expenses among the
LPG Cars generally and between Propane Cars and Butane Cars, in accordance with
and subject to the terms of Exhibit B-1 and Exhibit B-1a, respectively, to which
reference is made for all relevant purposes hereunder;
(c) the WPC Services to be provided in connection with this
grant of the Operating Rights, together with the fees to be paid for such WPC
Services and all other pertinent information with respect thereto, are set forth
in Exhibits A-1 through A-4, to which reference is made for all relevant
purposes hereunder;
(d) the CPC Services to be provided in connection with the LPG
Cars, together with the fees to be paid for such CPC Services and all other
pertinent information with respect thereto, are set forth in Exhibits B-1, B-1a
and B-2, to which reference is made for all relevant purposes hereunder;
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(e) CPC may exercise its Emergency Use Rights at any time by
giving WPC oral notice regarding the existence of an emergency, and if the LPG
Cars situated on Refinery premises are insufficient to handle such emergency,
WPC shall assist CPC in securing additional LPG Cars. In the event CPC exercises
its Emergency Use Rights, (i) WPC's obligations under the applicable Feedstock
Agreements shall be suspended insofar as WPC's ability to perform such
obligations are materially and adversely affected by the exercise of CPC's
Emergency Use Rights and (ii) CPC shall reimburse WPC for all reasonable costs,
expenses and penalties incurred by WPC in connection with, arising out of, or
directly resulting from CPC's exercise of such Emergency Use Rights;
(f) CPC represents, warrants and covenants as follows that:
(i) (A) with respect to LPG Cars that CPC Leases, CPC
has or will have the right to transfer the Operating Rights to WPC in accordance
with the terms of this Agreement, subject to any applicable third Person
consents required under the Leases; (B) with respect to LPG Cars that CPC owns,
it will (1) maintain and defend its right, title and interest in such LPG Cars,
subject to the Permitted Encumbrances, subject further to CPC's right to contest
in good faith and by appropriate means any claims by third Persons affecting
CPC's right, title and interest in such LPG Cars, and (2) not assign any
interest in such LPG Cars except as provided in Section 12.3, and (C) with
respect to LPG Cars that CPC Leases, it will (1) timely pay all amounts due from
CPC under the Leases applicable to the LPG Cars and otherwise comply with such
Leases in all material respects, (2) maintain such Leases in full force and
effect, the foregoing being subject only to CPC's right to contest in good faith
and by appropriate means any disputes arising under such Leases and (3) not
assign any of its interest under the Leases except as provided in Section 12.3;
and
(ii) it will exercise every reasonable effort to
ensure that each LPG Car departing from any Refinery shall be properly coded to
reflect whether such departing LPG Car is a Propane Car or a Butane Car;
(iii) it will exercise every reasonable effort to
ensure that each LPG Car within the Refinery premises that is used by CPC for
Refinery purposes shall be properly coded as a Butane Car; and
(iv) EXCEPT AS EXPLICITLY SET FORTH IN THIS SECTION
3.4(F), THERE ARE NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR AGAINST
INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHERWISE, AND ALL SUCH
WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY CPC AND EXCLUDED FROM THIS
AGREEMENT.
(g) WPC represents, warrants and covenants as follows that:
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(i) it has or, by the Effective Date, will have all
material governmental consents, licenses and approvals necessary to exercise the
Operating Rights and generally to perform Services using the LPG Cars in
accordance with the applicable terms and conditions of this Agreement;
(ii) it will (A) maintain its right, title and
interest in the Operating Rights, subject to the terms of this Agreement and
subject further to WPC's right to contest in good faith and by appropriate means
any claims by third Persons affecting WPC's right, title and interest in the
Operating Rights, (B) COMPLY IN ALL MATERIAL RESPECTS WITH THE APPLICABLE TERMS
OF LEASES APPLICABLE TO THE LPG CARS AND INDEMNIFY AND HOLD CPC HARMLESS FROM
AND AGAINST ALL COSTS, LIABILITIES AND EXPENSES ARISING OUT OF, OR IN ANY WAY
ASSOCIATED WITH, WPC'S USE OF ANY LPG CAR FOR PURPOSES OTHER THAN THOSE
CONTEMPLATED BY THE APPLICABLE LEASE, INCLUDING BUT NOT LIMITED TO CLEANING AND
INSPECTION COSTS AND ADDITIONAL RENTAL FEES FOR SUCH LPG CAR AND/OR FOR OTHER
RAIL CARS OR OTHER EQUIPMENT REQUIRED TO BE LEASED OR PURCHASED AS A RESULT OF
SUCH USE BY WPC and (C) not assign any of its interest in the Operating Rights
except as provided in Section 12.3, or as provided in any applicable Lease; and
(iii) it will exercise every reasonable effort to
ensure that each LPG Car departing from a location other than a Refinery shall
be properly coded to reflect whether such departing LPG Car is a Propane Car or
a Butane Car, including, but not limited to, coding as a Propane Car each LPG
Car moving Third Party LPG on behalf of WPC to a location other than a Refinery,
whether or not Propane is being transported.
(h) (i) This Section 3.4(h) establishes the term of the
Operating Rights granted by CPC to WPC hereunder and the respective rights and
obligations of the Parties regarding the LPG Cars upon the termination of such
Operating Rights.
(ii) The Operating Rights with respect to all LPG Cars, other
than the WPC LPG Cars (hereinafter defined), shall terminate and revert to CPC
at the end of the Primary Term (hereinafter defined). Notwithstanding the
foregoing, CPC shall transfer the WPC LPG Cars to WPC in accordance with the
terms and provisions of this Section 3.4(h). "WPC LPG Cars" means a number of
LPG Cars equal to the number of LPG Cars, averaged over the twelve (12) Month
period ending the Month before the Month in which the Primary Term ends, engaged
by WPC in carrying Third Party LPG for itself or for WPC customers other than
CPC (such activity being hereinafter referred to as "WPC Third-Person Carriage")
during such twelve (12) Month period. "Primary Term" shall mean ten (10) Years
from the Effective Date, and any extensions mutually agreed to in writing by the
Parties.
(iii) If WPC terminates this Agreement before the end of the
Primary Term in accordance with Section 2.2 because of CPC's Material Default,
CPC's dissolution (subject, however, to the provisions of Section 2.2(b)) or the
occurrence of a Bankruptcy Event with respect to CPC, then:
(1) WPC's Operating Rights shall terminate and revert
to CPC as to a number of Butane Cars equal to the average number of all Butane
Cars in the LPG Car fleet over the
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twelve (12) Month period ending the Month before the Month in which WPC
terminates this Agreement;
(2) WPC shall retain the exclusive Operating Rights
to a number of Propane Cars equal to the average number of all Propane Cars in
the LPG Car fleet over the twelve (12) Month period ending the Month before the
Month in which WPC terminates this Agreement, until the end of the Primary Term,
and CPC shall have no rights whatsoever to such Propane Cars until the end of
the Primary Term, including, but not limited to, any Emergency Use Rights, the
right to use such Propane Cars to carry Products to and from all Refineries
subject to this Agreement (such activity being hereinafter referred to as
"Refinery Service") or for any other purpose whatsoever; and
(3) at the end of the Primary Term, (a) at WPC's
option, exercised in accordance with Section 3.4(h)(vii)(7), CPC shall transfer
to WPC a number of LPG Cars equal to the number of LPG Cars, averaged over the
twelve (12) Month period ending the Month before the Month in which the Primary
Term expires, engaged in WPC Third-Person Carriage during such twelve (12) Month
period and (b) WPC's Operating Rights in the remaining LPG Cars shall terminate
and revert to CPC.
(iv) If CPC terminates this Agreement before the end of the
Primary Term in accordance with Section 2.2 because of WPC's Material Default,
WPC's dissolution (subject, however, to the provisions of Section 2.2(b)), or
the occurrence of a Bankruptcy Event with respect to WPC, then WPC's Operating
Rights shall terminate and revert to CPC as to all LPG Cars, including but not
limited to LPG Cars engaged in WPC Third-Person Carriage.
(v) If there is a partial termination of this Agreement
pursuant to Section 2.4 before the end of the Primary Term, then:
(1) if such termination is due to termination of a
Feedstock Agreement between WPC and a Refinery based on CPC's Material Default
thereunder, then, at the time of such partial termination, (a) WPC's Operating
Rights shall terminate and revert to CPC as to a number of Butane Cars equal to
the number of Butane Cars, averaged over the twelve (12) Month period ending the
Month before the Month in which such partial termination occurred, engaged in
Refinery Service for such Refinery covered by such terminated Feedstock
Agreement during such twelve (12) Month period, and (b) WPC shall retain the
exclusive Operating Rights to a number of Propane Cars equal to the number of
Propane Cars, averaged over the twelve (12) Month period ending the Month before
the Month in which such partial termination occurred, engaged in Refinery
Service and WPC Third-Person Carriage during such twelve (12) Month period, and
CPC shall have no rights whatsoever to such Propane Cars until the end of the
Primary Term, including, but not limited to, any Emergency Use Rights, the right
to use such Propane Cars for Refinery Service or for any other purpose
whatsoever;
(2) except as otherwise provided in this Section
3.4(h)(v), if such termination occurs in connection with the consummation of the
Disposition of a Refinery and the assignment by CPC to the Transferee of the
Feedstock Agreement associated with such Refinery, then
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WPC shall retain its Operating Rights as to all LPG Cars until the end of the
Primary Term (it being understood that if such Feedstock Agreement is not
assigned in connection with such Disposition, then, at the time of such partial
termination, WPC's Operating Rights shall terminate and revert to CPC as to a
number of LPG Cars equal to the number of LPG Cars, averaged over the twelve
(12) Month period ending the Month before the Month in which such Disposition
was consummated, engaged in Refinery Service for such Refinery);
(3) if such termination is due to termination of a
Feedstock Agreement between WPC and a Refinery based on WPC's Material Default
thereunder (including but not limited to the occurrence of a Refinery Closure
Event, as defined in such Feedstock Agreement), then, at the time of such
partial termination, WPC's Operating Rights shall terminate and revert to CPC as
to a number of LPG Cars equal to the number of LPG Cars, averaged over the
twelve (12) Month period ending the Month before the Month in which such partial
termination occurred, engaged in Refinery Service for such Refinery covered by
such terminated Feedstock Agreement during such twelve (12) Month period and WPC
shall retain its Operating Rights as to all other LPG Cars until the end of the
Primary Term; and
(4) at the end of the Primary Term, (a) at WPC's
option, exercised in accordance with Section 3.4(h)(vii)(7), CPC shall transfer
the WPC LPG Cars to WPC, and (b) WPC's Operating Rights in the remaining LPG
Cars shall terminate and revert to CPC.
(vi) If, in connection with the Disposition of a Refinery, the
Feedstock Agreement for such Refinery is assigned to the Transferee, CPC agrees
that it will use every reasonable effort to maintain during the Primary Term a
number of LPG Cars in the LPG Car fleet equal to the average number of LPG Cars
that were in the LPG Car fleet over the twelve (12) Month period ending the
Month before the Month the Disposition of such Refinery and the assignment of
the associated Feedstock Agreement were consummated.
(vii) It is understood and agreed that, with respect to all
transfers of LPG Cars and/or the termination of Operating Rights under this
Section 3.4:
(1) all such transfers shall be consummated as soon
as practicable, but in no event later than sixty (60) Days after the end of the
Primary Term;
(2) in cases where WPC's Operating Rights are being
terminated, WPC shall return the LPG Cars in WPC's possession that are affected
by such termination as soon as practicable, but in no event later than sixty
(60) Days after the termination of WPC's Operating Rights in such LPG Cars;
(3) LPG Cars transferred to WPC shall reflect, as
nearly as practicable, (a) the proportion of CPC-owned and CPC-Leased LPG Cars
at the time of such transfer and (b) the age distribution of all LPG Cars owned
by CPC at the time of the transfer;
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(4) all transfers of LPG Cars to WPC shall be made
without warranty other than warranties of the type given by CPC in Section
3.4(f)(i), subject to the disclaimers set forth in Section 3.4(f)(iv), and, with
respect to the Leased LPG Cars, subject to the Leases applicable to such LPG
Cars;
(5) CPC shall have no obligation to provide Services
to LPG Cars which have been transferred to WPC in accordance with this Section
3.4(h) or as to which WPC's Operating Rights have terminated;
(6) where CPC transfers LPG Cars owned by CPC to WPC,
such transfers shall be accompanied by payment to CPC, in immediately available
funds, of an amount necessary, after taking into account prior capital cost
recovery payments by WPC, to yield CPC a seven percent (7%) return on capital.
An example of the foregoing which embodies the intent of the Parties is attached
hereto as Schedule 3.4(h). WPC shall pay such amount simultaneously with the
transfer of such LPG Cars; and
(7) in connection with the exercise of WPC's option
to cause CPC to transfer to WPC LPG Cars in accordance with Sections
3.4(h)(iii)(3) or 3.4(h)(v)(4), WPC shall exercise such option in either event
by providing CPC with written notice to such effect, which notice shall be
received by CPC not less than 45 Days before the end of the Primary Term. The
transfer of WPC LPG Cars pursuant to the exercise of such option shall take
place in accordance with and subject to the terms and provisions of this Section
3.4(h)(vii). Time is of the essence in connection with the exercise of WPC's
option under this Section 3.4(h), and WPC shall be deemed to have waived such
option under this Section 3.4(h) if it does not timely deliver written notice to
CPC exercising such option in accordance with this Section 3.4(h)(vii)(7). If
WPC fails to exercise its option in accordance with this Section 3.4(h)(vii)(7),
WPC's Operating Rights in such LPG Cars shall terminate and revert to CPC at the
end of the Primary Term in accordance with Section 3.4(h)(ii).
ARTICLE 4
STANDARD OF PERFORMANCE AND CARE
4.1 WPC STANDARD OF PERFORMANCE. WPC shall perform the WPC Services and
shall require all of its employees and any agents or subcontractors furnishing
WPC Services, to exercise reasonable care and diligence in providing WPC
Services to CPC.
4.2 CPC STANDARD OF PERFORMANCE. CPC shall perform the CPC Services and
shall require all of its employees and any agents or subcontractors furnishing
CPC Services to exercise reasonable care and diligence in providing CPC Services
to WPC.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF CPC. CPC hereby represents and
warrants to WPC that on and as of the date hereof:
(a) It has all requisite power and authority to carry on the
business in which it is engaged and to perform its respective obligations under
this Agreement;
(b) The execution and delivery of this Agreement have been
duly authorized and approved by all requisite corporate action;
(c) It has all requisite power and authority to enter into
this Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not, violate any of
the material provisions of its organizational documents, any material agreement
pursuant to which CPC or its properties are bound or, to its knowledge, any
material laws applicable to CPC; and
(e) This Agreement is valid, binding, and enforceable against
it in accordance with its terms, subject to bankruptcy, moratorium, insolvency
and other laws generally affecting creditors' rights and general principles of
equity (whether applied in a proceeding in a court of law or equity).
5.2 REPRESENTATIONS AND WARRANTIES OF WPC. WPC hereby represents and
warrants to CPC that on and as of the date hereof:
(a) It has all requisite power and authority to carry on the
business in which it is engaged and to perform its respective obligations under
this Agreement;
(b) The execution and delivery of this Agreement have been
duly authorized and approved by all requisite partnership action;
(c) It has all requisite power and authority to enter into
this Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not, violate any of
the material provisions of its organizational documents, any material agreement
pursuant to which WPC or its properties are bound or, to its knowledge, any
material laws applicable to WPC; and
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(e) This Agreement is valid, binding, and enforceable against
it in accordance with its terms, subject to bankruptcy, moratorium, insolvency
and other laws generally affecting creditors' rights and general principles of
equity (whether applied in a proceeding in a court of law or equity).
ARTICLE 6
INDEMNIFICATION
6.1 WPC'S INDEMNITY. WPC AGREES TO INDEMNIFY AND HOLD HARMLESS CPC, ITS
AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
CONTRACTORS (COLLECTIVELY, THE "CPC INDEMNIFIED PERSONS"), FROM ALL ACTUAL
LOSSES, COSTS, EXPENSES, CLAIMS (INCLUDING, WITHOUT LIMITATION, PERSONAL INJURY
OR PROPERTY DAMAGE CLAIMS), DAMAGES AND CAUSES OF ACTION, INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES AND COSTS OF COURT (COLLECTIVELY, THE
"LOSSES") INCURRED BY THE CPC INDEMNIFIED PERSONS, OR ANY OF THEM, AND PAID TO
THIRD PERSONS RESULTING FROM THE NEGLIGENCE, DISHONESTY, WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF WPC (INCLUDING, WITHOUT LIMITATION, ITS OFFICERS, EMPLOYEES,
AGENTS, CONTRACTORS AND AFFILIATES) OR WPC'S BREACH OF THIS AGREEMENT IN
CONNECTION WITH THE PERFORMANCE OF WPC'S OBLIGATIONS UNDER THIS AGREEMENT.
6.2 CPC'S INDEMNITY. CPC AGREES TO INDEMNIFY AND HOLD HARMLESS WPC, ITS
AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
CONTRACTORS (COLLECTIVELY, THE "WPC INDEMNIFIED PERSONS"), FROM ALL ACTUAL
LOSSES, COSTS, EXPENSES, CLAIMS (INCLUDING, WITHOUT LIMITATION, PERSONAL INJURY
OR PROPERTY DAMAGE CLAIMS), DAMAGES AND CAUSES OF ACTION, INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES AND COSTS OF COURT (COLLECTIVELY, THE
"LOSSES") INCURRED BY THE WPC INDEMNIFIED PERSONS, OR ANY OF THEM, AND PAID TO
THIRD PERSONS RESULTING FROM THE NEGLIGENCE, DISHONESTY, WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF CPC (INCLUDING, WITHOUT LIMITATION, ITS OFFICERS, EMPLOYEES,
AGENTS, CONTRACTORS AND AFFILIATES) OR CPC'S BREACH OF THIS AGREEMENT IN
CONNECTION WITH THE PERFORMANCE OF CPC'S OBLIGATIONS UNDER THIS AGREEMENT.
ARTICLE 7
FEES
7.1 COMPENSATION.
(a) WPC COMPENSATION. As compensation for the WPC Services
under this Agreement, CPC shall pay WPC the respective amounts set forth on
Exhibits A-1 through A-4, as applicable, unless a different amount has been
agreed upon in writing by WPC and CPC. Compensation for Non-Exhibit Services
performed by WPC shall be determined in accordance with the applicable RFS.
WPC's compensation shall be paid in accordance with the billing and payment
procedures set forth in Section 7.2.
(b) CPC COMPENSATION. As compensation for the CPC Services
under this Agreement, WPC shall pay CPC the respective amounts set forth on
Exhibits B-1, B-1a or B-2, as
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applicable, unless a different amount has been agreed upon in writing by WPC and
CPC. Compensation for Non-Exhibit services performed by WPC shall be determined
in accordance with the applicable RFS. CPC's compensation shall be paid in
accordance with the billing and payment procedures set forth in Section 7.2.
(c) PERIODIC FEE REDETERMINATION. Every Year after the
Effective Date of this Agreement, either Party shall have the option to open
this Agreement solely for the purpose of renegotiating the fees to be paid for
Services rendered hereunder. To exercise such option, a Party at least ninety
(90) Days before the expiration of such one (1) Year period must provide to the
other Party written notification (the "Renegotiation Notice") of its desire to
renegotiate fees for any or all Services rendered hereunder. In any such
renegotiations, the Parties shall continue to recognize that the fees to be paid
for Services rendered hereunder must reflect the fair market value of comparable
Services provided and received by third Persons who are not Affiliates of either
Party in the area(s) where such Services are being provided. If, after
negotiating in good faith for a period of ninety (90) Days following the date of
the Renegotiation Notice, the Parties are unable to agree upon a mutually
satisfactory fee for the Services in question, the matter shall be submitted to
the alternative dispute resolution procedures as provided in Article 11 hereof.
During the period while such negotiations or dispute resolution procedures are
ongoing until (i) a new fee is agreed to or (ii) a new fee is established as
provided herein, the fee for the Services in question shall be determined in
accordance with the fee arrangement that was applicable immediately prior to the
date of the Renegotiation Notice. If a new fee is established under this Section
7.1(c), whether by renegotiation, arbitration, or otherwise, such new fee shall
be effective as of, and shall, if necessary, be made retroactive to the first
Day of the applicable one (1) Year period immediately following the
Renegotiation Notice, plus interest thereon at the Base Rate.
(d) HARDSHIP REDETERMINATION. In the event conditions change
such that this Agreement causes, or could reasonably be expected to cause, a
material long term economic or operational hardship to either Party, upon the
written request of either Party, CPC and WPC shall meet to renegotiate in good
faith such burdensome terms and provisions so as to make them fair and
equitable. Such renegotiations shall occur within thirty (30) Days of the date
of the non-requesting Party's receipt of such written request for such
renegotiations. If the Parties are unable to agree on new provisions to replace
such burdensome terms and provisions within ninety (90) Days of the
non-requesting Party's receipt of such written request, the matter shall be
submitted to the alternative dispute resolution procedures set forth in Article
11 hereof. It is understood and agreed that the rights granted in this Section
7.1(d) can only be used by a Party to commence good faith renegotiations once
during each Year during the term hereof. If new provisions are agreed upon under
this Section 7.1(d), whether by renegotiation, arbitration, or otherwise, such
new provisions shall be effective as of, and shall, if necessary, be made
retroactive to, the date on which the notice commencing renegotiations under
this Section 7.1(d) was given, plus interest thereon at the Base Rate. The
retroactivity provisions of the preceding grammatical sentence shall apply only
to economic provisions, and, without limiting or modifying the foregoing, it is
understood and agreed that such retroactivity provisions shall not apply to
operational provisions.
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7.2 BILLING AND PAYMENT.
(a) After rendering Services hereunder, the Party rendering
such Services shall submit an invoice to the other Party by facsimile
transmission describing such Services with reasonable specificity, the amounts
due in respect of such Services and such other information and detail as may be
mutually agreeable to the Parties. By not later than ten (10) Days after the
other Party's receipt of such invoice, such other Party shall pay the Party
delivering the invoice all amounts due for Services rendered in immediately
available funds via wire transfer (or other mutually agreeable manner) into an
account designated by the invoicing Party. If the Day on which any payment is
due is not a Business Day, then the relevant payment shall be due upon the
immediately preceding Business Day, except if such payment due date is a Sunday
or Monday, then the relevant payment shall be due upon the immediately
succeeding Business Day.
(b) If CPC or WPC should fail to remit any amounts in full
when due as required hereunder, or if any adjustments are made under this
Agreement, including, without limitation, adjustments as the result of the
conclusion of any audits or as a result of the resolution of a billing dispute,
interest on the unpaid portion shall accrue from the date upon which such
payment should have been made hereunder until paid in full at the Base Rate. All
such accrued interest shall be added to the amount reflected as being owed
hereunder by either CPC or WPC, as the case may be, on the next invoice or by
separate invoice.
(c) If a good-faith dispute arises as to the amount payable in
any statement, the amount not in dispute shall be paid. If either Party elects
to withhold any payment otherwise due as a consequence of such good-faith
dispute, the withholding Party shall provide the other Party with written notice
of its reasons for withholding payment, and shall simultaneously place the
disputed amount into an escrow account at a mutually acceptable commercial bank,
pending resolution of the dispute. Any such dispute shall be resolved in
accordance with the alternative dispute resolution procedures set forth in
Article 11. The performance of both Parties under this Agreement shall continue
pending the outcome of such procedures. If it is subsequently determined,
whether by mutual agreement of the Parties or otherwise, that the withholding
Party is required to pay all or any portion of the disputed amounts to the other
Party, the withholding Party, in addition to paying over such amounts, shall
also pay interest accrued on such amounts from the original due date until paid,
at the Base Rate.
(d) No retroactive adjustments may be made for any overcharge
or under-charge after a period ending twenty-four (24) Months from the end of
the Month in which the invoice for the Services forming the basis of the
overcharge or undercharge was rendered or not rendered, as the case may be,
unless a claim for such adjustment shall have been presented prior to the end of
such period. Any payment with respect to a retroactive adjustment shall include
an amount equal to interest on all amounts past due, from the date such amounts
should have been paid until the date of their payment, at the Base Rate, except
in instances where neither Party knew or could have known that the overcharge
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or undercharge occurred, in which case interest on such amounts shall accrue at
the Base Rate from the date of demand for payment until such amounts are paid.
(e) Either Party, upon notice in writing to the other, shall
have the right at reasonable hours to audit the accounts and records relating to
the accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
(f) All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the defaulting Party) failure to make
payment of undisputed amounts on the due date, the other Party (the
non-defaulting Party) may, at its option and in its discretion, setoff against
any amounts owed to the defaulting Party any amounts owed by the defaulting
Party under this Agreement or otherwise. The obligations of the non-defaulting
Party and the defaulting Party under this Agreement in respect of such amounts
shall be deemed satisfied and discharged to the extent of any such setoff. The
non-defaulting Party will give the defaulting Party notice of any setoff made
under this Section 7.2(f) as soon as practicable after the setoff is made
provided that failure to give such notice shall not offset the validity of the
setoff.
(g) ALL DISPUTES ARISING UNDER THIS ARTICLE 7 THAT ARE NOT
OTHERWISE RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE
DISPUTE RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE 11 HEREOF. TO THE EXTENT
THAT ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE
DISPUTE RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT
CAUSING THE DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE
PARTY ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH
CLAIM AND ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
ARTICLE 8
OPERATING COMMITTEE
8.1 GENERALLY. For each of the Services rendered hereunder, CPC and WPC
agree to establish an Operating Committee ("Operating Committee") for each
Refinery receiving Services to perform the duties outlined below. The Operating
Committee shall be composed of members from both CPC and WPC, and, where
appropriate, shall include a representative of CPC's Transportation Planning and
Services ("TP&S") group. Duties of the Operating Committee will include, but
will not be limited to, the following:
(a) administering and coordinating the routine business of the
Operating Committee, which will include the planning, coordinating, and
scheduling of Services;
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(b) determining and developing strategies with respect to
Operating Committee activities;
(c) developing, communicating, and monitoring mutually agreed
to standards of performance for Services;
(d) reviewing all significant equipment, design, process, and
operating changes affecting Services;
(e) conducting regularly scheduled planning, problem solving,
and expense review meetings pertaining to Services;
(f) participating in the alternative dispute resolution
procedures as set forth in Article 11 hereafter; and
(g) developing procedures for making the Parties' performance
of Services more efficient and cost-effective.
ARTICLE 9
CONFIDENTIALITY
9.1 CONFIDENTIALITY. Each Party agrees that it will maintain this
Agreement, all terms and conditions of this Agreement and all other Confidential
Information (as hereinafter defined) in strictest confidence and that it will
not cause or permit disclosure of Confidential Information to any third Person
without the express written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Article 9 may be made by
either Party: (i) to the extent necessary for such Party to enforce its rights
hereunder against the other Party; (ii) to the extent a Party is contractually
or legally bound to disclose information to a third Person (such as a
shareholder, a commercial lender or a Transferee or a prospective Transferee of
any Refinery); (iii) only to the extent to which a Party hereto is required to
disclose all or part of this Agreement by a statute or by the order of a court,
agency, or other governmental body exercising jurisdiction over the subject
matter hereof, by order, by regulations, or by other compulsory process
(including, but not limited to, deposition, subpoena, interrogatory, or request
for production of documents); (iv) to the extent required by the applicable
regulations of a securities or commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the provisions of this Article 9).
"Confidential Information" shall mean any information proprietary to either
Party and maintained by it in confidence or as a trade secret, including,
without limitation, business plans and strategies, proprietary software,
financial statements, customer or client lists, personnel records, analysis of
general energy market conditions, sales, transportation and service contracts
and the commercial terms thereof, relationships with current and potential
business partners, suppliers, customers, service providers and financial
sources, data base contents (including but not limited to the CPC Databases) and
valuable information of a like nature relating to the business of such Party. It
is understood and agreed that Confidential Information shall not include
information of a Party that (w) becomes generally available to the public at the
time of
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disclosure to the other Party, or (x) after the time of disclosure to the other
Party, was generally made available to the public without breach of this
Agreement, or (y) the Person receiving the information can show was rightfully
in its possession at the time of disclosure or (z) was rightfully acquired by
the recipient from third Persons who did not themselves obtain such information
under a confidentiality or other similar agreement with the Party whose
information was disclosed.
9.2 NOTIFICATION OF DISCLOSURE. If either Party is or becomes aware of
a fact, obligation, or circumstance that has resulted or may result in a
disclosure of Confidential Information authorized by this Article 9, it shall so
notify the other Party promptly and shall provide documentation or an
explanation of such disclosure as soon as it is available. Each Party further
agrees to cooperate to the fullest extent in seeking confidential status to
protect any Confidential Information so disclosed.
9.3 DISCLOSURE TO COUNSEL. The Parties hereto acknowledge that
independent legal counsel, certified public accountants or other consultants or
independent contractors of a Party (collectively, "Outside Consultants") may,
from time to time, be provided with a copy of this Agreement if, in the judgment
of the disclosing Party, the information contained in this Agreement is
necessary to the performance of such Outside Consultants' duties. Accordingly,
the Parties agree that such disclosure does not require consent by the other
Party, provided that any such Outside Consultants agree to be bound by the
provisions of this Article 9.
9.4 RESPONSIBILITY FOR CONFIDENTIALITY. Each Party will be deemed
solely responsible and liable for the actions of its employees, Outside
Consultants, officers and agents for maintaining the confidentiality commitments
of this Article 9, but will be required in that regard only to exercise such
care in maintaining the confidentiality of the Confidential Information as such
Party normally exercises in preserving the confidentiality of its other
commercially sensitive information.
ARTICLE 10
FORCE MAJEURE
10.1 In the event either Party is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
10.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of a Refinery or any operating units thereof, or modes of transportation used by
WPC to perform its Services hereunder,
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floods, washouts, arrests or restraints of the government, either federal or
state, civil or military, civil disturbances, explosions, sabotage, breakage or
accident to equipment, machinery or lines of pipe, freezing of machinery,
equipment or lines of pipe, electric power shortages, inability of any Party to
obtain necessary permits and/or permissions due to existing or future rules,
orders, laws or governmental authorities (both federal, state and local),
shutdowns of a Refinery or any operating units thereof or modes of
transportation used by WPC to perform its Services hereunder due to explosion or
other extraordinary incident, or any other causes, whether of the kind herein
enumerated or otherwise, which were not reasonably foreseeable on the Effective
Date, and which are not within the control of the Party claiming suspension and
which such Party is unable to overcome by the exercise of due diligence. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty, and that the
above requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of opposing parties when such course is inadvisable in the
discretion of the Party having difficulty. The term "Force Majeure" shall also
include any such event occurring with respect to the facilities or services of
either CPC's or WPC's third Party suppliers or customers delivering or receiving
any product, fuel, feedstock, or other substance necessary to the performance of
such Party's obligations, and shall also include curtailment or interruption of
deliveries or service by such third Party suppliers or customers as a result of
another event of Force Majeure.
ARTICLE 11
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
11.1 Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach or performance hereof, including, but not limited
to, any disputes concerning the interpretation of the terms and provisions
hereof, shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to
resolve any disputes, controversy or claim arising out of or relating to this
Agreement.
(b) Should the Parties directly involved in any dispute,
controversy or claim be unable to resolve same within a reasonable period of
time, such dispute, controversy or claim shall be submitted to the Operating
Committee with such explanation or documentation as the Parties deem appropriate
to aid the Operating Committee in their consideration of the issues presented.
The date the matter is first submitted to the Operating Committee shall be
referred to as the "Submission Date." The Operating Committee representatives
shall attempt in good faith, through the process of discussion and negotiation,
to resolve any dispute, controversy, or claim presented to it within forty-five
(45) Days after the Submission Date.
(c) If the Operating Committee representatives cannot so
resolve any dispute, controversy, or claim submitted to it within forty-five
(45) Days after the Submission Date, the Parties shall attempt in good faith to
settle the matter by submitting the dispute, controversy or claim to mediation
within sixty (60) Days after the submission date using any mediator upon which
they mutually agree. If the Parties are unable to mutually agree upon a mediator
within seventy-five (75)
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Days after the Submission Date, the case shall be referred for mediation to the
office of Judicial Arbitration and Mediation Services, Inc. ("JAMS") in Houston,
Texas. The cost of the mediator will be split equally between the Parties unless
they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the
aforesaid mediation procedure within thirty (30) Days of the initiation of such
procedure, or if either Party will not participate in such mediation, either
Party may request that the matter be resolved through arbitration by submitting
a written notice (the "Arbitration Notice") to the other. Any arbitration that
is conducted hereunder shall be governed by the Federal Arbitration Act, 9
U.S.C. ss. 1 ET SEQ., and will not be governed by the arbitration acts, statutes
or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing Party's
arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen (15) Days of receipt of an Arbitration Notice, the
other Party shall name its arbitrator by written notice to the other and may
designate any additional issue(s) for arbitration. The two named arbitrators
shall select the third arbitrator within fifteen (15) Days after the date on
which the second arbitrator is named. Should the two arbitrators fail to agree
on the selection of the third arbitrator, either Party shall be entitled to
request the Senior Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. All arbitrators shall be
qualified by education or experience within the liquefied petroleum gas, natural
gas liquids, or petroleum refining industry to decide the issues presented for
arbitration. No arbitrator shall be: a current or former director, officer or
employee of either Party, or its Affiliates; an attorney (or member of a law
firm) who has rendered legal services to either Party, or its Affiliates, within
the preceding three (3) Years; or an owner of any of the common stock of either
Party or its Affiliates.
(f) The three arbitrators shall commence the arbitration
proceedings within twenty-five (25) Days following the appointment of the third
arbitrator. The arbitration proceedings shall be held at a mutually acceptable
site and if the Parties are unable to agree on a site, the arbitrators shall
select the site. The arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each Party shall have the
opportunity to present its evidence at the hearing. The arbitrators may call for
the submission of pre-hearing statements of position and legal authority, but no
post-hearing briefs shall be submitted. The arbitration panel shall not have the
authority to award punitive, exemplary or consequential damages. The
arbitrators' decision must be rendered within thirty (30) Days following the
conclusion of the hearing or submission of evidence, but no later than ninety
(90) Days after the appointment of the third arbitrator. With respect to
disputes regarding the value of transferred LPG Cars under Section 3.4(h)(vii)
or fee redeterminations under Article 7, each Party shall submit to the
arbitration panel a final offer of its proposed resolution of the dispute. A
majority of the arbitrators shall approve the final offer of one Party without
modification, and reject the offer of the other Party.
(g) The decision of the arbitrators or a majority of them,
shall be in writing and shall be final and binding upon the Parties as to the
issue(s) submitted. The cost of the hearing shall be shared equally by the
Parties, and each Party shall be responsible for its own expenses and those of
its
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counsel or other representatives. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may have to the arbitrability
of any such disputes, controversies or claims and further agrees that a final
determination in any such arbitration proceedings shall be conclusive and
binding upon each Party. Judgment on the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. The prevailing Party shall
be entitled to recover reasonable attorneys' fees and court costs in any court
proceeding relating to the enforcement or collection of any award or judgment
rendered by the arbitration panel under this Agreement.
(h) All deadlines specified herein may be extended by mutual
written agreement of the Parties. The procedures specified herein shall be the
sole and exclusive procedures for the resolution of disputes between the Parties
arising out of or relating to this Agreement; PROVIDED, HOWEVER, that a Party
may seek a preliminary injunction or other preliminary judicial relief if in its
judgment such action is necessary to avoid irreparable damage. Despite such
action, the Parties will continue to participate in good faith in the procedures
specified herein. All applicable statutes of limitation, including, without
limitation, contractual limitation periods provided for in this Agreement shall
be tolled while the procedures specified in this Section 11 are pending. The
Parties will take all actions, if any, necessary to effectuate the tolling of
any applicable statutes of limitation.
ARTICLE 12
MISCELLANEOUS
12.1 INTEGRATION, AMENDMENTS, AND WAIVER. This Agreement, including,
without limitation, all exhibits hereto, integrates the entire understanding
between the Parties with respect to the subject matter covered and supersedes
all prior understandings, drafts, discussions, or statements, whether oral or in
writing, expressed or implied, dealing with the same subject matter. This
Agreement may not be amended or modified in any manner except by a written
document signed by both Parties that expressly amends this Agreement. No waiver
by CPC or WPC of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver unless expressly provided.
No waiver shall be effective unless made in writing and signed by the Party to
be charged with such waiver. Notwithstanding the foregoing, however, if there is
a conflict between this Agreement and a RFS, the RFS shall control.
12.2 INDEPENDENT RELATIONSHIP. Nothing contained in this Agreement
shall be construed to create an association, trust, partnership, or joint
venture or impose a trust or partnership duty, obligation, or liability on or
with regard to either Party.
12.3 BINDING NATURE; ASSIGNMENT AS SECURITY. Except as provided in this
Section 12.3, neither Party may assign all or any part of its rights or
obligations under this Agreement without the prior written consent of the other
Party, such consent to be granted at the sole discretion of the other Party,
except that (i) either Party may assign its rights hereunder to any Affiliate of
such Party without the approval of the other Party (but such assignment shall in
no way relieve or release the assigning Party from any obligations hereunder,
whether accrued or unaccrued, unless consented to in writing by
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the non-assigning Party, such consent to be granted at the sole discretion of
such Party) and (ii) either Party may, for collateral purposes, mortgage,
pledge, encumber or grant a security interest in or a lien on its interest in
this Agreement and/or its rights hereunder to any commercial bank, trustee or
other Person acting on behalf of any such commercial bank, but only with the
prior consent of the other Party, such consent not to be unreasonably withheld.
Any transfer or assignment in violation of this Section 12.3 shall be void.
12.4 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED,
ENFORCED, AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
12.5 CONFLICTS OF INTEREST. No director, employee, or agent of either
Party shall give or receive any commission, fee, rebate, gift, or entertainment
of significant cost or value in connection with this Agreement.
12.6 REPORTS AND RECORD KEEPING. Each Party shall provide the other
Party with such reports as may be mutually agreeable to both Parties. Each Party
shall maintain such records and accounts as may be necessary to the performance
of its respective duties and obligations hereunder, in accordance with good
business practices.
12.7 REMEDIES.
(a) FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE
OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
REMEDIES OR DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY
PROVISION HEREOF) FOR CONSEQUENTIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES IN
TORT OR CONTRACT. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT FOR INCIDENTAL
DAMAGES. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO ANY PROVISION
OF THIS AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE
- 26 -
LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE
APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
(b) Except as otherwise provided herein, each Party reserves
to itself all rights, setoffs, counterclaims, and other remedies and/or defenses
which such Party is or may be entitled to arising from or out of this Agreement
or as otherwise provided by law.
12.8 NO THIRD PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the Parties and their respective successors and permitted assigns,
and shall not inure to the benefit of any other Person whomsoever, it being the
intention of the Parties that no Person shall be deemed a third Party
beneficiary of this Agreement.
12.9 NOTICES. Any notice or other communication provided for in this
Agreement or any notice which either Party may desire to give to the other shall
be in writing and shall be deemed to have been properly given if and when sent
by facsimile transmission, delivered by hand, or if sent by mail, upon deposit
in the United States mail, either U.S. Express Mail, registered mail, or
certified mail, with all postage fully prepaid, or if sent by courier, by
delivery to a bonded courier with charges paid in accordance with the customary
arrangements established by such courier, in each case addressed to the Parties
at the following addresses:
If to CPC: Chevron Products Company
To the Refinery Manager for each Refinery
receiving the Services at issue and in
need of notice herein, at the addresses
set forth in the applicable Feedstock
Agreements.
In addition, for matters involving LPG Car Services:
Chevron Products Company
Manager, Rail Transportation Services
575 Lennon Lane
Section 515
Walnut Creek, California 94589
Telephone: 510/977-7177
Facsimile: 510/977-7066
- 27 -
In all situations, with a copy to:
Vice President and General Counsel
Chevron Products Company
575 Market Street, Suite 2182
San Francisco, California 94105-2854
Telephone: (415) 894-3232
Facsimile: (415) 894-5489
If to WPC: Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Telephone: 713/507-3725
Facsimile: 713/507-6834
with a copy to:
Vice President and General Counsel
Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway - Suite 1200
Houston, Texas 77040-6095
Telephone: 713/507-3725
Facsimile: 713/507-6834
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U.S. Mail, whether by U.S. Express
Mail, registered mail, or certified mail, or by overnight courier shall be
deemed to have been received by the close of the second Business Day after the
Day upon which it was sent, or such earlier time as is confirmed orally or in
writing by the receiving Party. Any Party may change its address or facsimile
number by giving notice of such change in accordance with the terms of this
Section 12.9.
12.10 GOVERNMENT REGULATION. This Agreement and the operations
hereunder shall be subject to the valid and applicable federal and state laws
and the valid and applicable orders, laws, local ordinances, rules, and
regulations of any local, state or federal authority having jurisdiction, but
nothing contained herein shall be construed as a waiver of any right to question
or contest any such order, laws, local ordinances, rules, or regulations in any
forum having jurisdiction in the premises.
12.11 SAFE PRACTICES. Both Parties acknowledge that they are familiar
with, and shall take all steps necessary to inform, warn and familiarize their
respective employees, agents, customers and
- 28 -
contractors who may be affected by the provision or receipt of Services of all
hazard and proper safety procedures pertaining thereto.
12.12 CONSTRUCTION OF AGREEMENT. In construing this Agreement, the
following principles shall be followed:
(a) no consideration shall be given to the fact or presumption
that one Party had a greater or lesser hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding syntactical variant
expressions; and
(d) the plural shall be deemed to include the singular and
vice versa, as applicable; and
(e) captions used in this Agreement are for the Parties'
convenience only, and shall not be used in its construction or interpretation.
12.13 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, (i) such provision will be fully severable,
(ii) this Agreement will be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part of this Agreement, and
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision, there will be added automatically
as a part of this Agreement a provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and may be legal, valid
and enforceable. If a provision of this Agreement is or becomes illegal, invalid
or unenforceable in any jurisdiction, the foregoing event shall not affect the
validity or enforceability in that jurisdiction of any other provision of this
Agreement nor the validity or enforceability in other jurisdictions of that or
any other provision of this Agreement.
12.14 FURTHER ASSURANCES. Each Party shall take such acts and execute
and deliver such documents in form and substance reasonably satisfactory to each
of them, in order to effectuate the purposes of this Agreement. This Section
12.14 neither limits nor modifies the rights and obligations of the Parties to
cooperate in accordance with the terms of Section 3.2(c).
12.15 WAIVER OF CONSUMER RIGHTS. EACH PARTY EXECUTING THIS AGREEMENT AS
A BUYER OR SELLER HEREBY WAIVES ITS RESPECTIVE RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT
- 29 -
GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY
CONSENTS TO THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT HEREBY
REPRESENTS AND WARRANTS THAT (I) SUCH PARTY'S LEGAL COUNSEL WAS NOT DIRECTLY OR
INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER PARTY EXECUTING THIS
AGREEMENT OR BY AN AGENT OF SUCH OTHER PARTY SELLER, AND (II) NEITHER PARTY
EXECUTING THIS AGREEMENT IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
12.16 INSURANCE. Each Party agrees to carry insurance of the types and
in the amounts mutually agreed to by the Parties. Either Party may elect to
self-insure for all or any portion of such coverages without the consent of the
other Party.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the
Day and Year first above written.
CHEVRON PRODUCTS COMPANY
a Division of Chevron U.S.A. Inc.
By: __________________________
Name: ________________________
Title: _________________________
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: WARREN PETROLEUM G.P., INC.
By: __________________________
Name: ________________________
Title: _________________________
- 30 -
EXHIBITS AND SCHEDULES
Exhibit A-1 WPC Transportation Services
Exhibit A-2 WPC Feedstock Products Storage Services
Exhibit A-3 WPC Isomerization Services
Exhibit A-4 WPC Feedstock Products Transfer Services
Exhibit B-1 CPC Rail Transportation Services
Exhibit B-1a Fee for CPC Rail Services
Exhibit B-2 CPC Freight Audit and Payment Services
Exhibit C Request for Services
Schedule 3.4(h) Illustration of LPG Car Payment Under
Section 3.4(h)(vii)(6)
- 31 -
EXHIBIT A-1
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC TRANSPORTATION SERVICES
SCOPE OF SERVICES: WPC shall perform all Services reasonably requested in
connection with the transportation of Products. In general, WPC will be required
under Exhibits A-1 through A-4 to:
1. Determine the availability of modes of transportation for such
Products;
2. Secure the availability of trucks, barges, pipelines or other modes
of transportation (excluding rail cars);
3. Dispatch, on a Daily basis, the foregoing modes of transportation
for such Products;
4. Trace and track LPG Cars, trucks, barges or other modes of
transporting Products; and
5. Negotiate commercially reasonable freight rates for LPG Cars,
trucks, barges and other modes of transporting Products.
In addition, WPC shall perform the Services more particularly described
in Parts I, II and III of this Exhibit.
PART I -- LPG CAR OPERATION SERVICES
1. Through the use of the RMS, track the actual movements of all LPG
Cars.
2. Generate and review reports from the RMS to monitor all rail
activities, including providing reports to shipping locations and receiving
locations.
3. In consultation with CPC, schedule LPG Cars to be in place to meet
Refinery needs.
4. Plan and coordinate LPG Car fleet sizing requirements.
5. Resolve scheduling and dispatching problems of LPG Cars in transit.
- 32 -
6. Coordinate the scheduling of LPG Cars into maintenance shops for
required inspections.
7. Work with Refineries, Refinery customers and TP&S maintenance
specialists on handling LPG Cars that need maintenance in addition to required
inspections.
8. Maintain rail tariff, rate files and associated data bases and
provide reports on rail tariffs and rates to such CPC personnel as are necessary
to perform the Services as set forth in Exhibits B-1, B-1a and B-2.
9. Attend DOT and AAR hazardous material seminars and training
sessions.
10. Review all DOT/AAR publications for changes in regulations that
would affect the shipping of LPG Cars or any other regulation that might affect
the LPG Cars.
11. Assist in training CPC personnel in preparing and shipping LPG Cars
in accordance with all applicable DOT and AAR regulations.
12. Work with all government and industry groups on issues regarding
odorization of Propane in LPG Cars.
13. Assist in developing and communicating quality standards for all
Products that are shipped by CPC.
14. Maintain an Emergency Response Procedure in accordance with
applicable law.
15. Enter orders into CPS for Products shipped from each Refinery.
PART II -- COMMERCIAL TRUCK OPERATION SERVICES
1. Review third Person carrier insurance coverage for compliance with
CPC and DOT policies.
2. Review third Person carrier Motor Carrier Safety rating for
compliance with CPC and DOT policies.
3. Have third Person carrier complete Motor Carrier Safety Survey.
4. Have third Person carrier complete Chemical Manufacturers
Association Highway Carrier Assessment Protocol.
- 33 -
5. Work with all government and industry groups on issues regarding
odorization of Propane in trucks.
6. Provide freight rate or other pertinent information to FIS.
7. Assist in resolving freight bill problems.
8. Conduct on-site safety audits of third Person carriers.
9. Perform DOT/SFH reviews on all common carrier trucks used by CPC.
10. Enter orders into CPS for truck shipments of Products shipped from
the Refineries.
PART III -- BARGE OPERATION SERVICES
1. Monitor all regulatory developments applicable to barges and the
movement of Products on barges, including issues regarding the odorization of
Propane.
2. Perform compliance reviews for all marine terminals and transport
operations pertinent to the transportation of Products.
3. Develop emergency response and spill plans for facilities to comply
with applicable federal, state and local requirements.
4. Maintain training programs that comply with federal HAZMAT
regulations.
FEES: The consideration for WPC providing the transportation Services set forth
in Exhibit A-1 in connection with the transportation of Feedstocks and Refinery
Products as provided in the Feedstock Agreements is included in the pricing
provisions of each Feedstock Agreement. In addition, the fees for transportation
Services set forth herein are included in the fees set forth in Exhibits A-2,
A-3 and A-4.
- 34 -
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT A-2
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC FEEDSTOCK PRODUCTS STORAGE SERVICES
SCOPE OF SERVICES: WPC will perform all Services reasonably requested in
connection with the storage of Feedstock Products, including but not limited to:
1. Negotiating, in consultation with CPC, commercially reasonable
leases or other contractual arrangements for the storage of Feedstock Products;
2. Consulting with the Refineries in connection with the management of
Feedstock Products inventories including accounting for volumes of Feedstock
Products moved into and out of storage facilities; and
3. Any other Services mutually agreed to in writing by the Parties.
* [REDACTED]
- 35 -
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT A-3
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC ISOMERIZATION SERVICES
SCOPE OF ISOMERIZATION SERVICES: WPC will perform all Services reasonably
requested in connection with the isomerization and general processing of Mixed
Butanes into Isobutane, including but not limited to:
1. Negotiating, in consultation with CPC, (i) commercially reasonably
relationships with third Persons providing services (including, without
limitation, storage services) with respect to isomerization and general
processing of Mixed Butanes into Isobutane and (ii) planning and accounting for
Daily movements of Mixed Butanes and Isobutane into and out of the Refineries
and relevant isomerization facilities (such Refineries and facilities being
collectively called the "Locations") according to their Daily Mixed Butanes and
Isobutane requirements;
2. Arranging for storage of Mixed Butanes and Isobutane at the
Locations; and
3. Any other Services mutually agreed to in writing by the Parties.
* [REDACTED]
- 36 -
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT A-4
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC FEEDSTOCK PRODUCTS TRANSFER SERVICES
SCOPE OF SERVICES: WPC will perform all Services reasonably requested in order
to effectuate the transfer of Feedstock Products between the Refineries,
including but not limited to:
1. Scheduling movement of Feedstock Products between Refineries;
2. Determining the availability of LPG Cars for the transportation of
such Feedstock Products ;
3. Securing the availability of trucks, barges, pipelines and other
related equipment for such transportation;
4. Daily dispatching of LPG Cars and other means of transporting
Feedstock Products;
5. Negotiating commercially reasonable freight rates for LPG Cars and
other means of transporting Feedstock Products; and
6. Any other Services mutually agreed to in writing by the Parties.
* [REDACTED]
- 37 -
EXHIBIT B-1
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
CPC RAIL TRANSPORTATION SERVICES
SCOPE OF SERVICES: CPC will perform the following Services in connection with
WPC's rail transportation of Products and Third-Party LPG:
1. Providing WPC with access to CPC's car tracking data systems
currently used (or planned) at mutually agreeable Refinery locations and WPC
locations, subject to the limitations set forth below in this Exhibit B-1 and
any and all limitations in the applicable Database Agreements;
2. Managing and operating RMS, BLS and RAS components of the CPC
Databases;
3. Managing accounting for the LPG Cars;
4. Using commercially reasonable efforts to: (i) provide rail car
capacity as requested by WPC for transportation Services; (ii) administer
Leases; (iii) negotiate (in consultation with WPC) new Lease(s) or the purchase
of LPG Cars, subject to the provisions of Exhibit B-1a; and (iv) process Lease
rental payments;
5. Providing the following maintenance services for LPG Cars:
(a) oversee shop work to ensure the use of appropriate
repair practices and procedures;
(b) coordinate LPG Car maintenance schedules with WPC;
(c) develop planned maintenance activity schedules for
LPG Cars in consultation with WPC;
(d) contract with maintenance shops and others for
required LPG Car maintenance work;
(e) review LPG Car maintenance invoices for
appropriateness and process them for payment; and
- 38 -
(f) manage the response to government-mandated rail car
maintenance programs for all LPG Cars, including
coordinating and reporting routine DOT compliance
maintenance and testing activities (such as, for
example, safety valve and tank testing);
6. Providing a reasonable number of WPC personnel or contractors with
training on applicable CPC Databases (to the extent permitted under license
agreements applicable to such Databases) to permit such WPC personnel or
contractors to perform car tracking and scheduling functions;
7. Supervising and monitoring the following accounting functions with
respect to the LPG Cars:
(a) processing and payment of pertinent LPG Car-related
invoices;
(b) processing of certain LPG Car-related receivables,
including but not limited to LPG Car mileage credits;
(c) providing to CPC and WPC pertinent tax reporting
information, as needed;
(d) processing LPG Car mileage equalization invoices;
(e) distributing and allocating costs among LPG Cars in
accordance with Exhibit B-1a; and
(f) summary reporting to WPC of pertinent accounting
information relating to the LPG Cars;
8. Updating UMLER, including the review of car mileage credit rating
records to ensure proper payment of credits due and making routine contacts with
AAR personnel regarding the foregoing and related matters;
9. Monitoring and participating in DOT and AAR related legislative and
other public affairs activities to gauge impact on CPC and WPC operations
hereunder;
10. Procuring CLM services and car mileage credit auditing services on
commercially reasonable terms;
11. Overseeing activities intended to enhance and update the CPC
Databases; and
12. Any other Services mutually agreed to in writing by the Parties.
- 39 -
OTHER PROVISIONS: It is understood and agreed that (a) WPC's access to the
Databases shall not include tracking systems for CPC Cars
other than the LPG Cars, and (b) CPC shall have no obligation
under any circumstances to add WPC-owned or WPC-Leased rail
cars to the CPC Databases, or to provide any Services with
respect to such rail cars. CPC may take all steps reasonably
necessary, consistent with the foregoing, to ensure the
integrity of the CPC Databases (including but not limited to
its car tracking data systems) for all CPC Cars. Any
incremental costs or expenses that are approved by WPC in
writing prior to incurring same and attributable to providing
WPC with access to CPC's car tracking data systems or other
CPC Databases (including but not limited to amounts reasonably
incurred in amending applicable license agreements and
increased fees and cost reimbursements payable under such
agreements) shall be borne solely by WPC.
FEES: Calculated in accordance with the procedures set forth in Exhibit B-1a.
NOTICES: Notices to CPC in respect of CPC Services hereunder shall be given in
accordance with and subject to Section 12.9 of the Agreement to:
Chevron Products Company
Transportation Planning and Services Group
575 Lennon Lane
Section 515
Walnut Creek, California 94598
Attention: Manager, Rail Transportation Services
Telephone: 510/977-7177
Facsimile: 510/977-7066
With a copy to:
Vice President and General Counsel
Chevron Products Company
575 Market Street, Suite 2182
San Francisco, California 94105-2854
Telephone: 415/894-3232
Facsimile: 415/894-5489
- 40 -
EXHIBIT B-1A
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
FEE FOR CPC RAIL SERVICES
LEASE COSTS
LPG Car Lease costs (including, but not limited to, rentals and tax and other
cost reimbursements to the owner of an LPG Car) are payable Monthly in advance.
These costs are paid by CPC on receipt of invoice, according to Lease terms.
Detailed cost information on these Lease payments is retained in RAS on an LPG
Car-by-LPG Car basis. Costs are assigned to and payable by WPC in the following
Month for Propane Cars. Determination of Propane Car Lease costs allocable to
WPC shall be made in accordance with Note 1 below.
MAINTENANCE/REPAIR COSTS
LPG Car maintenance expense is payable to contract shops and railroads depending
on actual work performed. These costs are paid by CPC on receipt of invoice,
according to contract terms. Maintenance cost information is retained in RAS on
an LPG Car-by-LPG Car basis. Costs will be charged to WPC for Propane Cars on a
Monthly basis. (*See Note 1 below.)
MATERIAL SUPPLY COSTS
Material purchase costs which are not a part of normally scheduled maintenance
activities (such as, for example, special purchases or purchases in advance) are
accrued in this category. Invoices for material supply are paid by CPC according
to invoice terms. Material supply cost information is retained in RAS on an LPG
Car-by-LPG Car basis or fleet user code basis when appropriate. Costs in this
category will be allocated to WPC if special material purchases are requested by
WPC, or if Propane Cars have required special material purchases. (*See Note 1
below.)
INFORMATION SERVICES COSTS
Fees paid to contractors who supply CLM and car mileage data are retained in RAS
on a distributed basis. The costs are divided equally among all CPC Cars. A pro
rata portion of these costs will be charged to WPC based on the ratio of Propane
Cars to all CPC Cars. (*See Note 1 below.)
MILEAGE EQUALIZATION COSTS
Mileage equalization charges are received from the AAR for all rail cars owned
by CPC and from each lessor for all rail cars Leased by CPC. These costs are
divided among all CPC Cars based on their calculated share of excess empty trip
miles (defined as all empty miles in excess of 106% of loaded miles). This
calculation is done each calendar year by TP&S for all CPC Cars using actual
route mileage and shipment information in the CPC Databases. Invoices for
mileage equalization are usually received in the third or fourth quarter for the
preceding calendar year and are processed on receipt.
- 41 -
Mileage equalization charges for WPC's account will be based on WPC's actual
Propane Car shipment activity and its calculated share of excess empty miles.
INSPECTION FEES
Contract fees paid for mileage credit auditing services (provided by RELAM) are
paid by CPC and captured in RAS on a distributed basis as Inspection Fees. The
costs are divided among all CPC Cars according to the number of CPC Cars
assigned to each fleet with an equal share charged per CPC Car. A pro rata
portion of these costs will be allocated to WPC for Propane Cars. (*See Note 1
below.)
PROPERTY TAX COSTS
Rail car property taxes applicable to the LPG Cars shall be paid each calendar
year by the CUSA tax group. These tax payments are accrued monthly by the tax
group and are charged to TP&S through the CPC Databases. The accruals are
captured on a pro rata basis in RAS based on an approximation of the current
value. During the first quarter of each calendar year, detailed state-by-state
mileage reports are issued by TP&S. These reports are used by the CUSA tax
department to determine actual tax liabilities and payments to the various
government entities. The actual payments are then used to adjust the current
calendar year accruals for estimated tax payments. A pro rata portion of these
costs will be allocated to WPC for Propane Cars. (*See Note 1 below.)
DEPRECIATION EXPENSES
Depreciation expenses for LPG Cars owned by CPC are charged to TP&S and are
captured on an LPG Car-by-LPG Car basis. These LPG Car-specific costs will be
allocated to WPC for Propane Cars. Depreciation costs are calculated on CPC's
standard calculation for assets of this class. (*See Note 2 below).
GENERAL & ADMINISTRATIVE EXPENSES
General and administrative expenses ("G&A") include (but are not limited to)
labor and burden, office expense, travel, miscellaneous expense, and computer
systems charges for LPG Car administration. G&A is divided equally among all CPC
Cars. As of March 1, 1996, there were approximately 2000 CPC Cars. A portion of
G&A is charged Monthly to WPC based on the number of CPC Cars that are Propane
Cars. (*See Note 1 and Note 3 below.) G&A statements are generated and billed
internally by CPC, and will be allocated to WPC on an equivalent basis to other
internal customers served by TP&S.
MILEAGE CREDITS
Mileage credits (also referred to as "car hire credits") received are captured
in RAS on a CPC Car-by-CPC Car basis. (*See Note 1 below.) These credits shall
be rebated to WPC for CPC Cars that are Propane Cars. Due to delays in
processing mileage data by the AAR, mileage credits are paid three (3) Months in
arrears. RELAM is currently used for auditing mileage credit payments to ensure
that credits are received when due. RELAM's fee is based on a percentage of
actual underpayments recovered. No reverse audit is presently performed - i.e.,
if mileage credits are overpaid, there is no
- 42 -
mechanism for detecting the overpayment. If CPC is billed for overpayment of
mileage credits, WPC will be responsible for rebating the full amount of the
overpayment attributable to Propane Cars after receipt, in accordance with the
billing procedures set forth in Article 7 of the Agreement. (*See Note 1 below.)
*NOTES
1. (a) Allocation of costs among LPG Cars shall be made according
to the allocation of LPG Cars between Butane Cars and Propane Cars, as
such cars are assigned in the CPC Databases pursuant to WPC or Refinery
coding, as applicable, according to the actual assignment of LPG cars
on the last Day of the applicable Month unless specifically noted
otherwise. It is understood and agreed that all costs allocable to LPG
Cars engaged in WPC Third-Person Carriage shall be borne solely by WPC.
The Parties acknowledge that CPC is currently in the process of
updating and enhancing the CPC Databases, and as soon as reasonably
possible CPC and WPC agree (i) to establish, by not later than the
Effective Date, a method reasonably satisfactory to the Parties to
ensure that costs allocable to WPC Third-Person Carriage are not borne
by CPC (such method being called the "Cost Allocation Method"), and
(ii) to establish a method reasonably satisfactory to the Parties to
allocate costs among LPG Cars on the basis of such Cars' actual usage
for Butane Car purposes, Propane Car purposes or WPC Third-Person
Carriage, as applicable (such method of cost allocation to be referred
to as the "Usage Method"), and shall exercise commercially reasonable
efforts to agree upon a method for measuring and providing each Party
with accurate information regarding the actual usage of each LPG Car.
Without limiting the generality of any other provision of this
Agreement (including, but not limited to, Sections 3.2 and 12.14), the
Parties agree to take such acts (including, but not limited to,
providing all reasonably necessary personnel and funds) and to execute
and deliver such documents (including but not limited to any amendments
to this Agreement) reasonably necessary to evidence and confirm the
adoption of a Cost Allocation Method and a Usage Method that is
commercially reasonable and otherwise mutually satisfactory to the
Parties.
(b) The applicable calendar month shall correspond to the
Month in which pertinent invoices or receivables are processed. With
respect to such a Month, the RAS close normally occurs on the 18th
Business Day of the next Month; items after such Day shall be processed
in the following Month.
2. Depreciation for CPC-owned LPG Cars is billed at the established rate
according to GAAP. A substantial number of LPG Cars will be retired at
the mandatory 40 year age
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
- 43 -
within the next six calendar years. Replacement of these LPG Cars will
be made in consultation with WPC; however, CPC reserves the right to
determine whether CPC should make this replacement through capital
investment. Other options would include Leasing replacement LPG Cars
from third Persons. In the event CPC elects (after consultation with
WPC) to purchase replacement LPG Cars, the expenses charged to WPC will
include a reasonable capital cost recovery factor for each such LPG
Car. Failure of the Parties to agree upon a capital cost recovery
factor for any such LPG Car within 30 Days after CPC begins
negotiations with WPC regarding such factor shall be submitted to the
alternative dispute resolution procedures in Article 11. For purposes
of determining whether a capital cost recovery factor is "reasonable"
for purposes of the foregoing, the Parties agree that such factors
shall not exceed the cost payable for a long term lease of a comparable
LPG Car.
*
3. G&A allocation to Propane Cars will be the lesser of (a) [REDACTED] per
LPG Car per Year (billed at [REDACTED] per LPG Car per Month) or (b)
actual G&A, as determined under this Exhibit B-1a. Beginning on the
last to occur of (x) January 1, 1997, or (y) the Month following the
Month in which the updated and enhanced CPC Databases, modified in
accordance with Note 1 above, have begun commercial operation, and for
the remaining term of this Agreement, G&A allocation to Propane Cars
shall be determined in accordance with "General and Administrative
Expenses" above.
- 44 -
EXHIBIT B-2
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
CPC FREIGHT AUDIT AND PAYMENT SERVICES
SCOPE OF SERVICES: CPC will perform the following Services for WPC related to
the processing, pre-audit and payment of WPC's commercial rail, truck and air
freight invoices, including the following:
1. Data management of WPC's billing and audit information, including:
(a) capture invoice data electronically or manually, as
appropriate;
(b) controlling and improving WPC carrier billing
practices;
(c) maintaining and monitoring minimum billing
requirements;
(d) developing Electronic Data Interface
("EDI")/Electronic Funds Transfer ("EFT")
partnerships with carriers;
(e) maintaining contract and tariff rates charged by
WPC's carriers for purposes of pre-auditing and
validation that carrier invoiced charges are correct;
(f) providing WPC with electronic B/L interfaces that are
necessary if WPC desires to use EDI;
(g) providing WPC with data repositories and archives;
and
(h) maintaining control table and all other data in
system-useable form relating to WPC's arrangements
with its carriers.
2. Financial controls over WPC's carrier expenses, including:
(a) automated ledger coding;
(b) validating invoices for duplicates, terms, rates and
extensions;
(c) resolving billing disputes with carriers; and
- 45 -
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
(d) performing accounts payable interfacing needed to
distribute freight expense to WPC's cost centers.
3. Providing WPC with general information Services related to carrier
billing and audits, including:
(a) making CPC's client/server and database related to
WPC's commercial freight activity and expense
accessible to WPC for purposes of both routine and
customized reporting;
(b) providing a reasonable number of WPC employees or
contractors with training in use of CPC's carrier
audit and billing information management system; and
(c) managing a systems environment that makes detailed
commercial freight expense information available to
WPC.
4. WPC shall comply with all applicable reasonable funding requirements
established by CPC.
* [REDACTED]
TERM: Month-to-Month, terminable by either Party's giving not less than 60 Days'
written notice to the other Party.
OTHER PROVISIONS: WPC shall provide CPC with copies of all contracts with
carriers.
NOTICES: Notices to CPC in respect of CPC Services hereunder shall be given in
accordance with and subject to Section 12.9 of the Agreement to:
Chevron Products Company
Supervisor, Freight Information Services
P. O. Box 4120
Concord, California 94524
Telephone: 510/680-3101
Facsimile: 510/680-3212
- 46 -
With a copy to:
Vice President and General Counsel
Chevron Products Company
575 Market Street, Suite 2182
San Francisco, California 94105-2854
Telephone: 415/894-3232
Facsimile: 415/894-5489
- 47 -
EXHIBIT C
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
FORM OF WORK ORDER
REQUEST FOR SERVICES
This REQUEST FOR SERVICES (the "RFS") dated ____________, 1996, is made
and entered into by and between Chevron Products Company, a division of CUSA
U.S.A. Inc., a Pennsylvania corporation (hereinafter referred to as "CPC") and
Warren Petroleum Company, Limited Partnership, a Delaware limited partnership
(hereinafter referred to as "WPC"). This RFS has been executed and delivered in
connection with that certain Feedstock and Refinery Product Master Services
Agreement dated as of _____________, 1996 between CPC and WPC (the "MSA").
Capitalized terms not defined in this RFS have the meanings given them in the
MSA.
For the mutual covenants and obligations set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, WPC and CPC agree as follows:
- 48 -
1. SERVICES. The [WPC/CPC] Non-Exhibit Services to be rendered pursuant
to this RFS are described in ANNEX 1, which is attached hereto and incorporated
herein for all purposes.
2. PLACE OF PERFORMANCE: The [WPC/CPC] Non-Exhibit Services shall be
performed or delivered at the following location(s):
_____________________________.
3. DATE OF COMMENCEMENT AND COMPLETION OF THE SERVICES. The [WPC/CPC]
Non-Exhibit Services shall begin on ____________________, proceeding diligently,
until all Services have been completed, which date of completion shall be no
later than ________________________.
4. PRICE OR RATE. The price or rate for Non-Exhibit Services performed
or delivered under this RFS (unless otherwise indicated, inclusive of any and
all labor costs and any and all third-Party costs, fees, prices, rates and
rentals of any kind) are described in ANNEX 1, which is attached hereto and
incorporated herein for all purposes. The Party providing the Services
acknowledges and agrees that if the prices or rates quoted are on a lump sum
basis, such Party shall not be entitled to the entire lump sum amount unless and
until all of the Services have been completed.
5. RELATIONSHIP OF RFS TO MSA. Except as specifically amended by this
RFS, (i) the terms and provisions of the MSA shall govern the rights and
obligations of the Parties hereto and (ii) the provisions of the MSA, including,
without limitation, the insurance and indemnity obligations of the Parties set
forth therein, are incorporated herein for all purposes. Notwithstanding the
foregoing, if a term or provision of the MSA conflicts with a term or provision
of this RFS, this RFS shall control.
WITNESS THE EXECUTION HEREOF as of the date first hereinabove
referenced.
CHEVRON PRODUCTS COMPANY
a Division of Chevron U.S.A. Inc.
By: __________________________
Name: ________________________
Title: _________________________
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: WARREN PETROLEUM G.P., INC.
By: __________________________
Name: ________________________
Title: _________________________
<PAGE>
ANNEX 1 TO REQUEST FOR SERVICES
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
SCHEDULE 3.4(H)
* [REDACTED]
EXHIBIT 10.57
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
BARGE CO. TERM SHEET
As part of the transactions contemplated by the Combination Agreement
and Plan of Merger dated May ___, 1996 between Chevron U.S.A. Inc. ("CUSA") and
NGC Corporation ("NGC"), CUSA and NGC have agreed to establish a new company to
own and operate barges currently owned by CUSA. To effectuate the foregoing, the
parties have agreed to the following:
1. Subject to the mutual agreement of the parties, a new company
will be established by CUSA as either a limited liability
company or a corporation ("Barge Co.") under Delaware law.
2. CUSA will transfer to Barge Co. the twenty-one (21) barges
listed on Exhibit "A" which is attached hereto and made a part
* hereof at their current book value of approximately [REDACTED]
in exchange for a 100% interest in Barge Co.
3. A twenty-five percent (25%) interest in Barge Co. will be
acquired by the company ("NEWCO") that is formed in connection
with the merger (the "Merger") of NGC and certain business
units of CUSA. At CUSA's election, this twenty-five percent
(25%) interest will either be contributed by CUSA directly or
* acquired by Newco from Barge Co. for the sum of [REDACTED].
The acquisition will be evidenced through the issuance of
shares or interests, as the case may be. If Newco buys the
* interest in Barge Co. for [REDACTED], the cash proceeds to
CUSA in the Merger will be reduced by a corresponding amount.
4. Barge Co. will enter into separate time charters with NEWCO
covering each of the twenty-one (21) barges which will have a
* term of [REDACTED]. The time charter rate will cover all
operating costs, maintenance, insurance and other expenses
reasonably incurred by Barge Co. in the operation of the
barges plus a
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
* profit of approximately [REDACTED].
5. Consistent with time charters, NEWCO shall have the right to
direct the movement of the barges, provide third party product
transportation services and retain the revenues derived
therefrom.
6. The time charters will provide that CUSA's barge standards
regarding health, safety and environment will be fully
complied with.
* 7. For a period of [REDACTED] from the effective date of the
Merger, NEWCO shall have the right to purchase ("Call") all of
* CUSA's interest in Barge Co. for the sum of [REDACTED]. Such
right to purchase or call on CUSA's interest in Barge Co.
shall be fully assignable by NEWCO and shall be binding on any
successors or assigns of CUSA.
8. Upon expiration of NEWCO's right to purchase as set forth in
paragraph 7 above, CUSA shall have the right to sell to NEWCO
("Put") all of its interest in Barge Co. for the sum of
* [REDACTED]. Alternatively, at its option, CUSA may sell its
interest to a third party upon expiration of NEWCO's right to
purchase as set forth in paragraph 7 above.
9. It is understood and agreed that Barge Co. will at no time
take title to any products that are transported by the Barges.
10. NEWCO will enter into a mutually acceptable services agreement
with Chevron Chemical Company to provide certain barge
transportation services which will have a term coterminous
with the term of the time charters.
11. The effect of the foregoing has resulted in an agreed
reduction in the value of Warren Petroleum Company for
* purposes of Merger of [REDACTED].
If prior to the closing of the Merger, an alternative structure can be
utilized to transfer the barges to NEWCO or a third party acceptable to the
parties, the parties agree to cooperate with each other and Barge Co. will not
be established. The foregoing term sheet is an outline of terms and is subject
to definitive agreements satisfactory to the parties.
Chevron U.S.A. Inc. NGC Corporation
By: ________________________________ By: ________________________________
Printed Name: ______________________ Printed Name: ______________________
Title: _____________________________ Title: _____________________________
EXHIBIT A
BARGES
Apaches
Cheyenne
Osage
City of New Orleans
City of Pensacola
Pt Everglades
Puerto La Cruz
Cherokee
Chikasaw
Choctaw
Sioux
City of Corpus Christi
City of St. Marks
City of Mobile
City of Lake Charles
City of Galveston
City of Tulsa
Creek
Seminole
Natchez
Comanche
EXHIBIT 10.58
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
CCC PRODUCT SALE AND PURCHASE AGREEMENT
THIS PRODUCT SALE AND PURCHASE AGREEMENT (the "Agreement") is made and
entered into this day of , 1996, by and between WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP, a Delaware limited partnership with offices at 13430
Northwest Freeway, Suite 1200, Houston, TX 77040-6095 (hereinafter referred to
as "WPC"), and CHEVRON CHEMICAL COMPANY, a Delaware corporation with offices at
1301 McKinney Street, Houston, TX 77010 (hereinafter referred to as "CCC").
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA"), and NGC Corporation ("NGC"),
have entered into certain agreements ( the "Merger Agreements") pursuant to
which CUSA would contribute certain gas gathering, processing and other
midstream assets and related liabilities of CUSA's Warren Petroleum Company
division ("Warren") and natural gas business unit division to a corporation to
be formed which NGC would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously sold to CCC and CCC purchased from Warren
all of CCC's Product and, from time to time, Offspec Product needs and both CCC
and WPC desire that such relationship continue; and
WHEREAS, WPC has quantities of Products (as defined in Article I below)
available for sale from certain of its facilities located in Mont Belvieu,
Texas, that it desires to sell to CCC, and CCC desires to purchase such Products
from WPC.
NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the parties as well as for other good and valuable consideration, WPC
and CCC agree as follows:
ARTICLE 1.
1
DEFINITIONS
1.1 As used in this Agreement, the following terms shall be given the
following meanings:
AFFILIATE shall mean any Person that directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term "control" (including the
terms "controlled by" or "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise. Any Person shall be deemed to be
an Affiliate of any specified Person if such Person owns 50% or more of
the voting securities of the specified Person, if the specified Person
owns 50% or more of the voting securities of such Person, or if 50% or
more of the voting securities of the specified Person and such Person
are under common control.
ALTERNATE INDEX shall have the meaning specified in Section 5.2
hereinafter.
ARBITRATION NOTICE shall have the meaning specified in Section 15.1(d)
hereinafter.
BANKRUPTCY EVENT shall mean the occurrence of one or more of the
following events with respect to a Party: (A) the entry of a decree or
order for relief against a Party by a court of competent jurisdiction
in any involuntary case brought against a Party under any bankruptcy
insolvency or other similar law (collectively, "Debtor Relief Laws")
generally affecting the rights of creditors and relief of debtors now
or hereafter in effect, (B) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar agent under
applicable Debtor Relief Laws for a Party or for any substantial part
of its assets or property, (C) the ordering of the winding up or
liquidation of a Party's affairs, (D) the filing of a petition in any
such involuntary bankruptcy case, which petition remains undismissed
for a period of 180 Days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy law),
(E) the commencement by a Party of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable
Debtor Relief Laws for a Party or for any substantial part of its
assets or property, or (G) the making by a Party of any general
assignment for the benefit of its creditors.
BARREL shall mean forty-two (42) U. S. Gallons.
BASE RATE shall mean the lesser of (i) two percent (2%) above the per
annum rate of interest announced from time to time as the "prime rate"
for commercial loans by First
2
National Bank of Chicago, as such "prime rate" may change from time to
time, or (ii) the maximum applicable non-usurious rate of interest.
BASE VOLUMES shall mean the minimum Daily volume of Products that CCC
will agree to purchase and WPC will agree to sell and deliver each
Month during each Delivery Period.
BUSINESS DAY shall mean a Day on which Federal Reserve member banks in
New York City are open for business.
CCC'S FACILITIES shall mean CCC's Port Arthur chemical plant situated
in Port Arthur, Texas, and Cedar Bayou chemical plant situated in
Baytown, Texas.
DAY OR DAILY shall mean a twenty-four (24) hour period commencing 7:00
a.m. local time and extending until 6:59 a.m. local time on the
following Day.
DELIVERY MONTH shall mean the Month in which Product(s) are to be
delivered to CCC as provided herein.
DELIVERY PERIOD shall mean a two Month period commencing on the first
Day of January, March, May, July, September and November of each Year.
DELIVERY POINT(S) shall have the meaning specified in Section 7.2
hereinafter.
EFFECTIVE DATE shall mean __________________, 1996.
EP MIX shall mean a liquid hydrocarbon stream containing a mixture of
ethane and propane in the proportions of 80% ethane and 20% propane and
other associated compounds which meets the specifications set forth in
Exhibit "A".
GALLON shall mean the unit of volume used for the purpose of
measurement of liquid. One (1) U.S. liquid gallon contains two hundred
thirty-one (231) cubic inches when the liquid is at a temperature of
sixty degrees Fahrenheit (60 F) and at the vapor pressure of the liquid
being measured.
INVENTORY ACCOUNT shall have the meaning specified in Section 10.1
hereinafter.
MONTH OR MONTHLY shall mean a period commencing at 7:00 a.m. local time
on the first Day of a calendar month and extending until 6:59 a.m.
local time on the first Day of the next succeeding calendar month.
NATURAL GASOLINE shall mean a liquid hydrocarbon stream containing
natural gasoline and other associated compounds which meets the
specifications set forth in Exhibit "A".
3
NEW TAXES shall mean any Taxes enacted and effective after the
Effective Date, including that portion of any Taxes or New Taxes that
constitutes an increase either in rate or breadth of coverage.
NORMAL BUTANE shall mean normal butane which meets the specifications
set forth in Exhibit "A".
OFFSPEC PRODUCT shall have the meaning specified in Section 8.1
hereinafter.
OTHER FEEDSTOCKS shall have the meaning specified in Section 4.4
hereinafter.
PARTY shall mean individually either CCC or WPC (including their
respective successors and permitted assigns); collectively, the
"PARTIES."
PERSON shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other
organization of any nature or kind.
PRODUCT shall mean EP Mix, Propane, Normal Butane and Natural Gasoline
as defined herein.
PROPANE shall mean a liquid hydrocarbon stream containing propane,
incidental hydrocarbons and other associated compounds which meets the
specifications set forth in Exhibit "A".
REQUIRED INVENTORY shall have the meaning specified in Section 10.2
hereinafter.
RENEGOTIATION NOTICE shall have the meaning specified in Section 5.3
hereinafter.
STORAGE FACILITY shall mean the underground liquid hydrocarbon storage
facility located in Mont Belvieu, Texas owned and operated by WPC and
being the same storage facility previously owned and operated by
Warren.
TAXES shall mean any and all ad valorem, property, occupation,
severance, production, extraction, first use, conservation, Btu or
energy, gathering, transport, pipeline, utility, gross receipts, gas or
oil revenue, gas or oil import, privilege, sales, use, consumption,
excise, lease, transaction, environmental, and other taxes,
governmental charges, duties, licenses, fees, permits and assessments.
YEAR shall mean a period of twelve (12) consecutive Months commencing
from the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meanings indicated throughout this
Agreement.
4
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 CCC hereby represents and warrants to WPC that on and as of the
date hereof:
(a) It is duly formed and validly existing and in good standing
under the laws of the state or jurisdiction of formation, with
all requisite corporate power and authority to carry on the
business in which it is engaged and to perform its respective
obligations under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action;
(c) It has all the requisite corporate power and authority to
enter into this Agreement and perform its obligations
hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which CCC or its
properties are bound or, to its knowledge, any material laws
applicable to CCC; and
(e) This Agreement is valid, binding, and enforceable against it
in accordance with its terms, subject to bankruptcy,
moratorium, insolvency and other laws generally affecting
creditor's rights and general principles of equity (whether
applied in a proceeding in a court of law or equity).
2.2 WPC hereby represents and warrants to CCC that on and as of the
date hereof:
(a) It is duly formed and validly existing under the laws of the
state or jurisdiction of formation, with all requisite power
and authority to carry on the business in which it is engaged
and to perform its respective obligations under this
Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite partnership action;
(c) It has all the requisite power and authority to enter into
this Agreement and perform its obligations hereunder;
5
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any material laws
applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable against it
in accordance with its terms, subject to bankruptcy,
moratorium, insolvency and other laws generally affecting
creditor's rights and general principles of equity (whether
applied in a proceeding in a court of law or equity).
ARTICLE III
TERM
3.1 Unless otherwise provided herein, this Agreement shall
* remain in full force and effect for a period of [REDACTED] from the
Effective Date hereof and shall continue from year to year thereafter
* unless terminated by either Party hereto at the end of such [REDACTED]
period or any yearly anniversary thereafter by giving the other Party
at least two years advance written notice of its intention to so
terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be terminated
as follows:
(a) By the non-defaulting Party, upon thirty (30) Days written
notice to the other Party, after it has been determined
through the alternative dispute resolution procedures of
Article XV that a Material Default has occurred in the
performance of a Party's obligations hereunder (it being
understood that, for purposes of the foregoing, "Material
Default" shall mean that the arbitrators have determined that
(i) in consequence of such default, the objectives of this
Agreement (as expressed in the Master Alliance Agreement of
even date herewith by and among CCC, WPC and others) are not
being met and (ii) the defaulting Party failed to take the
steps necessary to accomplish such objectives);
(b) In the event either Party is dissolved (unless the successor
to such dissolved Party or its assets is an Affiliate of CCC
or WPC) or;
(c) If a Bankruptcy Event occurs with respect to either Party.
ARTICLE IV
QUANTITY
6
4.1 WPC agrees to sell to CCC, and CCC agrees to purchase from WPC on
each day during the term hereof, the Base Volumes as determined and nominated by
CCC in accordance with the procedures set forth in Article VI hereinafter. In
addition, CCC further agrees to purchase from WPC and WPC agrees to use its best
efforts to sell and deliver to CCC one hundred percent (100%) of CCC's
Additional Volume needs. It is understood and agreed that all costs and expenses
incurred by WPC in obtaining such Additional Volumes for sale and delivery to
CCC in excess of such costs and expenses that are normally incurred by WPC in
satisfying CCC's Base Volume needs shall be shared by WPC and CCC on an equal
basis. Prior to incurring any such costs and expenses, WPC will advise CCC as to
its estimate of such costs and will not incur such costs until approved by CCC.
If CCC is unwilling to pay for its share of such costs, WPC shall be released
from any obligation to supply such Additional Volumes to CCC.
4.2 The Parties hereto recognize that currently, and without spending
additional capital, CCC has no other method to obtain the supply of Product
other than through WPC's equipment and facilities. The Parties further recognize
that it is intended that WPC be CCC's sole supplier and a preferred customer of
WPC. Accordingly, WPC agrees that it will advise CCC daily as to the
availability of Products for sale and will work with CCC to manage CCC's Product
supply needs.
4.3 It is understood and agreed that certain Offspec Product(s) and/or
other opportunistic chemical feedstocks ("Other Feedstocks") may, by mutual
agreement of the parties, intentionally be sold and purchased hereunder. In such
event, the price, specifications and terms of delivery for such Offspec
Product(s) or Other Feedstocks shall be mutually agreed to by the parties prior
to the delivery of same.
4.4 The parties hereto recognize and acknowledge that during the term
hereof it may be more economical to both CCC and WPC to import Products, Offspec
Products and/or Other Feedstocks than to purchase same from the Mont Belvieu
market. If such Products are purchased by WPC for resell to CCC, the price for
such imported Products, Offspec Products and/or Other Feedstocks will be
mutually agreed to by the parties prior to importing same. It is understood and
agreed that nothing contained in this Article IV is intended to preclude CCC
from obtaining supplies of Products, Offspec Products or Other Feedstocks from
sources outside of the United States as long as the dock and/or other
terminalling facilities owned by WPC or its Affiliates are used to off-load
and/or receive such other Products, Offspec Products or Other Feedstocks at
mutually agreeable rates that are fair and commercially reasonable.
7
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,
ARTICLE V
PRICE
5.1 Except as otherwise provided herein, CCC shall pay WPC for
* (i) the Base Volumes purchased hereunder, a price equal to [REDACTED]
as quoted by the Oil Price Information Service ("OPIS") for Mont
Belvieu, Texas (Non-TET), and (ii) any Additional Volumes purchased
hereunder, a price mutually agreed to by the Parties, and if the
* Parties are unable to agree upon a price, a price equal to [REDACTED]
as quoted by OPIS for Mont Belvieu, Texas (Non-TET) for the period of
time (Days) during each Delivery Month such Additional Volumes are
delivered to CCC. In addition to the foregoing, for all Products
delivered hereunder (including the Base Volumes and the Additional
Volumes), CCC shall pay to WPC a delivery fee (the "Delivery Fee")
* equal [REDACTED] per Barrel. For all purposes hereof, delivery of
Products shall be deemed to occur at the point where title and risk of
loss passes to CCC as provided herein.
5.2 If for any reason the OPIS price for a particular Product should
cease to be published, the parties agree promptly and in good faith to negotiate
a mutually satisfactory alternate index or substitute methodology for
calculating the Price for such Product (the "Alternate Index"). If, on or before
thirty (30) Days after the index used to determine the Price ceases to be
available, the parties are unable to agree on an Alternate Index or substitute
methodology upon which to base the calculation of the Price, the parties shall
submit such determination to the alternative dispute resolution procedures set
forth in Article XV hereinafter, which alternative dispute resolution procedures
will determine the Alternate Index. From the date on which the index price used
to determine the Price for a particular Product ceases to be available until the
Alternate Index is determined, the Price for such Product shall be the average
of the Prices in effect (or that would have been in effect) during the twelve
(12) Months preceding the Month in which the index upon which the Price was
based ceased to be available, which price shall be effective until the effective
date of the Alternate Index determined as set forth in this Section 5.2. Upon
the determination of an Alternate Index, the Price will be adjusted
retroactively to the date on which the index upon which the Price previously was
based ceased to be available.
* 5.3 Every [REDACTED] after the Effective Date of this
Agreement, the parties shall have the option to open this Agreement
solely for the purpose of renegotiating the pricing provisions hereof.
To exercise such option, a party at least ninety (90) days before the
expiration of such five (5) year period must provide to the other party
written notification (the "Renegotiation Notice") of its desire to
renegotiate the price for the Product sold and purchased hereunder. In
any such renegotiations, the parties shall continue to recognize that
the price for Product must reflect the prevailing market value of spot
sales and purchases of Product(s) in Mont Belvieu, Texas. If, after
negotiating in good faith for a period of ninety (90) days
8
following the date of the Renegotiation Notice, the parties are unable
to agree upon a mutually acceptable price for such Product(s), the
matter shall be submitted to the alternative dispute resolution
procedures as set forth in Article XV hereof. During the period while
negotiations are ongoing until (i) a new price is agreed to or (ii) a
new price is established by the alternative dispute resolution
procedures as provided herein, the price for the Product(s) sold and
purchased hereunder shall be determined in accordance with the pricing
formula that was applicable immediately prior to the date of the
Renegotiation Notice. If a new price is agreed to or is established
through the alternative dispute resolution procedures as provided
above, this Agreement shall be amended to reflect such new price.
5.4 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CCC and WPC shall meet to renegotiate such burdensome terms and provisions so as
to make them fair and equitable. Such renegotiations shall commence within
thirty (30) days of the written request for such renegotiations. If the parties
are unable to agree on new provisions to replace such burdensome terms and
provisions within ninety (90) days of the non-requesting party's receipt of such
written request, the matter shall be submitted to the alternative dispute
resolution procedures set forth in Article XV hereof. It is understood and
agreed that, unless mutually agreed to by the Parties, the rights granted in
this Section 5.4 can only be used by a Party to commence good faith
renegotiations once during each year during the term hereof. If new provisions
are agreed upon under this Section 5.4, whether by renegotiation, mediation,
arbitration or otherwise, such new provisions shall be effective as of, and
shall, if necessary, be made retroactive to, the date on which the notice
commencing renegotiations under this Section 5.4 was given.
5.5 If, at any time during the term of this Agreement, WPC enters into
an agreement having a term of one year or more with another chemical company to
sell Products and provide the same or similar services at WPC's Mont Belvieu
facilities as WPC provides to CCC as provided herein, WPC agrees to provide the
same overall economic package to CCC.
ARTICLE VI
NOMINATIONS
6.1 On the first Business Day of the Month immediately preceding each
Delivery Period, CCC shall nominate in writing to WPC the Base Volumes to be
purchased by CCC on each Day during such Delivery Period. If prior to or during
a Delivery Month CCC needs Additional Volumes, as soon as reasonably possible
prior to the Day CCC desires for the delivery of such Products to commence, CCC
shall request that such Products be supplied by WPC. Such request may be verbal
if immediately followed in writing by facsimile transmission.
6.2 Daily and Monthly variations between the Base Volumes nominated by
CCC to be purchased and the volumes taken by CCC shall, as appropriate, be added
to or subtracted from CCC's
9
Inventory Account if, at the time, CCC has sufficient volumes above the Required
Inventory levels in its Inventory Account. If there does not exist sufficient
volumes in CCC's Inventory Account to allow for such minor Daily and Monthly
variations, any such increases in the volumes of Product required by CCC shall
be deemed Additional Volumes and, if available, shall be purchased from WPC at a
price equal to the average of the daily high and low prices of each Product as
quoted by OPIS for Mont Belvieu, Texas (Non-TET) on the Business Day such minor
variations occurred, if on a Business Day, or the next succeeding Business Day
thereafter if not on a Business Day.
6.3 CCC shall advise WPC as soon as reasonably possible of any
unscheduled turnarounds at CCC's Facilities and shall give WPC at least twenty
four (24) hours notice prior to the startup of such Facilities following a
scheduled or unscheduled turnaround.
6.4 To minimize the costs and expenses associated with (i) variances
between the volumes of Base Volumes nominated and the volumes actually taken and
(ii) obtaining the volumes of other Products requested by CCC, CCC and WPC agree
to establish a scheduling committee (the "Scheduling Committee") to perform the
duties as outlined below. The Scheduling Committee shall be comprised of members
from both CCC and WPC. CCC and WPC each shall bear their own costs and expenses
associated with the Scheduling Committee and its activities. The duties of the
Scheduling Committee will include, but will not be limited to, the following:
(a) administering and coordinating the routine business of the
Scheduling Committee including forecasting, planning and
scheduling of Product deliveries and movements;
(b) determining and developing strategies with respect to
Scheduling Committee activities;
(c) developing, monitoring and communicating mutually agreed to
standards of performance;
(d) monitoring the nomination procedures and deliveries of
Products;
(e) reviewing all significant equipment, design, process and
operating changes affecting the volumes of Products needed by
CCC's Facilities;
(f) conducting regularly scheduled planning, problem solving and
expense review meetings;
(g) participating in the alternative dispute resolution procedures
and set forth in Article XV hereinafter;
(h) forecasting the availability of Products, Offspec Products
and/or Other Products and CCC's anticipated needs for same;
and
10
(i) aiding in the development of feedstock inventory plans and
cost risk management programs to assist CCC in lowering its
feedstock costs and assist CCC in optimizing the flexibility
of CCC's Facilities.
6.5 Solely for planning purposes in connection with the management of
the brine supply at WPC's Storage Facility, CCC shall provide to WPC a six (6)
Month rolling estimate of the total inventory of non-LPG feedstocks that CCC
will expect to be stored in WPC's Storage Facility. For the purpose of this
Section 6.5, "non-LPG feedstocks" shall mean Ethylene, Propylene, PP Mix,
Naphtha and other chemical feedstocks.
ARTICLE VII
DELIVERIES
7.1 The Product to be sold and purchased hereunder shall be delivered
by WPC to CCC or to CCC's designated representative for the account of CCC, at
the point(s) of delivery specified herein. Except as otherwise provided herein,
all Products sold and delivered hereunder shall be used solely by CCC as
feedstock or fuel at CCC's Facilities.
7.2 The point(s) of delivery for Product sold and delivered hereunder
(hereinafter the "Delivery Point(s)") shall be at WPC's Storage Facility and the
delivery of Product shall be deemed to occur (i) at the point at which Product
passes into the pipeline connected to WPC's Storage Facility and designated by
CCC, with respect to Product physically delivered to CCC, and/or (ii) on the
date WPC advises CCC by product transfer order, book transfer, or letter of
transfer, that Product was transferred to CCC's Inventory Account, with respect
to in-storage transfers and Required Inventory purchases by CCC from WPC,
7.3 For all deliveries of Product from WPC's Storage Facility into a
pipeline designated by CCC, WPC shall operate and maintain equipment to ensure
that the delivery pressure shall be sufficient to allow the Product to enter at
the applicable Delivery Point at the then prevailing operating pressure and flow
rates required therein, which pressure and flow rates shall vary from time to
time, but will not be more than the Maximum Operating Pressure or less than the
Minimum Operating Pressure as set forth in the table below, nor greater than the
flow rates for each Product as set forth below:
(a) Pipeline(s) Delivering Products on CCC's behalf to Port
Arthur:
11
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,
================================================================================
MAXIMUM
MINIMUM OPERATING OPERATING
PRODUCT PRESSURE PRESSURE MAXIMUM FLOW RATE
================================================================================
EP Mix * 900 psig 1220 psig 35,000 Bbls/Day
- --------------------------------------------------------------------------------
* Shall also apply to blends of
Ethane and Propane ranging from
an 80/20 mix to a 60/40 mix.
(b) Pipeline(s) Delivering Products on CCC's behalf to Cedar Bayou:
================================================================================
MAXIMUM
MINIMUM OPERATING OPERATING
PRODUCT PRESSURE PRESSURE MAXIMUM FLOW RATE **
================================================================================
Purity Ethane 550 psig 1440 psig 90,000 Bbls/Day
- --------------------------------------------------------------------------------
EP Mix 550 psig 1440 psig 90,000 Bbls/Day
- --------------------------------------------------------------------------------
Propane 550 psig 1440 psig 50,000 Bbls/Day
- --------------------------------------------------------------------------------
All Grades of
Butane 550 psig 1440 psig 50,000 Bbls/Day
- --------------------------------------------------------------------------------
Natural Gasoline 550 psig 1440 psig 50,000 Bbls/Day
- --------------------------------------------------------------------------------
** WPC shall not be required to deliver more
*` than [REDACTED] per Day of Product,
whether combined or as a single Product.
If CCC's Product needs increase due to expansion or otherwise such that CCC will
require increased flow or delivery rates, upon mutual agreement of the Parties
concerning the reimbursement or sharing of the costs and expenses (if any)
associated with the increase in the flow or delivery rates, the Maximum Flow
Rates as set forth above will amended. If the Parties are unable to agree on the
reimbursement or sharing of such costs and expenses, the matter shall be
submitted to the alternative dispute resolution procedures as set forth in
Article XV hereof.
7.4 Title to and risk of loss associated with the Products sold and
purchased hereunder shall pass from WPC to CCC upon the commencement of the
delivery of such Product at the Delivery Point or when the Product is deemed to
have been delivered as provided in Section 7.2
12
above. CCC shall be responsible for all risk of loss, damage or liability to the
extent that any such loss, liability or damage arises from acts or omissions
occurring after the commencement of physical delivery of the Product at and
downstream of the Delivery Point(s), except for any negligent acts of WPC, its
employees, agents or subcontractors that occur downstream of the Delivery
Point(s), and WPC shall be responsible for all risk of loss, damage or liability
to the extent that any such loss, liability or damage arises from acts or
omissions occurring prior to the commencement of physical delivery of the
Product upstream of the Delivery Point(s), except for any negligent acts of CCC,
its employees, agents or subcontractors that occur upstream of the Delivery
Point(s). In the event delivery of the Product sold hereunder is by in-storage
transfer of Product, all risk of loss, damage or liability shall pass from WPC
to CCC at the point in time when such in-storage transfer shall be deemed to
have occurred as provided in Section 7.2 above, except for any such losses,
damages and liabilities that are caused by the negligence of WPC, its employees,
agents or subcontractors.
ARTICLE VIII
QUALITY
8.1 Except as otherwise provided herein, all Products sold and
purchased hereunder shall meet the specifications set forth in Exhibit A,
attached hereto and made a part hereof. CCC shall have the right to reject
Product which fails to meet such quality specifications (hereinafter referred to
as "Offspec Product").
8.2 Should the Product delivered hereunder to CCC, or to CCC's
designated representative for the account of CCC, fail at any time to conform to
the specifications set forth in Exhibit A, each party shall notify the other as
soon as practicable after becoming aware that the Product fails to meet such
specifications, and WPC immediately shall undertake and diligently pursue such
acts as may be necessary to correct such failure so as to deliver Product
conforming to the specifications set forth above; but nothing contained in this
Article VIII or any other part of this Agreement shall be construed to affect
CCC's right, at any time and from time to time, to reject any Product not
conforming to said specifications.
8.3 The term of this Agreement shall not be extended by the length of
time of any period or periods when deliveries have been rejected, refused or
suspended by CCC as provided for herein. Notwithstanding the provisions of
Section 8.2 above, if (i) after being given the opportunity to treat and/or
fractionate such Offspec Product, WPC elects not to treat and/or fractionate
same and CCC elects to accept such Offspec Product, or (ii) CCC unknowingly
accepts Offspec Product, the parties will mutually agree upon a discounted price
to be paid by CCC to WPC for such Offspec Product. In no event shall the
discounted price paid by CCC be less than (y) the price for such specification
Product as set forth in Article V, less $0.022 per Gallon or (z) the price for
such specification Product, less the decrease in the yield value solely caused
by such Offspec Product, whichever is higher.
8.4 Notwithstanding the specifications of EP Mix set forth in Exhibit
A, WPC agrees to use all reasonable efforts to (i) notify CCC when the methanol
levels in the EP Mix being
13
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,
delivered to CCC exceeds eighty parts per million (80 ppm) (ii) deliver to CCC
EP Mix containing less than 80 ppm of methanol, but will have no liability to
CCC for failing to do so after exercising such reasonable efforts.
ARTICLE IX
WARRANTY
9.1 WPC warrants title to all Products sold and delivered by it to CCC,
and further warrants that WPC has the right to sell such Products and that such
Products meet the quality specifications as set forth herein and is free from
all liens, claims or other charges. UNLESS OTHERWISE PROVIDED IN THIS AGREEMENT,
THERE ARE, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR OTHERWISE, AND ALL
SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY WPC AND EXCLUDED FROM THIS
AGREEMENT.
ARTICLE X
STORAGE SERVICES
10.1 Upon execution of this Agreement, CCC shall be deemed to have
entered into a Storage Agreement with WPC, effective as of the Effective Date,
pursuant to the terms and provisions set forth in Exhibit "B" attached hereto
and made a part hereof, pursuant to which CCC will lease Product storage
capacity at WPC's Storage Facility (the "Inventory Account").
10.2 Each Month during the term hereof, CCC shall maintain in its
Inventory Account the following volumes of inventory of each Product included in
the Base Volumes applicable during the Delivery Period (the "Required
Inventory") based on CCC's Delivery Period nominations:
=================================================================
Months Required Inventory
=================================================================
* May through October [REDACTED]
-----------------------------------------------------------------
* November through April [REDACTED]
-----------------------------------------------------------------
If at any time during a Delivery Month, CCC fails and or refuses to maintain the
Required Inventory for each Product, WPC will have the right, but not the
obligation, to sell such volumes of Product(s) to CCC at a mutually agreed upon
price or, if the parties are unable to agree upon a mutually acceptable price,
at a price equal to the average of the daily high and low
14
prices of each Product as quoted by OPIS for Mont Belvieu, Texas (Non-TET) on
the Day the volumes of such Product(s) were reduced below the Required Inventory
level, if such Day is a Business Day, or the next succeeding Business Day if
such Day is not a Business Day.
10.3 Upon CCC's request, WPC will either purchase from CCC volumes of
Product(s) in CCC's Inventory Account at a mutually agreed upon price, or sell
such Product(s) on CCC's behalf at a mutually agreed upon price or,if the
parties are unable to agree upon a mutually acceptable price, at a price equal
to the average of the daily high and low prices of each Product as quoted by
OPIS for Mont Belvieu, Texas (Non-TET) for the two Business Days following the
Day such request is received by WPC.
ARTICLE XI
TAXES
11.1 WPC shall be liable for and shall pay, or cause to be paid, or
reimburse CCC, if CCC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include without limitation, Taxes imposed under Section
4611, 4612, 4661, 4662, 4771 and 4772 and successor sections of the Internal
Revenue Code) applicable to the Product sold hereunder upstream of the Delivery
Point(s). If CCC is required to remit such Tax, the amount thereof shall be
deducted from any sums becoming due to WPC hereunder. CCC shall be liable for
and shall pay, cause to be paid, or reimburse WPC, if WPC has paid, all
environmental Taxes and all Taxes applicable to the sale and/or delivery of
Product hereunder at and downstream of the Delivery Point(s) including any Taxes
imposed or collected by a taxing authority with jurisdiction over CCC, provided,
however, when laws, ordinances or regulations permit or impose upon WPC the
obligation to collect or pay Taxes applicable to the sale and/or delivery of
Product hereunder at the Delivery Point, WPC shall collect all such taxes from
CCC, which shall be in addition to the applicable Price, and remit the same to
the appropriate governmental authority, unless CCC furnishes a certificate of
exemption. WPC and CCC shall indemnify, defend, and hold the other harmless from
and against any liability with respect to the Taxes for which the other party is
liable. 11.2 While this Agreement remains in effect, CCC shall pay to WPC on
demand, from time to time, all amounts necessary to compensate WPC for any New
Taxes incurred by WPC after the Effective Date of this Agreement applicable to
the sale and/or delivery of Product at and downstream of the Delivery Point(s),
and CCC shall indemnify, defend, and hold WPC free and harmless from and against
any liability with respect to all such New Taxes. WPC will notify CCC of the
enactment of any New Taxes as promptly as practical after it obtains knowledge
thereof. WPC will furnish CCC with a statement setting forth the basis and
amount of each request by WPC for compensation under this Section 11.2.
11.3 To claim an exemption from payment of a Tax, a party shall provide
a certificate of exemption or other reasonably satisfactory evidence of
exemption from any Tax, and each party agrees to cooperate with the other party
in obtaining any such exemption. In addition,
15
CCC acknowledges receipt of the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986) or is knowledgeable of the
contents thereof.
ARTICLE XII
MEASUREMENT AND ANALYSES
12.1 On all deliveries into or out of pipelines, quantities shall be
determined by pipeline meter in accordance with the America Petroleum Institute
("API") Manual of Petroleum Measurement Standards. For ethane and EP Mix,
volumes of such Products shall be determined (where practical) on a mass (pound)
measurement basis in accordance with the latest edition of GPA PUBLICATIONS 8173
AND 8182. For all other Products, the volumes shall be determined on a
volumetric basis. All quantities shall be corrected to standard conditions of
60o Fahrenheit and equilibrium vapor pressure in accordance with the API Manual
of Petroleum Measurement Standards, Chapter 14, Section B. The quantity and
quality of Products covered by this Agreement shall be measured according to the
current versions of the applicable standards of API and the American Society for
Testing Materials, if available. Each Party shall be entitled to have its
representatives present during all loadings, unloadings, tests and measurements
involving Products delivered hereunder. If the parties cannot agree on
measurement or quality tests results, the measurements and quality tests
required to determine the volume of receipts or shipments or the conformity of
the Products delivered to the specifications set forth herein shall be made by
an independent inspector selected jointly by the parties, the cost of which
shall be shared equally by the parties.
ARTICLE XIII
BILLING AND PAYMENT
13.1 Each Month during the term hereof, WPC shall submit an invoice to
CCC by facsimile transmission setting forth the quantity of each Product
delivered during the immediately preceding Delivery Month, the price for such
Product, the amount due hereunder for such quantities, and such other
information and detail as may be mutually agreeable to the Parties. CCC shall
remit by wire transfer of funds, into an account designated by WPC, any amounts
due no later than ten (10) Days after CCC's receipt of WPC's invoice. If the Day
on which any payment is due is not a Business Day, then the relevant payment
shall be due upon the immediately preceding Business Day, except if such payment
due date is a Sunday or Monday, then the relevant payment shall be due upon the
immediately succeeding Business Day.
13.2 If CCC or WPC should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such accrued
interest shall be added to the amount reflected as being owed hereunder by
either CCC or WPC, as the case may be, on the next invoice or by separate
invoice.
16
13.3 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of a good faith dispute, the
withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance with
the alternative dispute resolution procedures of Article XV. The performance of
both Parties under this Agreement shall continue pending the outcome of such
procedures. If it is subsequently determined, whether by mutual agreement of the
Parties or otherwise, that the withholding Party is required to pay all or any
portion of the disputed amounts to the other Party, the withholding Party, in
addition to paying over such amounts, shall also pay interest accrued on such
amounts from the original due date until paid, at the Base Rate.
13.4 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the invoice or statement forming the basis of the overcharge or
undercharge was delivered or not delivered, as the case may be, unless a claim
for such adjustment shall have been presented prior to the end of such period.
Any payment with respect to a retroactive adjustment shall include an amount
equal to interest on all amounts past due from the date of the initial payment
at the Base Rate, except in instances where neither Party knew or could have
known that the overcharge or undercharge occurred, in which case interest shall
run from the date of demand for payment. Each Party shall maintain true and
complete records relating to this Agreement and shall retain all such records
for a minimum period of twenty-four Months after the end of the Month in which
Products are delivered.
13.5 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
13.7 ALL DISPUTES ARISING UNDER THIS ARTICLE XIII THAT ARE NOT
OTHERWISE RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE
DISPUTE RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XV HEREOF. TO THE EXTENT
THAT ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE
DISPUTE RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT
CAUSING THE DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE
PARTY ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH
CLAIM AND ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
17
13.8 All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the "defaulting Party") failure to make
payment of undisputed amounts on the due date, the other Party (the
"non-defaulting Party") may, at its option and in its sole discretion, setoff
against any amounts owed to the defaulting Party, any amounts owed by the
defaulting Party under this Agreement or otherwise. The obligations of the
non-defaulting Party and the defaulting Party under this Agreement in respect of
such amounts shall be deemed satisfied and discharged to the extent of any such
setoff. The non-defaulting Party will give the defaulting Party notice of any
setoff made under this Section 13.8 as soon as practicable after the setoff is
made, provided that failure to give such notice shall in no way affect the
validity of the setoff.
ARTICLE XIV
FORCE MAJEURE
14.1 In the event either Party is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation. If an event of Force Majeure
results in substantial interference with a Party's performance hereunder and
such condition continues for six (6) consecutive Months or longer, the other
Party shall have the right to terminate this Agreement upon sixty (60) Days
written notice to the other.
14.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of either Party's facilities or any operating units thereof, floods, washouts,
arrests or restraints of the government, either federal or state, civil or
military, civil disturbances, explosions, sabotage, breakage or accident to
equipment, machinery or lines of pipe, freezing of machinery, equipment or lines
of pipe, electric power shortages, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules, orders, laws or
governmental authorities (both federal, state and local), shutdowns due to
explosion or other extraordinary incident, or any other causes, whether of the
kind herein enumerated or otherwise, which were not reasonably foreseeable on
the Effective Date, and which are not within the control of the Party claiming
suspension and which such Party is unable to overcome by the exercise of due
diligence. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties
18
when such course is inadvisable in the discretion of the Party having
difficulty. The term "Force Majeure" shall also include any event of Force
Majeure occurring with respect to the facilities or services of either CCC's or
WPC's third Party suppliers or customers delivering or receiving any product,
fuel, feedstock, or other substance necessary to the performance of such Party's
obligations, and shall also include curtailment or interruption of deliveries or
service by such third Party suppliers or customers as a result of an event of
Force Majeure. It is expressly agreed by the Parties that neither (i) CCC's
inability economically to use Feedstock purchased under this Agreement nor (ii)
WPC's ability to sell Feedstock to a market at a more advantageous price shall
constitute an event of Force Majeure.
ARTICLE XV
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
15.1 Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach or performance hereof, including, but not limited
to, any disputes concerning the interpretation of the terms and provisions
hereof, shall be resolved through the use of the following procedures or any
other procedures mutually agreed to in writing by the Parties:
(a) The parties will initially attempt in good faith to resolve
any disputes, controversy or claim arising out of or relating
to this Agreement.
(b) Should the Parties directly involved in any dispute,
controversy or claim be unable to resolve same within a
reasonable period of time, such dispute, controversy or claim
shall be submitted to the Scheduling Committee with such
explanation or documentation as the Parties deem appropriate
to aid the Scheduling Committee in their consideration of the
issues presented. The date the matter is first submitted to
the Scheduling Committee shall be referred to as the
"Submission Date." The Scheduling Committee representatives
shall attempt in good faith, through the process of discussion
and negotiation, to resolve any dispute, controversy, or claim
presented to it within forty-five (45) days after the
Submission Date.
(c) If the Scheduling Committee representatives cannot so resolve
any dispute, controversy, or claim submitted to it within
forty-five (45) days after the Submission Date, the Parties
shall attempt in good faith to settle the matter by submitting
the dispute, controversy or claim to mediation within sixty
(60) days after the Submission Date using any mediator upon
which they mutually agree. If the Parties are unable to
mutually agree upon a mediator within seventy-five (75) days
after the Submission Date, the case shall be referred for
mediation to the office of Judicial Arbitration and Mediation
Services, Inc. ("JAMS") in Houston, Texas. The cost of the
mediator will be split equally between the Parties unless they
agree otherwise in writing.
19
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) days of the initiation
of such procedure, or if either Party will not participate in
such mediation, either Party may request that the matter be
resolved through arbitration by submitting a written notice
(the "Arbitration Notice") to the other. Any arbitration that
is conducted hereunder shall be governed by the Federal
Arbitration Act, 9 U.S.C. ss. 1 ET SEQ., and will not be
governed by the arbitration acts, statutes or rules of any
other jurisdiction.
(e) The Arbitration Notice shall name the noticing Party's
arbitrator and shall contain a statement of the issue(s)
presented for arbitration. Within fifteen (15) Days of receipt
of an Arbitration Notice, the other Party shall name its
arbitrator by written notice to the other and may designate
any additional issue(s) for arbitration. The two named
arbitrators shall select the third arbitrator within fifteen
(15) Days after the date on which the second arbitrator was
named. Should the two arbitrators fail to agree on the
selection of the third arbitrator, either Party shall be
entitled to request the Senior Judge of the United States
District Court for the Southern District of Texas to select
the third arbitrator. All arbitrators shall be qualified by
education or experience within the natural gas, liquefied
petroleum gas, natural gas liquids or chemical industry to
decide the issues presented for arbitration. No arbitrator
shall be: a current or former director, officer or employee of
either Party, or its affiliates; an attorney (or member of a
law firm) who has rendered legal services to either Party, or
its affiliates, within the preceding three years; or an owner
of any of the common stock of either Party or its Affiliates.
(f) The three arbitrators shall commence the arbitration
proceedings within twenty-five (25) Days following the
appointment of the third arbitrator. The arbitration
proceedings shall be held in Houston, Texas at a mutually
acceptable site. The arbitrators shall have the authority to
establish rules and procedures governing the arbitration
proceedings. Each Party shall have the opportunity to present
its evidence at the hearing. The arbitrators may call for the
submission of pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be submitted.
After the presentation of the evidence has concluded, each
Party shall submit to the arbitration panel a final offer of
its proposed resolution of the dispute. A majority of the
arbitrators shall approve the final offer of one Party without
modification, and reject the offer of the other Party. The
arbitration panel shall not have the authority to award
punitive, exemplary or consequential damages. The arbitrators'
decision must be rendered within thirty (30) Days following
the conclusion of the hearing or submission of evidence, but
no later than 90 Days after appointment of the third
arbitrator.
20
(g) The decision of the arbitrators or a majority of them, shall
be in writing and shall be final and binding upon the Parties
as to the issue(s) submitted. The cost of the hearing shall be
shared equally by the parties, and each Party shall be
responsible for its own expenses and those of its counsel or
other representatives. Each Party hereby irrevocably waives,
to the fullest extent permitted by law, any objection it may
have to the arbitrability of any such disputes, controversies
or claims and further agrees that a final determination in any
such arbitration proceeding shall be conclusive and binding
upon each Party. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof. The prevailing Party shall be entitled to recover
reasonable attorneys' fees and court costs in any court
proceeding relating to the enforcement or collection of any
award or judgment rendered by the arbitration panel under this
agreement.
(h) All deadlines specified herein may be extended by mutual
agreement of the Parties. The procedures specified herein
shall be the sole and exclusive procedures for the resolution
of disputes between the parties arising out of or relating to
this Agreement; provided, however, that a Party may seek a
preliminary injunction or other preliminary judicial relief if
in its judgment such action is necessary to avoid irreparable
damage. Despite such action, the Parties will continue to
participate in good faith in the procedures specified herein.
All applicable statutes of limitation, including without
limitation, contractual limitation periods provided for in
this Agreement, shall be tolled while the procedures specified
in this Section are pending. The parties will take all
actions, if any, necessary to effectuate the tolling of any
applicable statutes of limitation.
ARTICLE XVI
LIMITATION OF DAMAGES
16.1 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE
OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
REMEDIES OR DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY,
OR INDIRECT DAMAGES IN TORT, CONTRACT, UNDER
21
ANY INDEMNITY PROVISION OR OTHERWISE. TO THE EXTENT ANY PAYMENT REQUIRED TO BE
MADE PURSUANT TO ANY PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO
CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE
DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A
REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
ARTICLE XVII
MISCELLANEOUS
17.1 This Agreement and the operations hereunder shall be subject to
the valid and applicable federal and state laws and the valid and applicable
orders, laws, local ordinances, rules, and regulations of any local, state or
federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, laws,
rules, or regulations in any forum having jurisdiction in the premises. If any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under the present or future laws effective during the term of this Agreement,
(i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Agreement, and (iii) the remaining provisions
of this Agreement will remain in full force and effect and will not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
17.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING
OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF
LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
17.3 This Agreement, including, without limitation, all exhibits
hereto, integrates the entire understanding between the Parties with respect to
the subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CCC or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether
22
or not similar) nor shall such waiver constitute a continuing waiver unless
expressly provided. No waiver shall be effective unless made in writing and
signed by the Party to be charged with such wavier.
17.4 The terms, covenants and conditions of this Agreement shall inure
to and be binding upon the parties hereto and their successors and permitted
assigns; provided, however, that neither Party may assign, mortgage, pledge,
encumber or grant a security interest in or a lien on its interest in this
Agreement and/or its rights hereunder in whole or in part without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld, and provided further, that either Party may assign its rights
hereunder to any Affiliate without the approval of the other Party, but any such
assignment shall in no way relieve or release such assigning Party from any
obligations hereunder, whether accrued or unaccrued, unless agreed to in writing
by the non-assigning Party.
17.5 With the other documents required hereunder, WPC shall provide to
CCC a Material Safety Data Sheet ("MSDS") for each Product delivered hereunder,
and CCC may rely on the information set forth in WPC's MSDS form relating to
such Products. The foregoing shall not apply to any Other Feedstocks or Offspec
Products that CCC requests be handled by WPC. CCC and WPC acknowledge that there
may be hazards associated with the loading, unloading, transporting, handling or
use of the Product sold hereunder, which may require that warning be
communicated to or other precautionary action taken with all persons handling,
coming into contact with, or in any way concerned with the Product sold
hereunder. CCC assumes as to its employees, independent contractors, and
subsequent purchasers of the Product sold hereunder all responsibility for all
such necessary warnings or other precautionary measures relating to hazards to
person and property associated with the Product sold hereunder and, furthermore,
CCC shall defend at its own expense, indemnify fully and hold harmless WPC and
its parents, subsidiaries and affiliates and its and their agents, officers,
directors, employees, representatives, successors and assigns from and against
any and all liabilities; losses; damages; demands; claims; penalties; fines;
actions; suits; legal, administrative or arbitration or alternative dispute
resolution proceedings; judgments, orders, directives, injunctions, decrees or
awards of any jurisdiction; costs and expenses (including, but not limited to,
attorneys' fees and related costs) arising out of or in any manner related to
CCC's failure to provide necessary warnings or other precautionary measures in
connection with the Product sold hereunder as provided above.
17.6 Except as otherwise provided herein, each Party reserves to itself
all rights, set-offs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
17.7 (a) Each Party agrees that it will maintain this
Agreement, all terms and conditions of this
Agreement, and all other Confidential Information (as
hereinafter defined) in strictest confidence, and
that it will not cause or permit disclosure of
Confidential Information to any third Person without
the express written consent of the other Party
hereto. Disclosures
23
of Confidential Information otherwise prohibited by
this Section 17.7 may be made by either Party: (i) to
the extent necessary for such Party to enforce its
rights hereunder against the other Party; (ii) to the
extent a Party is contractually or legally bound to
disclose information to a third Person (such as a
shareholder or commercial lender); (iii) only to the
extent to which a Party hereto is required to
disclose all or part of this Agreement by a statute
or by the order of a court, agency, or other
governmental body exercising jurisdiction over the
subject matter hereof, by order, by regulations, or
by other compulsory process (including, but not
limited to, deposition, subpoena, interrogatory, or
request for production of documents); (iv) to the
extent required by the applicable regulations of a
securities or commodities exchange; or (v) to an
Affiliate (but only if such Affiliate agrees to be
bound by the provisions of this Section).
"Confidential Information" shall mean any
information, proprietary to either Party and
maintained by it in confidence or as a trade secret,
including, without limitation, business plans and
strategies, proprietary software, financial
statements, customer or client lists, personnel
records, analysis of general energy market
conditions, sales, transportation, and service
contracts and the commercial terms thereof,
relationships with current and potential business
partners, supplies customers, service providers and
financial sources, data base contents and valuable
information of a like nature relating to the business
of such Party. It is understood and agreed that
Confidential Information shall not include
information of a Party that (w) becomes generally
available to the public at the time of disclosure to
the other Party, or (x) after the time of disclosure
to the other Party, was generally made available to
the public without breach of this Agreement, or (y)
the Person receiving the information can show was
rightfully in its possession at the time of
disclosure, or (z) was rightfully acquired by the
recipient from third Persons who did not themselves
obtain such information under a confidentiality or
other similar agreement with the Party whose
information was disclosed.
(b) If either Party is or becomes aware of a fact,
obligation, or circumstance that has resulted or may
result in a disclosure of Confidential Information
authorized by this Section 17.7, it shall so notify
the other Party promptly and shall provide
documentation or an explanation of such disclosure as
soon as it is available. Each Party further agrees to
cooperate to the fullest extent in seeking
confidential status to protect any Confidential
Information so disclosed.
(c) The Parties hereto acknowledge that independent legal
counsel, certified public accountants, or other
consultants or independent contractors of a Party
(collectively, "Outside Consultants") may, from time
to time, be
24
provided with a copy of this Agreement if, in the
judgment of the disclosing Party, the information
contained in this Agreement is necessary to the
performance of such Outside Consultants' duties.
Accordingly, the Parties agree that such disclosure
does not require consent by the other Party, provided
that any such Outside Consultants agree to be bound
by the provisions of this Section 17.7.
(d) Each Party will be deemed solely responsible and
liable for the actions of its employees, Outside
Consultants, officers, and agents for maintaining the
confidentiality commitments of this Section 17.7, but
will be required in that regard only to exercise such
care in maintaining the confidentiality of the
Confidential Information as such Party normally
exercises in preserving the confidentiality of its
other commercially sensitive information.
17.8 Nothing contained in this Agreement shall be construed to create
an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
17.9 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser
hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding
syntactical variant expressions; and
(d) the plural shall be deemed to include the singular
and vice versa, as applicable.
17.10 Any notice or other communication provided for in this Agreement
or any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand, or if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail or certified
mail, with all postage fully prepaid, or if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the parties at the
following addresses:
25
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Phone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Phone: (713) 507-3725
Telecopy: (713) 507-6834
If to CCC: CHEVRON CHEMICAL COMPANY
P. O. Box 3766
Houston, TX 77253
1301 McKinney Street
Houston, TX 77010
Attention: Vice President & General Manager -
U.S. Chemical Division
Telecopy: (713) 754-3077
with a copy to:
CHEVRON CHEMICAL COMPANY
P. O. Box 3725
Houston, TX 77253
1301 McKinney Street
Houston, TX 77010
Attention: Associate General Counsel
Phone: (713) 754-3319
Telecopy: (713) 754-3377
or at such other address as either party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such
26
earlier time as confirmed orally or in writing by the receiving party. Notice by
U. S. Mail, whether by U. S. Express Mail, registered mail or certified mail, or
by overnight courier shall be deemed to have been received by the close of the
second Business Day after the day upon which it was sent, or such earlier time
as is confirmed orally or in writing by the receiving party. Any party may
change its address or facsimile number by giving notice of such change in
accordance with herewith.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
Day and year first above written.
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G. P., INC.,
ITS GENERAL PARTNER
By: _______________________________________
Name: _______________________________________
Title:_______________________________________
CHEVRON CHEMICAL COMPANY
By: _______________________________________
Name: _______________________________________
Title:_______________________________________
27
EXHIBIT A
ATTACHED TO AND MADE A PART OF THAT CERTAIN CCC PRODUCT SALE
AND PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP AND CHEVRON CHEMICAL COMPANY
ETHANE-PROPANE
80-20 MIXTURE
SPECIFICATION
S-200
Product characteristics with test methods are herein specified for
ethane-propane 80-20 mixtures received or delivered by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
-----------
Percent by Liquid Volume
Methane (Percent of Ethane) 2.0% GPA 2177
Ethylene (Percent of Ethane) 1.0%
Methane, Ethane & Ethylene 78.0% 82.0%
Propane, Propylene & Butanes 18.0% 22.0% ASTM D-2597
Propylene 1.0%
Butanes 0.8%
2. CORROSION
Copper Strip @ 100 F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
4. DRYNESS No Free Water Visual
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
28
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
HD-5 PROPANE FUEL
SPECIFICATION
S-300
Product characteristics with test methods are herein specified for HD-5 propane
fuel received or delivered by WPC. This product meets the requirement of the GPA
HD-5 propane specification.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
-----------
Percent by Liquid Volume As limited by other
Ethane components & GPA 2177
vapor pressure.
Propane 90.0% 100.0%
Propylene 5.0% ASTM D-2597
Butanes & Heavier 2.5%
2. VAPOR PRESSURE
Psig @ 100 F 208 ASTM D-1267 (Note 1)
3. CORROSION
Copper Strip @ 100 F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
5. HYDROGEN SULFIDE
29
PPM by Weight in Liquid 1 Field - Length of
(Lab test required if field Stain Tube
test is positive.) Lab-Gas Chromatography
with Flame Photometric
Detector
30
CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field-Length of
(Field test invalid if Stain Tube
C4+ exceeds 1.0 IV%) Lab-UOP 212
(Lab test required if field UOP 791
test is positive.) Lab-Gas Chromatography
with Flame Photometric
Detector
7. NON-VOLATILE RESIDUE
a) Milliliters @ 100 F 0.05 ASTM D-2158 (Note 1)
b) Oil Stain Pass
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING UPON THE PRODUCT SOURCE:
8. DRYNESS
Freeze Valve, Seconds 60 60 ASTM D-2713
9. VOLATILE RESIDUE
95% Evaporated-Temperature, F -37 ASTM D-1837
10. AMMONIA
PPM by Weight in Liquid 1 Field-Length of
Stain Tube
Lab-UOP 430
11. FLUORIDES
PPM by Weight in Liquid as 5 Field-Length of
Monatomic Flourine Stain Tube
Lab-UOP-619-83 or OI
Analytical or Equal
12. OTHER DELETERIOUS SUBSTANCES PPM BY WEIGHT IN LIQUID
(Includes, but is not limited to, 1 Gas chromatography
Isoprene, Butadiene, with flame ionization
Vinyl Chloride, glycol, or electron capture
amine, caustic) detection or other
industry accepted methods
</TABLE>
31
NOTE: (1) The test methods for items 2 and 7 are not necessary if a
compositional analysis is available which indicates compliance with
these requirements.
32
NORMAL BUTANE
SPECIFICATION
S-400
Product characteristics with test methods are herein specified for normal butane
received or delivered by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Isobutanes and Lighter 5.0% ASTM D-2597
Butylene (Percent of N. Butane) 1.0%
N. Butane & Butylene 95.0% 100% GPA 2165
Pentanes & Heavier 2.0%
2. VAPOR PRESSURE
Psig @ 100 F 50 ASTM D-1267 (Note 1)
3. CORROSION
Copper Strip @ 100 F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated-Temperature, F +36 ASTM D-1837 (Note 1)
6. DRYNESS No Free Water Visual
</TABLE>
NOTE: (1) The test methods for items 2 and 5 are not necessary if a
compositional analysis indicates compliance with these requirements.
33
NATURAL GASOLINE
SPECIFICATION
S-600
Product characteristics with test methods are herein specified for natural
gasoline received or delivered by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Butanes & Lighter 3.0% GPA 2165
Butanes & Lighter 97% 100%
2. VAPOR PRESSURE
Psig @ 100 F, Reid 14 ASTM D-323 (Note 1)
3. CORROSION
Copper Strip @ 104 F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
4. DOCTOR TEST Negative GPA 1138
-----------
5. DRYNESS No Free Water Visual (Note 1)
-------
6. COLOR No Color Field White Cup Method
-----
Saybolt No. Plus 25 Lab-ASTM D-156
7. DISTILLATION
End Point, F 375 ASTM D-216
</TABLE>
NOTE: (1) The test methods for items 2 and 7 are not necessary if an
adequate compositional analysis is available which indicates
compliance with these requirements.
34
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,
EXHIBIT B
ATTACHED TO AND MADE A PART OF THAT CERTAIN CCC PRODUCT SALE
AND PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP AND CHEVRON CHEMICAL COMPANY
PRODUCT STORAGE AGREEMENT
This Storage Agreement shall constitute our mutual agreement to lease certain
Product storage space facilities owned or controlled by WPC.
1. LESSEE: Chevron Chemical Company
2. TERM: Coterminous with the term of the Master
Product Sale and Purchase Agreement to
which this Storage Agreement is
attached.
3. PRODUCTS: 80/20 E/P Mix, Propane, Normal Butane,
Natural Gasoline and other Products as
mutually agreed to by the Parties.
* 4. LEASE VOLUME: [REDACTED] barrels per Year. For the
first Year during the term hereof, the
* volume leased shall be [REDACTED]
Barrels. Annually, during the term
hereof, CCC shall have the right to
change the volumes leased hereunder
within the limits set forth above, upon
thirty (30) Days advanced written notice
to WPC prior to each anniversary of the
Effective Date. CCC shall be allowed one
free turn for the volumes leased each
Year during the term hereof.
* 5. LEASE RATE: [REDACTED] per Barrel per Year for
* volumes up to and including [REDACTED]
* Barrels, [REDACTED] per Barrel per Year
* for volumes exceeding [REDACTED] Barrels
* up to and including [REDACTED] Barrels,
* and [REDACTED] per Barrel per Year for
* volumes exceeding [REDACTED] Barrels up
* to and including [REDACTED] Barrels.
Additional storage space may be leased
during a Year for three Months at a time
at a Lease Rate of fifteen cents ($0.15)
per Barrel per three Month period.
35
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,
* 7. EXCESS STORAGE: [REDACTED] per barrel based on month end
inventory in excess of leased volume. To
the extent practicable, WPC and CCC
shall agree on excess storage amount
prior to storing.
* 8. RETURN PERCENTAGE: [REDACTED] on all volumes of Product
redelivered, excluding EP Mix. For EP
Mix, the return percentage will be
* [REDACTED] on all volumes redelivered up
* to [REDACTED] Barrels per Day and
* [REDACTED] on all volumes redelivered in
* excess of [REDACTED] Barrels per Day.
9. PAYMENT TERMS: Ten (10) days after receipt of invoice.
10. RE-OPENER: This Storage Agreement shall be subject
to the provisions of Sections 5.3 and
5.4 of the Agreement to which this
Exhibit is attached.
Exhibit 10.59
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
CCC/WPC SERVICES AGREEMENT
BETWEEN
CHEVRON CHEMICAL COMPANY
AND
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
CCC/WPC SERVICES AGREEMENT
TABLE OF CONTENTS
1.0 DEFINITIONS 1
2.0 SCOPE OF SERVICES 3
2.1 WPC SERVICES 3
Exhibit A - WPC Services 3
A-1 Motor Carrier Transportation 3
A-2 Ship Terminalling 3
A-3 Warrengas Terminalling 3
A-4 Mont Belvieu Terminalling 3
2.2 CCC SERVICES 3
Exhibit B - CCC Services 4
B-1 Export Refrigeration Equipment 4
B-2 Port Arthur Terminalling Services 4
B-3 Feedstock Pipeline Service 4
2.3 MANAGEMENT OF SERVICES 4
2.4 MAINTENANCE OF SERVICE UNITS AND FACILITY 4
2.5 NEW, MODIFIED AND TERMINATED SERVICES 4
2.6 WPC TERMINATED SERVICES 5
2.7 RESPONSIBLE CARE(R) 5
3.0 ADJUSTMENTS 6
3.1 OPERATING ADJUSTMENTS 6
3.2 UNIT SHUTDOWNS 6
3.3 HARDSHIP 6
4.0 ALLIANCE IMPROVEMENT TEAM 7
4.1 AIT ORGANIZATION 7
4.2 AIT SCOPE OF DUTIES 7
4.3 PLANNING AND BUDGET PROCEDURE 8
4.4 INFORMATION SHARING 8
5.0 TERM AND TERMINATION 9
5.1 TERM 9
5.2 DEFAULT PROCEDURE 9
5.3 ACCESS AND USE BEYOND TERM 9
6.0 BILLING AND PAYMENT 10
6.1 PROCEDURE 10
6.2 SETOFF 10
7.0 WARRANTIES AND LIABILITIES 10
7.1 LIMITATION OF WARRANTIES 10
7.2 LIMITATION OF LIABILITY 10
7.3 INDEMNITY 11
8.0 CONFIDENTIALITY 12
9.0 TAXES 12
10.0 FORCE MAJEURE 12
i
11.0 NOTICES 14
12.0 CONFLICT OF INTEREST 15
13.0 RIGHT TO AUDIT 15
14.0 INSURANCE 15
14.1 INSURANCE REQUIRED 15
14.2 POLICY ENDORSEMENTS 16
14.3 EVIDENCE OF INSURANCE 16
15.0 ASSIGNMENT 16
16.0 DISPUTE RESOLUTION 16
16.1 GENERAL PROCEDURE 16
16.2 SUBMISSION TO AIT 17
16.3 MEDIATION 17
16.4 BINDING ARBITRATION 17
17.0 COVENANTS RUNNING WITH THE LAND 19
18.0 FACILITY TRANSFER RESTRICTIONS 19
19.0 COMPLIANCE AND AFFIRMATIVE ACTION 19
20.0 GENERAL TERMS 20
20.1 INTEGRATION, AMENDMENTS AND WAIVER 20
20.2 INDEPENDENT CONTRACTORS 20
20.3 GOVERNING LAW 20
20.4 UNENFORCEABILITY 20
20.5 THIRD-PARTY BENEFICIARIES 20
20.6 DRUG, ALCOHOL AND RANDOM SECURITY SEARCH 20
20.7 TITLE TO PRODUCTS 20
ii
CCC/WPC SERVICES AGREEMENT
This Agreement is effective , 1996 ("Agreement") by and between Chevron Chemical
Company, a Delaware corporation ("CCC") and Warren Petroleum Company, Limited
Partnership, a Delaware limited partnership ("WPC").
WHEREAS, CCC's affiliate, Chevron U.S.A., Inc., ("CUSA"), and NGC Corporation,
("NGC") have entered into certain agreements (the "Merger Agreements") pursuant
to which CUSA would contribute certain gas gathering, processing and other
midstream assets and related liabilities of CUSA's Warren Petroleum Company
division ("Warren") and natural gas business unit division to a corporation to
be formed which NGC would then be merged into (the "Merger"); and
WHEREAS, immediately subsequent to the Merger, the gas gathering, processing and
other midstream assets and related liabilities of Warren will be transferred to
WPC; and
WHEREAS, CCC and WPC desire to work together to develop a relationship sometimes
hereinafter called an alliance ("Alliance") with the goal of creating a
comprehensive, mutually satisfactory, long-term relationship to fulfill
commercial needs previously performed by and between CCC and Warren to operate
facilities previously owned and operated by each party.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereafter set forth, the Parties agree as follows:
1.0 DEFINITIONS .
The terms used in this Agreement shall have the following meanings:
1.1. "Affiliate" shall mean any Person that directly or indirectly
through one or more intermediaries, controls or is controlled
by or is under common control with the Person specified. The
term "control" (including the terms "controlled by" or "under
common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through
<PAGE>
ownership, by contract, or otherwise. Any Person shall be
deemed to be an Affiliate of any specified Person if such
Person owns fifty percent (50%) or more of the voting
securities of such Person, or if fifty (50%) or more of the
voting securities of the specified Person and such Person are
under common control.
1.2. "Bankruptcy Event" shall mean the occurrence of one or more of
the following events with respect to a Party: (A) the entry of
a decree or order for relief against a Party by a court of
competent jurisdiction in any involuntary case brought against
a Party under any bankruptcy insolvency or other similar law
(collectively, "Debtor Relief Laws") generally affecting the
rights of creditors and relief of debtors now or hereafter in
effect, (B) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar
agent under applicable Debtor Relief Laws for a Party or for
any substantial part of its assets or property, (C) the
ordering of the winding up or liquidation of a Party's
affairs, (D) the filing of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a
period of 180 Days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy
law), (E) the commencement by a Party of a voluntary case
under any applicable Debtor Relief Law now or hereafter in
effect, (F) the consent by a Party to the entry of an order
for relief in an involuntary case under any such law or to the
appointment of or the taking of position by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or
other similar agent under any applicable Debtor Relief Laws
for a Party or for any substantial part of its assets or
property, or (G) the making by a part of any general
assignment for the benefit of its creditors.
1.3. "Business Day" shall mean any day on which commercial banks in
Houston, Texas are open for general business.
1.4. "Cedar Bayou Plant" or "CB" shall mean CCC's chemical plant
located on I-10, Baytown, Texas.
1.5. "Fannett Terminal" or "FT" shall mean Clark Refining &
Marketing, Inc.'s terminal located at Fannett.
1.6. "Mont Belvieu Terminal" or "MBT" shall mean WPC's liquid
hydrocarbon salt dome storage terminal located in Mont
Belvieu, Texas.
1.7. "Party" means individually either CCC or WPC (including their
respective successors and permitted assigns); collectively,
the "Parties."
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1.8. "Person" means any individual, corporation, partnership,
limited partnership, limited liability company, association,
joint venture, trust, or other organization of any nature or
kind.
1.9. "Port Arthur Plant" shall mean CCC's facilities within Clark
Refinery & Marketing, Inc.'s Port Arthur, Texas refinery.
1.10. "Port Arthur Terminal" or "PAT" shall mean CCC's barge loading
and unloading facility at Port Arthur, Texas.
1.11. "Warrengas Terminal" or "WG" shall mean WPC's storage and
marine facility located in Galena Park, Texas.
2.0 SCOPE OF SERVICES .
2.1. WPC SERVICES . During the term of this Agreement, WPC shall
provide and CCC shall pay for services described in the
Exhibits attached and identified below, ("WPC Services").
Except as expressly stated otherwise, WPC Services shall be
provided in accordance with the terms and conditions hereof
and the Exhibits. From time to time, the Parties may mutually
agree to the addition, deletion or modification of WPC
Services by amending this Agreement and its Exhibits. The WPC
Services included on the date of this Agreement are more
particularly described in the following Exhibits:
Exhibit A - WPC Services
EXHIBIT SERVICE LOCATION
A-1 Motor Carrier Transportation CB
A-2 Ship Terminalling WG
A-3 Warrengas Terminalling WG
A-4 Mont Belvieu Terminalling MBT
2.2. CCC SERVICES . During the term of this Agreement, CCC shall
provide and WPC shall pay for services described in the
Exhibits attached and identified below, ("CCC Services").
Except as expressly stated otherwise, CCC Services shall be
provided in accordance with the terms and conditions hereof
and the Exhibits. From time to time, the Parties may mutually
agree to the addition, deletion or modification of CCC
Services by amending this Agreement and its Exhibits. The CCC
3
Services included on the date of this Agreement are more
particularly described in the following Exhibits:
4
Exhibit B - CCC Services
EXHIBIT SERVICE LOCATION
B-1 Export Refrigeration Equipment WG
B-2 Port Arthur Terminalling Services PAT
B-3 Feedstock Pipeline Service MBT, FT
2.3. MANAGEMENT OF SERVICES . Unless otherwise set forth in an
Exhibit, the Party providing a Service shall at all times have
sole authority to manage, direct and control each Service.
Each Party shall, insofar as is reasonably practicable,
operate and maintain its facilities and systems, as the case
may be, in a manner that will avoid or minimize the likelihood
of a disturbance originating from its system which might cause
impairment of the Services. WPC and CCC shall promptly notify
each other of any matter, notification or occurrence of any
event which could reasonably be expected to have the potential
to materially affect the Services. Each Party shall at all
times comply with all laws, ordinances, rules and regulations
related to its Services, and obey all rules and procedures
established by the other Party while on the other Party's
premises whether leased or owned. Upon reasonable request for
health and safety reasons, CCC may require that WPC remove
from CCC's owned or leased premises any personnel or equipment
used to provide WPC Services, and upon reasonable request for
health and safety reasons, WPC may require that CCC remove
from WPC's owned or leased premises any personnel or equipment
used to provide CCC Services.
2.4. MAINTENANCE OF SERVICE UNITS AND FACILITY . Each Party shall
maintain all fixtures and equipment in all units and
facilities used to provide and deliver Services, or to receive
Services, in accordance with maintenance standards observed by
such Party in its maintenance of similar active units or
facilities of comparable age and service it owns and operates
in the State of Texas; provided such standard shall at a
minimum comply with such Party's respective industry standard.
2.5. NEW, MODIFIED AND TERMINATED SERVICES . Each Party may offer
the other Party the opportunity of providing new or modified
services as operational requirements arise. The Party
receiving the offer to provide new or modified services shall
not unreasonably reject such offer. Additionally, as
operational needs for a Service cease, a Party may terminate a
Service or a portion of the Service upon reasonable notice.
5
Notwithstanding the Parties intent to create a mutually
beneficial commercial relationship pursuant to this Agreement
and unless otherwise provided in the Exhibits, nothing in this
Agreement shall be construed as preventing either Party from
entering into agreements with other Parties for the sale or
purchase of Services.
2.6. WPC TERMINATED SERVICES . In the event Services under any
Exhibit cease to be provided for any reason other than at the
end of the Term hereof or any other reason as set forth in
Section 5 hereof, the Party that originally provided such
Services (the "Service Provider") shall, subject to the
Service Provider's primary use, allow the other Party access
to and the right to use any and all required brine systems,
equipment, units or other property, real or personal,
reasonably necessary to allow such other Party to obtain the
benefit of the Services previously provided by the Service
Provider. All expenses and costs related to the access and use
of such systems or property by the other Party shall be
mutually agreed to by the Parties.
2.7. RESPONSIBLE CARE(R) .
(a) CCC is fully committed to and shall abide by the
principles of Responsible Care(R) as espoused by the
Chemical Manufacturers Association.
(b) The Parties hereto acknowledge the importance of
handling chemical materials in a manner that will
ensure the safety of people and the protection of the
environment. It is agreed that they will use, handle,
store, transport and dispose of chemical materials in
accordance with all applicable laws and regulations.
A delivering or receiving Party (in either case,
herein referred to as the "Notifying Party") shall
have the right to suspend delivery or receipt of a
chemical material upon written notice to the other
Party (herein referred to as the "Notified Party") if
in the Notifying Party's reasonable judgment the
Notified Party is not complying with all such
applicable laws and regulations. Delivery or receipt
of chemical material will recommence at the time when
the Notifying Party in its reasonable judgment is
satisfied that the Notified Party is in conformance
with all such applicable laws and regulations. If the
Notified Party is unable or unwilling to meet such
requirements within ninety (90) days of receipt of
the Notifying Party's written notice that the
Notifying Party is suspending delivery or receipt of
such chemical materials, the Notifying Party shall
have the right to terminate or cause to have
terminated that portion of this Agreement relating to
such chemical material.
6
(c) Subject to mutually agreeable times and formats, each
of the delivering and receiving Parties agrees to
allow the other Party access to its facilities from
time to time to perform an on site review to assess
compliance by the other with all such applicable laws
and regulations.
3.0 ADJUSTMENTS .
3.1. OPERATING ADJUSTMENTS . Each Party agrees to modify the terms
in the Exhibits when and to the extent that the other Party
significantly changes the operation of its facilities under
this Agreement. In the event of any operational changes, the
affected Party shall be notified as soon as reasonably
possible. The Party providing Services shall, subject to the
other provisions of this Agreement, use reasonable effort to
accommodate the Party needing Services and the Parties shall
cooperate to effectuate the intent of this Section. The fees
charged by the Party providing Services for Services that were
changed to accommodate the other Party shall be mutually
agreed by the Parties.
3.2. UNIT SHUTDOWNS . Neither Party shall be obligated to provide
or receive Services during maintenance shutdowns of any unit
to which production or use of such Services relate, whether
planned or unplanned. The AIT shall meet each year to
determine the shutdown schedule for each unit covered by this
Agreement for the following year and shall reasonably
cooperate with each other in attempting to schedule planned
outages to minimize adverse impacts on each Party. At least
sixty (60) days prior to a planned shutdown, or as soon as
practicable for an unplanned shutdown, the Party shutting down
a unit shall notify the other Party of the date, anticipated
duration and identification of any unit or units that are
being shutdown that will affect the ability of a Party to
provide or receive Services.
3.3. HARDSHIP . In the event conditions change such that this
Agreement causes an economic or operational hardship to either
Party, upon the written request of either Party, CCC and WPC
shall meet to renegotiate in good faith for fairness and
equity such burdensome terms and provisions. Such
renegotiations shall commence within thirty (30) days from the
receipt of the written request for such renegotiations. If the
Parties are unable to agree on a resolution to such burdensome
terms and provisions within ninety (90) days of the
non-requesting Party's receipt of such written request, the
matter shall be submitted to the dispute resolution procedures
set forth in Section 16.
7
4.0 ALLIANCE IMPROVEMENT TEAM .
4.1. AIT ORGANIZATION . CCC and WPC agree to establish an Alliance
Improvement Team (the "AIT") to perform the duties outlined
below. The AIT will have members from both CCC and WPC. CCC
and WPC shall each bear their own costs for the AIT and AIT
activities. CCC and WPC will each choose a team leader from
its own organization. These two individuals will co-chair the
AIT. Each Alliance team leader will name an alternate team
leader in the event the designated Alliance team leader is
unavailable. The AIT may appoint subcommittees for specific
activities. CCC and WPC may each appoint additional members to
serve on the AIT or such subcommittees at its own expense.
4.2. AIT SCOPE OF DUTIES . The duties of the AIT will be to:
(a) administer and coordinate the routine business of the
Alliance including forecasting, planning,
operational, environmental, safety, maintenance,
technical and scheduling issues;
(b) determine and develop strategies with respect to
Alliance activities;
(c) develop, monitor and communicate mutually agreed to
standards of performance that serve to define each
Party's contribution to the Alliance;
(d) monitor the quality of the Services provided by each
Party;
(e) review all significant equipment, design, process,
and operating changes affecting the Services;
(f) conduct regularly scheduled planning, problem solving
and expense review meetings at such periodic
intervals as shall be mutually agreed;
(g) develop Unit Shut-Down schedules pursuant to Section
3.2;
(h) resolve disputes between the Parties in accordance
with the procedures set forth in Section 16.0;
(i) oversee efforts for long-range process improvement
efforts between CCC and WPC;
(j) review annual storage well workover requirements at
Mont Belvieu Terminal, plan the workover schedule and
recommend to the
8
Parties commercial lease terms, if CCC is required to
lease a well(s) from WPC in order to meet the well
workover plan;
(k) unless unduly burdensome on WPC, plan the supply of
Services in a manner to assist CCC in maintaining its
ISO 9000 certification; and
(l) review and approve required budgets identified in
Section 4.3 for both operating expenses and capital
expenses.
4.3. PLANNING AND BUDGET PROCEDURE . The Parties shall provide each
other (a) a three-year forecast in September of every year;
and (b) a three-month forecast fifteen (15) days prior to the
first day of each month with respect to the Services that will
be needed. Each Party shall make good faith forecasts for the
Services it needs under this Agreement; provided, however,
that such forecasts are for the purposes of planning and
scheduling and shall not be binding on either Party. The
Parties shall also meet on a regular basis to communicate
short term operational plans. In addition, the Parties shall
meet in September of each year to review and approve operating
budgets for (i) the Mont Belvieu Terminal (excluding budget
items not related to any Services); (ii) ethylene/propylene
export unit and (iii) the ethylene import unit. Such budgets
shall contain specific detail for each line item. WPC and CCC
shall promptly notify each other of any matter, notification
or occurrence of any event which could reasonably be expected
to have the potential to exceed a budgeted item by $10,000.00
or 25%, whichever is greater. Neither Party shall commit or
expend any amounts constituting capital expenses without the
other Party's prior approval. WPC shall not without CCC's
prior approval, commit or expend any single expense request,
not constituting a capital expense, which will result in an
estimated charge to CCC in excess of $25,000.00, except in
cases of emergency as hereinafter described, or unless the
expense is included in the approved annual budget. In cases of
emergency, WPC may, without obtaining approval of CCC, proceed
with maintenance or repair work necessary to restore the units
or equipment to operating conditions, or to minimize damage,
or protect the public safety without regard to the limitations
set forth above. However, it is also understood that every
reasonable effort will be made by WPC to notify CCC at the
earliest possible convenience of such emergencies and
expenditures.
4.4. INFORMATION SHARING . CCC and WPC will share their knowledge
of activities and trends in their lines of business which may
relate to the provision of Services pursuant to this
Agreement, but specifically acknowledge that such sharing of
knowledge is subject to and limited by
9
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
business, policy and legal considerations as determined by the
disclosing Party.
5.0 TERM AND TERMINATION .
5.1. TERM . Unless otherwise provided herein, including any
Exhibit, this Agreement shall remain in full force and effect
* for a period of [REDACTED] years from the Effective Date
hereof and shall continue from year to year thereafter unless
and until terminated by either Party at the end of such
* [REDACTED] year period or any yearly anniversary thereafter by
giving the other Party two years advance written notice of its
intention to so terminate; provided that WPC and CCC shall
have the right to terminate Services in any Exhibit at any
time (i) upon ninety (90) days advance written notice in the
event CCC terminates a major portion of its operations that
necessitate the need for the Service at its Cedar Bayou Plant,
Port Arthur Plant or Port Arthur Terminal, (ii) WPC terminates
a major portion of its operations related to the specific
Services at its Mont Belvieu Terminal or Warrengas Terminal,
or (iii) the occurrence of a Bankruptcy Event. WPC and CCC
shall have the right to terminate Services provided in any or
all of the Exhibits in the event that WPC shall not be
permitted to operate or must otherwise divest its interest in
the Mont Belvieu Terminal due to governmental or regulatory
restrictions.
5.2. DEFAULT PROCEDURE . This Agreement may be terminated by either
Party upon thirty (30) days written notice to the other Party,
after it has been determined through the dispute resolution
procedures set forth in Section 16 that the other Party has
materially defaulted on its obligations hereunder (it being
understood that, for purposes of the foregoing, "materially
defaulted" shall mean that the arbitrators have determined
that (i) in consequence of such default, the objectives of
this Agreement (as expressed herein and in the Master Alliance
Agreement of even date herewith by and among Chevron, WPC and
others) are not being met and (ii) the defaulting Party, after
notice and a reasonable opportunity to cure, failed to take
the steps necessary to accomplish such objectives.
5.3. ACCESS AND USE BEYOND TERM . The Parties acknowledge that CCC
has two (2) current contractual agreements with two (2) third
Parties requiring the need for export refrigeration Services
set forth in parts of
10
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
* Exhibits A-2, A-3, A-4 and B-1 that extend beyond the
[REDACTED] term set forth in Section 5.1. In the event that
WPC is unable or unwilling to continue to provide such export
Services, WPC shall grant CCC access and use of facilities at
Warrengas Terminal and Mont Belvieu Terminal at a reasonable
cost to allow CCC to perform such Services itself.
6.0 BILLING AND PAYMENT .
6.1. PROCEDURE . Unless otherwise provided in the Exhibits, the
Parties shall prepare each month a composite invoice for all
Services rendered. The total amount for all Services rendered
and received shall be paid to WPC or CCC, as the case may be,
within ten (10) days after the date of receipt of each month's
invoice. If any of the price indices or publications
referenced in this Agreement cease to be published or if such
indices or publications are changed substantially in their
method of measurement, the Parties shall substitute by mutual
agreement other indices or publications that, as closely as
practical, reflects the changes that such indices or
publications measured immediately prior to the change.
6.2. SETOFF . All payments will be made without setoff or
counterclaim; provided, however, that upon a Party's (the
defaulting Party) failure to make payment of undisputed
amounts on the due date, the other Party (the non-defaulting
Party) may, at its option and in its discretion, setoff
against any amounts owed to the defaulting Party any amounts
owed by the defaulting Party under this Agreement or
otherwise. The obligations of the non-defaulting Party and the
defaulting Party under this Agreement in respect of such
amounts shall be deemed satisfied and discharged to the extent
of any such setoff. The non-defaulting Party will give the
defaulting Party notice of any setoff made under this Section
6.2 as soon as practicable after the setoff is made provided
that failure to give such notice shall not offset the validity
of the setoff.
7.0 WARRANTIES AND LIABILITIES .
7.1. LIMITATION OF WARRANTIES . All Services shall (i) conform to
all requirements and specifications set forth in the
applicable exhibit; (ii) shall meet the generally accepted and
prudent practices of the industry for such Services; and (iii)
be performed by qualified personnel in a lawful, safe, timely
and cost effective manner. All fixtures and
11
equipment used to provide Services shall be maintained in good
operating condition and operated and maintained in compliance
with all applicable federal, state and local laws, rules and
regulations.
7.2. LIMITATION OF LIABILITY . NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL OR
INCIDENTAL DAMAGES, CONTINGENT OR PUNITIVE, INCLUDING, WITHOUT
LIMITATION, LOST PROFITS INCURRED OR CLAIMED BY THE OTHER
PARTY.
7.3. INDEMNITY .
(a) The Party providing Services under each exhibit shall
defend, indemnify and hold harmless the other Party,
its affiliates and subsidiaries, and the officers,
directors, employees and agents of any of them (each
an "Indemnitee") from and against any and all loss,
damage, injury, liability and claims thereof for
injury to or death of any person (except as provided
in Section 7.3(b) for its employees or employees of
one of its contractors) or for loss of or damage to
property resulting from such Party's performance of
or failure to perform such Services. Such indemnity
shall apply whether or not an Indemnitee was or is
claimed to be passively, concurrently or actively
negligent, and regardless of whether liability
without fault is imposed or sought to be imposed on
one or more of the Indemnities. This Indemnity shall
not apply to the extent that it is void or otherwise
unenforceable under applicable law in effect on or
validly retroactive to the date of this Agreement,
and shall not apply where such loss, damage, injury,
liability or claim is the result of the sole
negligence or willful misconduct of an Indemnitee.
(b) CCC shall defend, indemnify and hold harmless WPC
from and against any and all claims relating to this
Agreement for injury to or death of an employee or
representative of CCC or its subcontractors, whether
or not WPC, its employees or representatives are
claimed to be passively, concurrently or actively
negligent, and regardless of whether liability
without fault is imposed or sought to be imposed;
provided this indemnity shall not apply when such
injury or death is the result of the sole negligence
or willful misconduct of WPC, its employees or
representatives.
WPC shall defend, indemnify and hold harmless CCC
from and against any and all claims relating to this
Agreement for injury to
12
or death of an employee or representative of WPC or
its subcontractors, whether or not CCC, its employees
or representatives are claimed to be passively,
concurrently or actively negligent, and regardless of
whether liability without fault is imposed or sought
to be imposed; provided this indemnity shall not
apply when such injury or death is the result of the
sole negligence or willful misconduct of CCC, its
employees or representatives.
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8.0 CONFIDENTIALITY .
During the performance of this Agreement, each Party ("Recipient") may
gain access to or possession of information belonging to the other
Party ("Owner") that is confidential (a "disclosure"). Recipient shall
use such information only for the purpose disclosed and shall use its
commercially reasonable efforts to avoid other use or disclosure of
such information unless required by law or governmental agency or
consented to by its Owner, which consent shall not be unreasonably
withheld. Confidential information shall include business, technical,
personnel and other information designated as confidential, but shall
not include information that is or becomes publicly known without fault
of the Recipient, was known to Recipient or its predecessor from a
source independent of the Owner and recorded in writing prior to
disclosure, was independently developed by the Recipient, or was
received by the Recipient or its predecessor from a source independent
of the Owner prior to its disclosure. All confidential information
shall be returned to its Owner upon request.
9.0 TAXES .
Any sales, use, transfer or similar taxes, now or hereafter imposed,
levied or assessed by any governmental authority directly upon the
Services herein provided for or the transfer pursuant to the terms of
this Agreement of any related materials that are the subject matter of
this Agreement, shall, if collectible or payable by the Party providing
Services ("Supplier"), be paid by the Party receiving such Services
("Recipient) on demand by the Supplier. If the Recipient claims
exemption from any of the aforesaid taxes, then the Recipient shall
furnish the Supplier with a properly completed exemption certificate.
If the Recipient holds a Texas direct payment permit, it shall issue to
the Supplier a properly completed direct payment exemption certificate
and thereafter hold harmless and indemnify the Supplier for any sales
or use taxes assessed against the Supplier by any taxing authority in
respect to any taxable sales, including the amounts of any penalties,
interest and reasonable attorneys' fees. Notwithstanding the foregoing,
this Section shall not apply to (a) income, franchise or similar taxes
levied on or measured by a Party's net income; (b) personal property
taxes levied on or measured by the value of any related materials that
are the subject matter of this Agreement, to the extent such taxes are
applicable or allocable to periods in which the Supplier had title to
such related materials which were taxed.
10.0 FORCE MAJEURE .
10.1. If either Party is rendered unable, wholly or in part, by
Force Majeure to carry out its obligations under this
Agreement, is agreed that upon such Party's giving notice and
reasonably full particulars of such Force Majeure in writing
to the other Party after the occurrence of the cause
14
relied on, then the obligations of the Party giving such
notice, so far as to the extent that they are affected by such
Force Majeure, shall be suspended during the continuance of
any inability so caused, but for no longer period, and such
cause shall so far as possible be remedied with all reasonable
dispatch. Except as stated below, this Agreement shall not be
terminated by reason of any such cause, but shall remain in
full force and effect and this Agreement shall not be extended
regardless of such curtailment or cessation. If any such cause
results in substantial interference with a Party's performance
of Services and such condition continues for six (6) months or
longer, the other Party may terminate the affected Exhibit
upon sixty (60) days prior written notice. The Party not
declaring Force Majeure shall have the option to extent the
Agreement for any periods of Force Majeure.
10.2. The term "Force Majeure" as used herein shall mean acts of
God, strikes, lockouts, or other industrial disturbances, acts
of the public enemy, wars, blockades, insurrections, riots,
epidemics, landslides, lightning, earthquakes, fires,
tornados, hurricanes, or storms, tornado, hurricane, or storm
warnings which in any Parties' judgment require the
precautionary shutdown of either Party's facilities or any
operating units thereof, floods, washouts, arrests or
restraints of the government, either federal or state, civil
or military, civil disturbances, explosions, sabotage,
breakage or accident to equipment, machinery or lines of pipe,
freezing of machinery, equipment or lines of pipe, electric
power shortages, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules,
orders, laws or governmental authorities (both federal, state
and local), shutdowns due to explosion or other extraordinary
incident, or any other causes, whether of kind herein
enumerated or otherwise, which were not reasonably foreseeable
on the effective date of this Agreement, and which are not
within the control of the Party claiming suspension and which
such Party is unable to overcome by the exercise of due
diligence. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of
the Party having the difficulty, and that the above
requirement that any Force Majeure shall be remedied with all
reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing
parties when such course is inadvisable in the discretion of
the Party having difficulty. The term Force Majeure shall also
include any event of Force Majeure occurring with respect to
the facilities or services of either CCC's or WPC's third
party suppliers or customers delivering or receiving any
product, fuel, feedstock or other substance necessary to the
performance of such Party's obligations, and shall also
include the curtailment or interruption of deliveries or
service by such third party suppliers or customers as a result
of an event of Force Majeure. It is expressly agreed by the
Parties
15
that neither (i) CCC's inability economically to use Feedstock
purchased under this Agreement nor (ii) WPC's ability to sell
Feedstock to a market at a more advantageous price shall
constitute an event of Force Majeure.
11.0 NOTICES .
Any notice required or permitted hereunder shall be in writing and
shall be deemed to be given if delivered personally; delivery by
certified mail, postage prepaid; delivered by a recognized overnight
commercial carrier or telecopied with receipt acknowledged to the
following addresses:
If to WPC: WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13430 Northwest, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President & General Manager -
NGL Marketing
Telephone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13450 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
If to CCC: CHEVRON CHEMICAL COMPANY
P. O. Box 3766
Houston, Texas 77253
1301 McKinney
Houston, Texas 77010
Attention: Vice President & General Manager-
U.S. Chemical Division
Telecopy: (713) 754-3077
With a copy to:
CHEVRON CHEMICAL COMPANY
P. O. Box 3725
Houston, Texas 77253
1301 McKinney
Houston, Texas 77010
Attention: Associate General Counsel
Telecopy: (713) 754-3377
16
Either Party may change its notice address by notifying the other of
such change, which shall be effective fifteen (15) days after the
giving of such notice.
12.0 CONFLICT OF INTEREST .
Neither Party shall give any director, employee or representative of
the other Party any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement, or enter
into any other business arrangement with any director, employee or
representative of the other, without prior written notification to the
other Party. Any representative(s) authorized by either Party may cause
an audit of any and all records of the other Party as necessary and
proper to verify that there has been compliance with this Section.
13.0 RIGHT TO AUDIT .
Each Party shall maintain true and complete records related to the
Services and shall retain all such records for a minimum period of
twenty-four (24) months after the end of the month in which Services
are performed. Either Party, upon notice in writing to the other, shall
have the right, at reasonable hours, to audit the accounts and records
relating to the accounting or billing under the provisions of any
article hereof. Except as set forth below for matters related to CCC's
third party agreements, the auditing party must make written exception
to and make a claim upon the other Party for all discrepancies
disclosed by the audit within twenty-four (24) months of the rendition
of any statement or invoice forming the basis of such claim. The
requirement to make written exceptions within said twenty-four (24)
month period shall not apply to CCC for Services relating to the third
party agreements identified in Section 5.3, the time periods for which
will be governed by the terms and provisions of such third party
agreements. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
14.0 INSURANCE .
14.1. INSURANCE REQUIRED . CCC shall maintain during the term of
this Agreement insurance specified in Section 14.1(a) and
otherwise shall maintain a policy of self-insurance for
performance under this Agreement. WPC shall maintain during
the term of this Agreement insurance specified in Section
14.1(a), (b) and (c) unless it elects to self-insure for all
or any portion of the coverage in Section 14.1(b) and (c),
which it may do upon delivery of written notice to CCC.
17
(a) Workers' Compensation and Employers' Liability
Insurance as prescribed by applicable law, including
insurance covering liability under the Longshoremen's
and Harbor Worker's Act, the Jones Act and the Outer
Continental Shelf and Land Act, if applicable;
(b) Comprehensive or Commercial General Liability (Bodily
Injury and Property Damage) with contractual
liability insurance to cover liability assumed under
this Agreement. The limits of liability of such
insurance shall not be less than $1,000,000 combined
single limit per occurrence; and
(c) Automobile Bodily Injury and Property Damage
Liability Insurance, covering non-owned and hired
automobiles, the limits of which shall not be less
than $250,000 per person/$500,000 per occurrence for
Bodily Injury and $100,000 per occurrence for
Property Damage. This insurance shall extend to
automobiles used by a Party's personnel, agents or
subcontractors in performance of Services under this
Agreement.
14.2. POLICY ENDORSEMENTS . The insurance under this Section shall
provide that a Party will receive thirty (30) days written
notice prior to the cancellation or material change of the
insurance. The insurance specified under Section 14.1(a) shall
contain a waiver of subrogation against the indemnitees, and
the insurance provided under Section 14.1(b) and (c) shall
name the other Party as additional insured with respect to
performance under this Agreement.
14.3. EVIDENCE OF INSURANCE . Each Party shall, before commencing
work, provide the other Party with certificates or other
documentary evidence of the above insurance, satisfactory to
such Party.
15.0 ASSIGNMENT .
Neither Party shall voluntarily assign its rights nor delegate its
duties under this Agreement or an Exhibit, nor any part of such rights
or duties except to an Affiliate, without prior written consent of the
other Party.
16.0 DISPUTE RESOLUTION .
16.1. GENERAL PROCEDURE . CCC and WPC agree to utilize the procedure
set forth in this Section to resolve in good faith any
dispute, controversy or claim related to this Agreement,
including any dispute over the performance, breach,
termination, interpretation, or validity of this Agreement.
Nothing herein is intended to limit the Parties from resolving
informally between them any controversy, claim or dispute that
may
18
arise and thus avoiding the necessity of presenting such
matter to the AIT.
16.2. SUBMISSION TO AIT . The dispute, controversy, or claim shall
first be submitted to one representative chosen by each
Party's AIT with such explanation or documentation as the
Parties deem appropriate to aid such representatives in their
consideration of the issues presented. The date the matter is
first submitted to the AIT shall be referred to as the
"Submission Date." The AIT representatives shall attempt in
good faith, through the process of discussion and negotiation,
to resolve any dispute, controversy, or claim presented to it
within forty-five (45) days after the Submission Date.
16.3. MEDIATION . If the AIT cannot so resolve any dispute,
controversy, or claim submitted to it within forty-five (45)
days after the Submission Date, the Parties shall attempt in
good faith to settle the matter by submitting the dispute,
controversy or claim to mediation within sixty (60) days after
the Submission Date using any mediator upon which they
mutually agree. If the Parties are unable to mutually agree
upon a mediator within seventy-five (75) days after the
Submission Date, the case shall be referred for mediation to
the office of Judicial Arbitration and Mediation Services,
Inc. ("JAMS") that is in closest proximity to Houston, claim
or controversy arose. The cost of the mediation will be split
equally between the Parties unless they agree otherwise in
writing.
16.4. BINDING ARBITRATION .
(a) ALL DISPUTES ARBITRATION. All disputes between the
Parties arising under this Agreement and not resolved
through negotiation or mediation shall be submitted
to arbitration in accordance with this Section 16.0
and the Parties hereby expressly waive all rights to
have any such disputes heard before a court of law,
except the right to enforce an arbitration award as
described in Section 16.4 (e). Arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. ss.
1, et seq., and not by the arbitration acts, statutes
or rules of any other jurisdiction.
(b) PROCEDURE. In the event the Parties are unable to
resolve a dispute arising under this Agreement after
exercising good faith efforts to do so, either Party
may require that the matter be resolved through
binding arbitration by submitting a written notice to
the other. The notice shall name the noticing Party's
arbitrator and shall contain a statement of the
issue(s) presented for arbitration. Within fifteen
(15) days after receipt of a notice of arbitration,
the other Party shall name its arbitrator by written
notice and may
19
designate any additional issue(s) for arbitration.
The two named arbitrators shall select the third
arbitrator within fifteen (15) days after the date on
which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the
third arbitrator, either Party shall be entitled to
request the Senior Judge of the United States
District Court of the Southern District of Texas to
select the third arbitrator. All arbitrators shall be
qualified by education or experience within the
energy industry to decide the issues presented for
arbitration. No arbitrator shall be a current or
former director, officer or employee of either Party
or its Affiliates; an attorney (or member of a law
firm) who has rendered legal services to either Party
or its Affiliates, within the preceding three (3)
years; or an owner of any of the common stock of
either Party or its Affiliates.
(c) ARBITRATION HEARINGS. The three arbitrators shall
commence the arbitration hearing within twenty-five
(25) days following the appointment of the third
arbitrator. The proceeding shall be held at a
mutually acceptable site in Houston, Texas. If the
Parties are unable to agree on a site, the
arbitrators shall select a site. The arbitrators
shall have the authority to establish rules and
procedures governing the arbitration hearing. Each
Party shall have the opportunity to present its
evidence at the hearing. The arbitrators may call for
the submission of pre-hearing statements of position
and legal authority, but no post-hearing briefs shall
be submitted. With respect to disputes regarding
price, fees, rates, indices or any redetermination,
each Party shall submit to the arbitration panel a
final offer of its proposed resolution of the dispute
and a majority of the arbitrators shall approve the
final offer of one Party without modification, and
reject the offer of the other Party. The arbitration
panel shall not have the authority to award punitive
or exemplary damages or any type of damages expressly
waived in this Agreement. The arbitrators' decision
must be rendered within thirty (30) days following
the conclusion of the hearing or submission of
evidence, but no later than ninety (90) days after
appointment of the third arbitrator. All evidence
submitted in an arbitration proceeding, transcripts
of such proceedings, and all documents submitted by
the Parties in an arbitration proceeding shall be
deemed confidential information subject to Section
8.0.
(d) ARBITRATION DECISION. The decision of the arbitrators
or a majority of them, shall be in writing and shall
be final and binding upon the Parties as to the issue
submitted. Each Party shall bear the expense and cost
of its own attorneys and witnesses, its own
20
arbitrator and one-half of the expense and cost of
the third arbitrator.
(e) ENFORCEMENT OF AWARD. Judgment upon any award
rendered by the arbitrators may be entered in any
court having jurisdiction. The prevailing Party shall
be entitled to reasonable attorneys' fees in any
court proceeding necessary to enforce or collect any
award or judgment rendered by the arbitrators.
17.0 COVENANTS RUNNING WITH THE LAND .
The covenants and agreements contained in this Agreement touch and
concern the land on which the Mont Belvieu Terminal and Warrengas
Terminal are located, and both the benefits and burdens thereof shall
run with such land, and shall be binding upon, and inure to the benefit
of, the future owners and lessees thereof.
18.0 FACILITY TRANSFER RESTRICTIONS .
In the event WPC desires to sell or otherwise transfer its interest in
certain assets ("Offered Interest") situated in the Mont Belvieu and/or
Galena Park area which includes either or both of the Mont Belvieu
Terminal or the Warrengas Terminal, WPC shall first notify CCC and
enter into good faith negotiations with CCC to sell the Offered
Interest. If the parties are unable to agree upon terms of sale or
transfer of the Offered Interest after good faith negotiations, WPC
shall have the right to sell or otherwise transfer the Offered Interest
to a third party.
19.0 COMPLIANCE AND AFFIRMATIVE ACTION .
To the extent applicable to this Agreement, both Parties shall comply
with the following clauses contained in the Code of Federal Regulations
and incorporated herein by reference: 48 C.F.R. 52.203-6 (Subcontractor
Sales to Government); 48 C.F.R. 52.219-8, 52.219-9 (Utilization of
Small and Small Disadvantaged Business Concerns); 48 C.F.R. 52.222-26
(Equal Opportunity); 48 C.F.R. 52.222-36 (Handicapped Workers); 48
C.F.R. 52.223-2 (Clean Air and Water); and 48 C.F.R. 52-223-3
(Hazardous Material Identification and Material Safety Data). Unless
previously provided, if the value of this Agreement exceeds $10,000,
both Parties shall provide to the other Party a Certificate of
Non-segregated Facilities. Both Parties agree and covenant that none of
its employees,or employees of its subcontractors, who provide services
to either Party pursuant to this Agreement are or will be unauthorized
aliens as defined in the Immigration Reform and Control Act of 1986.
21
20.0 GENERAL TERMS .
20.1. INTEGRATION, AMENDMENTS AND WAIVER . This Agreement,
integrates the entire understanding between the Parties with
aspect to the subject matter covered. It supersedes all prior
understandings, drafts, discussions or statements, whether
oral or in writing, expressed or implied, dealing with the
same subject matter. It may not be amended or modified in any
manner except by a written agreement signed by both Parties.
No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision
(whether or not similar) nor shall such waiver constitute a
continuing waiver unless expressly provided.
20.2. INDEPENDENT CONTRACTORS . The Parties shall perform all
Services under this Agreement as independent contractors.
Nothing contained in this Agreement shall be construed to
create an association, trust, partnership or joint venture or
impose a trust or partnership duty, obligation or liability on
or with regard to either Party.
20.3. GOVERNING LAW . Any questions concerning the interpretation
and enforcement of this Agreement shall be governed by the
laws of the State of Texas without regard to its conflicts of
law provisions.
20.4. UNENFORCEABILITY . If any section or provision of this
Agreement or any exhibit shall be determined to be invalid by
applicable law, then for such period of time that same is
invalid, it shall be deemed to be deleted from this Agreement
and the remaining portions of this Agreement shall remain in
full force and effect.
20.5. THIRD-PARTY BENEFICIARIES . There are no intended third Party
beneficiaries to this Agreement and nothing in this Agreement
shall entitle any person other than CCC or WPC and their
respective successors and assigns permitted hereby to any
claim, cause of action, remedy or right of any kind.
20.6. DRUG, ALCOHOL AND RANDOM SECURITY SEARCH . In performing
Services under this Agreement, each Party agrees to abide by
and require all of its employees and contractor's to abide by
the other Party's drug, alcohol and random security search
policy.
20.7. TITLE TO PRODUCTS . Title to all products shall at all times
remain with the Party requesting Services and such Party shall
have the right at all times to remove such products and/or
transfer title and possession to others. The Party having
custody of any products waives any warehousemen or materialmen
liens related to the products.
22
20.8. RECORDING. WPC shall execute in recordable form a memorandum
or extract of this Agreement necessary to permit CCC to
effectuate its interest under Sections 5.3, 17 and 18.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their
duly authorized representatives as of the date first set forth above.
WARREN PETROLEUM COMPANY, CHEVRON CHEMICAL COMPANY
LIMITED PARTNERSHIP
By: WARREN PETROLEUM G.P., INC.
Sole General Partner
By: By:
Title: Title:
23
EXHIBIT A-1
Motor Carrier Transportation
1.0 Scope of Services.
1.1. NEWCO agrees to provide motor vehicle equipment which meets
all U.S. Department of Transportation standards and is safe,
complete and efficient for the performance of its
transportation obligations under this Agreement. NEWCO agrees
to accept CCC's shipments of products at the locations
identified in Section 2.0 and upon receipt of the such
products, NEWCO will transport such products with reasonable
dispatch and deliver them in like good order and condition to
the location designated by CCC and will provide specialized
transportation services as mutually agreed between NEWCO and
CCC.
1.2. The parties agree that the transportation provided under the
terms of this Agreement is on a non-exclusive basis and NEWCO
may commingle CCC's freight with other freight received from
customers not party to this Agreement so long as commingling
does not affect product quality or product value. CCC is not
precluded from using the services of other carriers under this
Agreement.
1.3. All obligations to tender shipment or ship products shall be
on a non-exclusive basis and the Parties are not obligated to
tender a shipment or ship products unless mutually agreed.
1.4. NEWCO authorized CCC or its authorized agent to reposition
trailers assigned to CCC facilities for the purpose of loading
and unloading provided CCC shall be responsible for any
liability related to such repositioning
iv
and will indemnify and hold harmless NEWCO, its Affiliates and
the officers, directors, employees and agents of any of them
from and against any and all loss, damage, injury, liability
and claims for injury to or death of any person or for loss or
damage to property resulting from the repositioning of
trailers by CCC.
1.5. NEWCO is responsible for filing, when applicable, a copy of
this Agreement with the appropriate regulatory agencies within
the period of time provided by law.
2.0 Product and Volume.
Chevron shall tender to NEWCO a series of shipments which constitute a
portion of its estimated requirements as set forth below:
PRODUCT ORIGIN ESTIMATED VOLUME
Lime St. Genevieve, MO 0 - 22 MMLBS
Butene CB-Baytown, TX 0 - 4 MMLBS
HAD CB-Baytown, TX 0 - 2 MMGAL
Naphtha CB-Baytown, TX 0 - 120 MMLBS
Polyethylene CB-Baytown, TX 0 - 41 MMLBS
Wax CB-Baytown, TX 0 - 55 MMLBS
Light Petroleum Oil CB-Baytown, TX 0 - 3.6 MMGAL
3.0 Rates.
v
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
* 3.1. CCC shall pay NEWCO a flat rate of [REDACTED] for all truck
load shipments of lime product from St. Genevieve, Missouri to
Belle Chasse, Louisiana (Oak Point).
3.2. NEWCO shall transport products, other than lime, at NEWCO
rates shown based upon mileage between origins and
destinations as provided in Appendix A. Rates include pump and
hose charges. Tank cleaning charges will be invoiced to CCC at
NEWCO's cost.
3.3. This Agreement applies to prepaid shipments originating at,
and collect shipments destined to the facilities or customers
of CCC. This Agreement will also apply to third-party
shipments in which CCC is responsible for the freight charges.
3.4. CCC will make payment of invoices submitted by NEWCO to CCC
within thirty (30) days of receipt. Invoices shall be
accompanied by substantiating documentation reflecting the
service provided and the charges therefor. The provisions of
Ex Parte Order No. MC-1 of the Interstate Commerce Commission
are not part of this Agreement.
3.5. The provisions of this Agreement shall apply on shipments
returned to the original shipping point by a reverse route,
including those shipments refused or rejected, and the rates
shall be no higher than the rates for outbound movement.
* 3.6. Demurrage shall accrue at a rate of [REDACTED] per fifteen
(15) minutes or a fraction thereof after two (2)
vi
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
hours free time for loading or unloading, unless amended for a
specific load.
4.0 Rate Adjustments.
NEWCO has the right to change at any time the price or freight
allowance specified herein, provided NEWCO has given CCC at least
thirty (30) days written notice of such change prior to the effective
date of such change. CCC's failure to serve NEWCO with written notice
of objection shall be considered acceptance of such change. If such
written notice of objection is served by CCC, NEWCO has the option to
continue to provide Services hereunder at the same fee and terms as
were in effect at the time NEWCO gave notice of such change and
thereafter resolve the issue by the dispute resolution provisions in
Section 16.
5.0 Term.
The Services covered in this Exhibit shall be effective for
* [REDACTED] from the effective date of this Agreement and shall continue
in effect thereafter unless and until cancelled by either Party by
giving the other Party one hundred eighty (180) days advance written
notice of the termination date.
6.0 Emergency Response.
NEWCO agrees that it has, or is developing, a written emergency
response plan and procedure. The plan takes into account the nature of
the materials to be shipped under this contract. NEWCO has provided, or
will provide, a copy of NEWCO's emergency response plan to CCC upon
request.
vii
7.0 Risk of Loss.
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by NEWCO, its employees,
contractors or agents which shall be the responsibility of NEWCO.
viii
EXHIBIT A-2
Ship Terminalling
1.0 Scope of Services.
NEWCO shall operate, maintain and provide qualified personnel for the
dock facilities at the Warrengas Terminal and coordinate the scheduling
for CCC shipment of the following products and other products, upon
mutual agreement, as follows:
PRODUCT ESTIMATED ANNUAL VOLUME
------- -----------------------
Ethylene Imports (C=2) 0 - 800 MMLBS
Ethylene Exports (C=2) 0 - 200 MMLBS
Propylene Exports (C=3) 0 - 200 MMLBS
Naphtha/Condensate Imports 0 - 5 MMBBLS
2.0 Hours of Operation.
Upon reasonable notice, NEWCO will provide Services at the dock
facilities 24 hours a day, 7 days a week, including holidays, for the
receipt and/or delivery of products.
3.0 Fees.
ix
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
3.1. Ethylene Import (C=2). Unloading fees for ethylene imports and
transfer into CCC's ethylene pipeline will consist of the
following components:
* TOTAL THROUGHPUT [REDACTED]
* O - 110 MMLBS/year [REDACTED]
* 110 - 220 MMLBS/year [REDACTED]
* 220 - 330 MMLBS/year [REDACTED]
* Over 330 MMLBS/year [REDACTED]
Repair and maintenance expenses shall be at cost as set forth
in the ethylene import unit budget.
3.2. Ethylene Export (C=2) and Propylene Export (C=3). Loading fees
for ethylene and propylene exports from CCC's ethylene and
propylene pipe lines shall consist of the following
components:
* (a) Monthly charge of [REDACTED]
(b) Electrical expenses and repair and maintenance
expenses at cost as set forth in the required
Ethylene/Propylene Export unit budget.
* (c) Berth charge of [REDACTED] per hour. This berth
charge shall not apply to vessels that are undergoing
conditioning.
x
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
3.3. Naphtha/Condensate Imports. Unloading of naphtha imports and
delivery by NEWCO pipeline into CCC's designated well at Mont
Belvieu's Terminal shall be * charged a fee of [REDACTED]
4.0 Fee Adjustments.
4.1. The Base Rates in Section 3.1 shall be adjusted by the
following factors:
(a) Electrical Factor. .05 (cent)/lb of the Base Rate is
electrical power related and will be escalated at the
beginNIng of each calendar quarter to reflect actual
unit electrical power costs to the Galena Park
Warrengas Terminal for the previous quarter. The base
for fourth quarter 1988 will be 6(cent) per kilowatt
hour (kwh). (Example: if unit power costs at the
TerminaL in the first quarter 1990 are 12(cent)/kwh,
the payments in Section 3.1 will reflect an added
cost of 0.05(cent)/lb for second quarteR 1990.)
(b) Fuel Factor. .05 (cent)/lb of the Base Rate is fuel
gas related and will be escalated at the beginning of
each calendar quarter to reflect actual unit fuel gas
costs to the Galena Park Warrengas Terminal for the
previous quarter. The base for fourth quarter 1988
will be $1.50/million British Thermal Unit (MBTU).
(example: if unit fuel gas costs at the Terminal in
first quarter 1990 are $3.00/MBTU, the payments in
Section 3.1 will reflect an added cost of
0.05(cent)/lb for second quarter 1990.)
xi
(c) Inflation Factor. The Base Rate except for the
0.1(cent)./lb portion of the Base Rate identified in
Sections 4.1(A) and 4.1(b) shall be escalated at the
beginning of each year to reflect the change in the
Non-Farm Business Implicit Price Deflator (NFBIPD)
published by the U.S. Department of Labor (i.e. the
costs for 1995 for the first 55 million pounds will
be increased by 0.004(cent)/lb if the 12-month
average of the NFBIPD increases by one percent (1%)
from 1988 to 1994).
4.2. The monthly charges in Section 3.2 (a) and (c) shall be
adjusted on January 1 of each year, using the Houston Consumer
Price Index (CPI) as compared to the base index on January 1,
1996. The fee and adjustments in Section 3.2 and 4.2 shall be
changed to a commercial based fee within the first six (6)
months of this Agreement.
4.3. For the fees specified in Section 3.3, each party shall have
the right to request a change in the fee at any time during
the term covered by this Agreement, provided it gives the
other party at least 90 days written notice of such change.
The failure of the notified party to serve the other party
with written notice of objection thirty (30) days prior to the
effective date shall be considered acceptance of such change.
If written notice of objection is served, the notifying party
shall have the right to continue to provide Services under
this Exhibit at the same price and terms in effect at the time
it gave notice of the requested change or resolve the issue by
the dispute resolution provision in Section 16.
5.0 Risk of Loss .
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by NEWCO, its
xii
employees, contractors or agents which shall be the responsibility of
NEWCO.
6.0 Demurrage.
Each Party shall be responsible for its demurrage, except for claims
attributable to the other Party's, or its employee's contractor's or
agent's negligent acts or omissions or for encroachment by the other
Party on the loading or unloading schedule as provided for in Section
7.0.
7.0 Scheduling.
The Parties agree that CCC shall have access to Dock 1 for up to 70%
dock utilization on a monthly basis. Scheduling for ship movement of
products shall be made through the logistics specialist at NEWCO's
Warrengas Terminal. NEWCO shall load and unload vessels at the docks in
order of their scheduled arrival. Neither Party shall be restricted to
its utilization percentage if the other Party is not using Dock 1.
Breadth interference between Docks 1 and 2 shall be taken into account
when either Party schedules activity for Docks 1 and 2.
xiii
Exhibit A-3
Warrengas Terminalling
1.0 Scope of Services .
1.1. NEWCO shall provide transfer, storage and other terminalling
services at the Warrengas Terminal including barge, truck and
pipeline receipt and delivery. NEWCO shall operate for the
benefit of both parties the flare system including the
processing of relief gasses and liquids.
1.2. NEWCO shall operate, maintain and provide qualified personnel
for the tank storage and dock facilities at the Warrengas
Terminal to service CCC's shipment requirements estimated as
follows:
PRODUCT ESTIMATED ANNUAL VOLUME
------- -----------------------
Propane - Propylene Mix (PPmix) 0 - 1.0 MMBBLS
Crude Butadiene (CC4) 0 - 1.5 MMBBLS
Crude Isoprene (C5) 0 - 500 M BBLS
Heavy Aromatic Distillate (HAD) 0 - 550 M BBLS
Ethylene (C=2) (Truck Unloading) 0 - 4000 MT
1.3. NEWCO shall provide access to and permit Chevron Pipeline
Company ("CPL") to use the flare system and will supply
instrumentation air, electricity, and any other utilities
reasonably required by the Chevron Pipeline Company pipeline
system within the Warrengas Terminal.
xiv
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
2.0 Hours of Operation .
Upon reasonable notice to NEWCO, the tank storage and dock facilities
shall remain operational twenty-four (24) hours a day, seven (7) days a
week, including holidays, for the receipt and/or delivery of products.
3.0 Fees .
3.1. Propane - Propylene Mix . Unloading PPmix from barges and
transporting by pipeline by NEWCO to a well owned or leased by
CCC at Mont Belvieu Terminal shall be charged at a fee of
* [REDACTED].
3.2. Crude Butadiene. Transporting CC4 from CCC's Cedar Bayou Plant
by NEWCO pipeline to Warrengas Terminal, storage in a
dedicated tank (currently designated as Tank 58) and loading
* product onto barges shall be charged at a fee of [REDACTED]
3.3. Crude Isoprene . Transporting C5 from CCC's Cedar Bayou Plant
by NEWCO pipeline to Warrengas Terminal, storage and loading
product onto barge, tank trucks or into pipeline at a fee to
be agreed upon by the parties in good faith negotiation as
such may be required in the future.
3.4. Heavy Aromatic Distillate . Transporting from CCC's Cedar
Bayou Plant by pipeline and re-delivery of HAD to the GATX
* Terminal shall be charged at a fee of [REDACTED].
3.5. Ethylene Receipts (C=2) . Receipt and unloading of tank trucks
* and transfer to CCC pipeline at a fee of [REDACTED].
xv
3.6. Flare System. NEWCO shall pay for all costs associated with
the normal operation and maintenance of the flare system and
associated relief systems, except for repair and maintenance
associated with the ethylene and propylene flare piping
associated with dock 1 equipment which shall be paid for by
CCC.
3.7. Chevron Pipeline System. There shall be no separate charges
for Services provided under Section 1.3 so long as CPL's use
of the flare system and instrumentation air, electricity and
other utilities is nominal. In the event CPL's use is more
than nominal, the Parties shall agree upon associated costs
and fees.
4.0 Fee Adjustments .
4.1. Each party shall have the right to request a change in the
fees in Section 3.0 at any time during the term covered by
this Agreement, provided it gives the other party at least
ninety (90) days written notice of such change. The failure of
the notified party to serve the other party with written
notice of objection thirty (30) days prior to the effective
date shall be considered acceptance of such change. If written
notice of objection is served, the notifying party shall have
the right to continue to provide Services under this Agreement
at the same fee and terms in effect at the time it gave notice
of the requested change and thereafter resolve the issue by
the dispute resolution provision in Section 16.
5.0 Storage Tanks.
5.1. NEWCO will operate and maintain storage tanks 58, 59, 60 and
W-20 for designated CCC product storage of CC4 and C5
products.
5.2. NEWCO shall be responsible for obtaining and maintaining all
operating permits required for the tanks.
xvi
5.3. Tanks 58, 59, 60 and W-20 (or in the alternative to W-20,
Tanks W-1 or W-2, if mutually agreed to by the Parties) shall
be dedicated exclusively to CCC products so long as CCC has
requirements for C5 and CC4 or similar product through put,
provided, CCC shall have exclusive use of W-20 for C5 service
until December 31, 1996. CCC agrees to release the tanks for
NEWCO's use when it no longer has any requirements for C5 and
CC4 or similar product throughput, but shall retain an option
to reinstate such use of any or all of the tanks upon one (1)
year's prior written notice to NEWCO.
5.4. CCC shall have the option to obtain mutually agreed upon
storage service at Warrengas Terminal for HAD storage, HPG
storage or other product storage for CCC's future terminalling
requirements at Warrengas Terminal.
6.0 Risk of Loss .
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by NEWCO, its employees,
contractors or agents which shall be the responsibility of NEWCO.
7.0 Scheduling .
All pipeline movements from Cedar Bayou to Warrengas Terminal shall be
scheduled through the NEWCO dispatching office at Mont Belvieu
Terminal. All truck, pipeline or marine movements into or out of
Warrengas Terminal shall be scheduled through the NEWCO logistics
specialists at Warrengas Terminal. CCC and NEWCO shall make dock
reservations on a first come/first serve basis and NEWCO shall provide
a dock schedule to CCC every Business Day.
8.0 Demurrage .
Each Party shall be responsible for its demurrage, except for claims
attributable to the other Party's, or its employee's, contractor's or
agent's negligent acts or omissions or for encroachment by the other
Party on the loading or unloading schedule as provided for in Section
7.0.
xvii
Exhibit A-4
Mont Belvieu Terminalling
1.0 Scope of Services .
1.1. NEWCO shall provide transfer, storage and other terminalling
services at the Mont Belvieu Terminal including rail, truck
and pipeline receipt and delivery of CCC's products, other
than LPG feedstocks which are covered under another agreement.
NEWCO shall operate six (6) storage wells for CCC activities,
the tank car rack and CCC pipeline connections at Mont Belvieu
Terminal. NEWCO shall operate and maintain for the benefit of
both parties the flare system used for the processing of
relief gasses and liquids.
1.2. NEWCO shall provide access to and permit Chevron Pipeline
Company ("CPL") to use the flare system and will supply
instrumentation air, electricity and any other utilities
reasonably required by the Chevron Pipeline Company pipeline
system within the Mont Belvieu Terminal.
1.3. NEWCO shall provide necessary improvements at the Mont Belvieu
Terminal to support CCC's 3 QTR 97 Port Arthur Plant Expansion
("Mont Belvieu Improvements"). Improvements include, per
mutually agreed to scope of work for the project, in-terminal
piping changes, installation of mainline pumps and metering
facilities. The expansion requires 30 MBPD of incremental EP
supply (in blends ranging from 80/20 to 60/40). The total
supply of EP to Port Arthur will be approximately 55 MBPD post
start-up.
2.0 Fees.
CCC shall pay fees to NEWCO for all directly attributable expenses to
dedicated facilities (e.g., CCC well workover cost) plus a portion of
the cost of facilities that are operated for the benefit of both NEWCO
and CCC consisting of the following:
2.1. Mont Belvieu Salaries, Wages and Benefits .
xviii
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Allocation %
WPC CHEMICALS
--- ---------
* Managers and Staff [REDACTED]
* Mechanics [REDACTED]
* Technicians and Engineers [REDACTED]
* Clerical [REDACTED]
* Operations [REDACTED]
* Contract [REDACTED]
2.2. Travel and Expense Accounts, Schools and Other Personnel
Costs.
When applicable, expenses shall be charged to party requiring
the expenditure. Travel to and from schools shall be charged
on the same percentages as the individual's salary is charged.
2.3. Water, Consumable Supplies, Personal Services, Communications,
Work Contracts, Security, Repairs and Maintenance .
Expenses that are for the exclusive benefit of CCC or its
wells and equipment shall be charged to CCC. Expenses at Mont
Belvieu Terminal for the brine system, security, roads and
other joint benefit facilities shall be allocated based on the
number of wells owned or leased by the parties. Expenses for
* the truck dock shall be allocated [REDACTED] to CCC and
* [REDACTED] to WPC.
2.4. Fuel and Power .
At NEWCO's cost, CCC shall be charged for fuel and power
consumed in operating their dedicated equipment. Also, at
NEWCO's cost, CCC shall be allocated fuel and power expense
for brine pumps, tank car rack, air system, lighting or other
joint benefit facilities based on horsepower involved or the
number of wells owned or leased by the parties, as
appropriate.
2.5. Intangible Overhead .
* Base fee of [REDACTED] M/YR.
2.6. Flare System.
xix
All direct costs associated with the operation and maintenance
of the Flare System and associated relief systems shall be
allocated on the basis of well count.
xx
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
2.7. Chevron Pipeline System.
There shall be no separate charges for services provided under
Section 1.2 so long as CPL's use of the flare system and
instrumentation air, electricity and other utilities is
nominal. In the event CPL's use is more than nominal, the
Parties shall agree upon associated costs or fees.
2.8. Improvements for Port Arthur Plant Expansion.
* Based upon estimated cost of [REDACTED] for the Mont Belvieu
Improvements, CCC shall pay to NEWCO the following fees after start-up
of Mont Belvieu Improvements:
* (a) Throughput fee of [REDACTED].
* (b) Additional fee of [REDACTED] for the first five (5) years of
operation invoiced monthly at a rate expressed in cents per
barrel of throughput. This rate shall be set at the beginning
of each year of operation and shall be revised as necessary
during each year to correspond to the estimated throughput
remaining for such year so that the total payment for each
year of operation shall equal $1 MM. Any imbalances in
payments shall be reconciled at the end of each year.
This fee shall be adjusted in the event the estimated cost of
the project changes.
3.0 Engineering, Design and Construction Services .
Engineering, design and construction services will be provided in
accordance with the annual budget of the Alliance Improvement Team and
the allocation of services will be on a project by project basis
according to resources, timing and complexity of any project.
4.0 Price Adjustments.
4.1. The percentage allocation rates and budget for the fees in
Sections 2.1 and 2.3 shall be made or adjusted by mutual
agreement, as part of the annual planning process and, if the
parties are unable to agree, by the dispute resolution
provision under Section 16.
xx
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
4.2. The intangible overhead rate under Section 2.6 shall be
adjusted on January 1 of each year beginning January 1, 1997
using the Houston Consumer Price Index as compared to the base
index of 140.9 for December, 1995.
5.0 Option to Reasonably Expand Operations .
Subject to availability and NEWCO's use of the Mont Belvieu Terminal,
CCC shall have an option to reasonably expand its operations and
facilities at the Mont Belvieu Terminal, including pipeline additions
and easements through the terminal at locations mutually acceptable to
NEWCO and CCC, and lease additional storage space from NEWCO at
mutually agreeable terms and conditions locations.
6.0 Pipeline Access .
Upon reasonable request, CCC shall have a non-exclusive right of access
to pipelines and operating equipment in the Mont Belvieu Terminal for
the movement of non-LPG products into CCC wells from sources such as
the Koch-Sterling, Citgo-Lakemont pipelines or future identified third
parties satisfying requirements of CCC.
This pipeline access shall be scheduled through Mont Belvieu Terminal *
dispatching and CCC shall pay NEWCO a handling fee of [REDACTED].
7.0 Temporary Storage.
Upon reasonable notice, NEWCO agrees to provide to CCC temporary well
storage for PPmix and Naphtha during any periods of time that CCC may
reasonably require for maintenance or workover on its wells. CCC shall
pay NEWCO a fee for such temporary storage equal to the spot short term
commercial rate for storage.
8.0 Risk of Loss .
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by NEWCO, its employees,
contractors or agents which shall be the responsibility of NEWCO.
xxi
9.0 Demurrage.
Each Party shall be responsible for its demurrage except for claims
attributable to the other Party, or its employee's, contractor's or
agent's negligent acts or omissions.
xxii
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Exhibit B-1
Export Refrigeration Equipment
1.0 Scope of Services .
CCC shall provide NEWCO access to its export refrigeration equipment at
the Warrengas Terminal for NEWCO's use in loading NEWCO or NEWCO's
customers products. NEWCO shall operate the export refrigeration
equipment for all product shipments.
2.0 Quantity .
To the extent the export refrigeration equipment is available for
shipments other than ethylene, it shall be available for NEWCO's
requirements to refrigerate products estimated at 0-3 MMBBLS/year.
3.0 Fee .
NEWCO shall pay CCC 1.0 cpg for a throughput of fully refrigerated
* propane and [REDACTED] for any other refrigerated product (e.g.
semi-refrigerated propane; fully refrigerated butane).
4.0 Fee Adjustment.
Each party shall have the right to request a change in the fee at any
time during the term covered by this Agreement, provided it gives the
other party at least ninety (90) days written notice of such change.
The failure of the notified party to serve the other party with written
notice of objection thirty (30) days prior to the effective date shall
be considered acceptance of such change. If written notice of objection
is served, the notifying party shall have the right to continue under
this Agreement at the same fee and terms in effect at the time it gave
notice of the requested change or resolve the issue by the dispute
resolution provision in Section 16.
5.0 Hours of Operation .
Subject to scheduling priorities under Section 7.0, the export
refrigeration equipment shall be available to NEWCO twenty-four (24)
hours a day, seven (7) days a week, including holidays, for the
refrigeration of NEWCO's products.
xxiii
6.0 Maintenance .
NEWCO shall maintain and perform all repairs on the export
refrigeration equipment. CCC shall pay for all maintenance and repairs
under $25,000 and NEWCO and CCC shall share the cost of all third party
labor, repairs and maintenance in excess of $25,000 by allocation
agreed to by the parties based upon mutually agreed factors including
but not limited to historical usage and causation of specific repair.
7.0 Scheduling .
CCC shall have first priority on scheduling the use of export
refrigeration equipment. Scheduling the use of such equipment for all
other uses shall be mutually agreed to by the Parties and shall be
scheduled through NEWCO's logistic specialists.
xxiv
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Exhibit B-2
Port Arthur Terminalling Services
1.0 Scope of Services .
CCC shall provide product transfer services at the Port Arthur Terminal
consisting of loading and unloading of barges of isobutane, normal
butane, refinery butane and other products mutually agreed upon by the
parties and transferring product by pipeline to Clark Refinery, Port
Arthur, Texas. The transfer services shall be for NEWCO requirements
for back-up or emergency service to normal pipeline delivery from NEWCO
to the Clark Refinery.
2.0 Quantity .
CCC agrees to provide transfer services for NEWCO requirements of
approximately 0-3000 BBLS/day.
3.0 Hours of Operation.
Upon reasonable notice, CCC will provide Services at the dock
facilities 24 hours a day, 7 days a week, including holidays, for the
receipt and/or delivery of products.
4.0 Fees .
* NEWCO shall pay CCC [REDACTED] for the unloading and transferring
services.
5.0 Price Adjustment.
Each party shall have the right to request a change in the fee at any
time during the term covered by this Agreement, provided it gives the
other party at least ninety (90) days written notice of such change.
The failure of the notified party to serve the other party with written
notice of objection thirty (30) days prior to the effective date shall
be considered acceptance of such change. If written notice of objection
is served, the notifying party shall have the right to continue under
this Agreement at the same fee and terms in effect at the time it gave
notice of the requested change or resolve the issue by the dispute
resolution provision in Section 16.
6.0 Termination.
xxv
CCC may terminate the Services relating to this Exhibit in the event of
a termination of CCC's right to lease the Port Arthur Terminal. NEWCO
may terminate the Services relating to this Exhibit in the event of
termination of that certain agreement between NEWCO, as assignee of
Chevron USA, Inc. and Clark Refining & Marketing, Inc.
7.0 Risk of Loss .
NEWCO shall retain risk of loss for all of its product except for loss
relating to the negligent acts or omissions by CCC, its employees,
contractors or agents, which shall be the responsibility of CCC.
8.0 Scheduling.
All requests for Services at the Port Arthur Terminal shall be
scheduled through CCC's feedstock supply representative.
xxvi
CONFIDENTIAL TREATMENT REQUESTED.
THE READACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Exhibit B-3
Feedstock Pipeline Service
1.0 Scope of Services .
CCC shall ship by CCC's pipelines between the Mont Belvieu Terminal and
Clark's Fannett Terminal, NEWCO's requirements for isobutane and butane
products and other products mutually agreed upon by the parties.
2.0 Quantity .
PRODUCT ESTIMATED VOLUME DESTINATION
Isobutane 1.2 MM BBLS/year MBT to FT
Refinery Butane 700 M BBL/year FT to MBT
3.0 Fees .
* NEWCO shall pay CCC [REDACTED] for isobutane shipments. All refinery
butane shipments shall be paid by Clark Refinery under separate
contract between Clark Refinery and CCC.
4.0 Fee Adjustment.
Each party shall have the right to request a change in the fee at any
time during the term covered by this Agreement, provided it gives the
other party at least ninety (90) days written notice of such change.
The failure of the notified party to serve the other party with written
notice of objection thirty (30) days prior to the effective date shall
be considered acceptance of such change. If written notice of objection
is served, the notifying party shall have the right to continue under
this Agreement at the same fee and terms in effect at the time it gave
notice of the requested change or resolve the issue by the dispute
resolution provision in Section 16.
5.0 Risk of Loss .
NEWCO shall retain risk of loss for all of its product except for loss
relating to the negligent acts or omissions by CCC, its employees,
contractors or agents, which shall be the responsibility of CCC.
xxvii
Exhibits 10.60
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
OPERATING AGREEMENT
BETWEEN
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
AND
CHEVRON PIPE LINE COMPANY
THIS AGREEMENT is made and entered into as of __________, 1996 by and between,
Warren Petroleum Company, Limited Partnership, a Delaware limited partnership
(hereinafter referred to as "Company"), and Chevron Pipe Line Company, a
Delaware Corporation (hereinafter referred to as "Operator").
WHEREAS, Company is the owner of certain petroleum products pipeline facilities
("Facilities") more particularly identified in Attachment II and Attachment III;
and
WHEREAS, Company does not have a working staff to operate the Facilities and
desires to engage Operator in these respects;
NOW, THEREFORE, in the consideration of the premises and mutual covenants
contained in this Agreement, Company and Operator agree as follows:
Section 1. DEFINITIONS
As used in this Agreement, the following words and terms shall have the meanings
set forth:
"Accounting Procedure" means the accounting procedure set forth in Attachment I,
hereof.
"AFE" means an approval for expenditure in the form approved by Company.
"Affiliate" of another Party means a company that beneficially owns, directly or
indirectly, more than fifty percent of the voting stock of such Party or another
company whose voting stock in turn is more than fifty percent owned by such
company.
"Agreement" means this Operating Agreement together with all Attachments.
"Capital Commitment Budget" means the capital budget as further described in
Section 5A. of this Agreement.
"Capital Expenditure Forecast" means the capital expenditure forecast as further
described in Section 5B. of this Agreement.
"Cash Operating Costs" means amounts payable to Operator under Section 3 of this
Agreement.
"Confidential Information" means any information relating to the identity of
shippers using the Facilities, the nature, kind, quantity, destination or
consignee or routing of Products using the Facilities, or any other information
which is in writing and has been labeled by Company as confidential.
Confidential Information shall not include any information which is acquired by
Operator in the course of its activities outside of the scope of this Agreement
or which becomes part of the public knowledge or literature without breach of
this Agreement.
"Costs" means all costs charged to the Company as provided in the Accounting
Procedure.
"Expenditure Authorities" means the expenditure authorities described in Section
6. of this Agreement.
"Facilities" means the facilities identified in Attachment II and Attachment III
hereto.
"Force Majeure" means an occurrence not within the control of the party and
which by the exercise of reasonable efforts such party is unable to prevent or
overcome, and shall include, but not be limited to, acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, hurricanes, storm warnings requiring evacuation
of facilities, arrests or restraints of the government, either federal or state,
civil or military, civil disturbances, explosions, sabotage, breakage or
accident to equipment, machinery or lines of pipe, extreme heat or cold weather,
freezing of machinery, equipment or lines of pipe, electric power shortages,
inability of any Party to obtain necessary materials and supplies, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), temporary cleaning or testing of facilities, temporary failure of
supply, or any other causes, whether of the kind herein enumerated or otherwise,
which were not reasonably foreseeable on the effective date of this Agreement,
and which are not within the control of the Party claiming suspension and which
such Party is unable to overcome by the exercise of due diligence. The term
"Force Majeure" shall also include those instances in which either Party hereto
is required to furnish materials and supplies for the purpose of constructing
and maintaining facilities or is required to secure permits or permission from
any governmental agency to enable such Party to acquire, or the delays on the
part of such Party in acquiring, at reasonable cost and after the exercise of
due diligence,
-2-
such materials and supplies, permits and permissions. It is understood and
agreed that the settlement of strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty, and that the above requirement
that any Force Majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the demands of
opposing parties when such course is inadvisable in the discretion of the Party
having difficulty. The term "Force Majeure" shall also include any such event
occurring with respect to the facilities or services of either Operator's or
Company's third-party suppliers or customers delivering or receiving any
product, fuel, feedstock, or other substance necessary to the continuous
operation of either Party's plants or facilities or performance of such Party's
obligations, and shall also include curtailment or interruption of deliveries or
service by such third-party suppliers or customers as a result of (i) another
event of Force Majeure or (ii) a breach by such third-party under the applicable
agreement(s).
"Insurance Manual Rates" means the published insurance industry recognized
computations of standard accepted insurance rates.
"Major Maintenance Budget" means the major maintenance budget as further
described in Section 5C. of this Agreement.
"Operating Expense Budget" means the operating expense forecast as further
described in Section 5D. of this Agreement.
"Operator" means Chevron Pipe Line Company acting in its capacity as operator of
Facilities hereunder.
"Parties" or "Party" means the Operator and/or Company.
"Products" means, without restriction natural gas or gas liquids, or product
derived from petroleum.
"Year" means a calendar year.
Section 2. OPERATIONS
Operator agrees to operate, maintain and repair the Facilities, and any
modifications or improvements thereof, and to perform any other duties as may be
requested by Company. Company does hereby authorize and empower Operator, on
behalf of Company, to do and perform or cause to be done and performed by others
any and all acts and things which Operator shall, in the exercise of its
discretion and judgment, deem necessary or advisable for the operation,
maintenance, and repair of such Facilities in accordance with the Expenditure
Authorities of Section 6, to the end that the Facilities may be used in a safe,
efficient and economical manner for receipt, delivery, measurement and
transportation of Products. Without limiting the foregoing, Operator shall:
A. perform such mechanical activities as may be required to
receive, deliver, transport and/or otherwise handle Products
tendered to and accepted into the Facilities.
-3-
B. submit to Company recommended budgets and other information as
set forth in Section 5. hereof.
C. purchase or cause to be purchased for and in the name of
Company materials, supplies and services necessary for the
operation of the Facilities in accordance with the budgets
approved by Company (or as otherwise approved under this
Agreement);
D. maintain surveillance of the Facilities, periodically inspect
the Facilities for damage or other conditions which could
affect the safe, efficient and economical operation of the
Facilities, and perform such repairs to the Facilities as
requested by Company or as required;
E. act as representative for Company in contacts with government
agencies relating to the physical operation, maintenance and
repair of the Facilities, where required by laws, rules,
regulations, orders, permit conditions, or right-of-way
agreements;
F. prepare, maintain and implement operating manuals, monitoring
programs, contingency plans and training programs satisfying
all applicable laws, rules, regulations, orders and any other
requirements of governmental authorities together with such
other operating procedures or manuals as Company may require;
G. prepare run tickets, daily status reports and other
appropriate accounting materials to document custody transfer
and receipt of Products, and sample and measure Products
received and delivered to verify quality and quantity as
operations may require;
H. prepare appropriate surveillance, operating and maintenance
reports to document the performance of the Facilities;
I. file, store and maintain in a manner such that they shall be
available for periodic inspection by Company all as-built
drawings or descriptions of the Facilities, construction and
maintenance records, inspection and testing records, operating
procedures and manuals, custody transfer documents, and such
other records (all collectively "records") as may be necessary
or appropriate to the operation, maintenance and repair of
Facilities, or required by applicable laws, rules,
regulations, orders and any other requirements of governmental
authorities, or requested by Company. All of such records
shall remain the property of Company;
J. to the extent applicable, prepare and file all tariffs subject
to approval of Company;
K. keep correct and complete accounts of all non-transportation
related receipts and disbursements made on the Company's
behalf;
-4-
L. attend, upon request, meetings of Company, or, whenever
otherwise required by Company, prepare and distribute reports
of all financial transactions involving the Company hereunder;
M. subject to approval of Company make all statutory and
regulatory filings required of the Company, including without
limitation, all permit applications, and filings with the
Federal Energy Regulatory Commission and state Public
Utilities Commissions, Department of Transportation, or other
regulatory agencies having jurisdiction over Company; and
N. provide equipment, materials and services as legally required
or as Company may from time to time request, for discharge
prevention and response for Products and/or hazardous
substances. These services shall include, but not be limited
to preparation, submission, and finalization of discharge
prevention and/or contingency plans for Products and/or
hazardous substances, and preparation for, prevention of,
response to and/or cleaning up of any discharge or threatened
discharge of Products and/or hazardous substances. Without
limiting the foregoing, Operator shall serve as response
action contractor for Company; and,
O. Provide right-of-way services relating to Facilities.
Notwithstanding the foregoing, Operator shall not perform any transportation
related revenue collection or accounting services on behalf of Company.
Operator agrees to perform all services hereunder in a manner consistent with
the usual and customary practices, codes and standards in the pipeline industry
(including specifically the Federal Energy Regulatory Commission, state Public
Utilities Commissions as well as applicable Department of Transportation and
American National Standards Institute) and in accordance with all valid and
applicable laws, rules, regulations, orders and any other requirements of
governmental authorities. Operator in its capacity as Operator pursuant to this
Agreement, shall assume no other liability to Company except in the case of
Operator's own gross negligence or willful misconduct. Operator shall furnish or
arrange for the necessary personnel to efficiently perform such services.
None of such personnel shall be employees or agents of Company, statutory or
otherwise.
Section 3. PAYMENT FOR OPERATOR SERVICES
A. Company shall pay and Operator shall receive as full and
complete compensation for the performance of Operator's
services as Operator hereunder, the sum of the amounts
becoming due as described and authorized in Attachment I,
Accounting Procedure. Company shall make payment in the time
and manner specified herein. To the extent incurred in the
performance of services hereunder, amounts of such payment to
Operator are hereinafter collectively referred to as Cash
Operating Costs.
B. Within the month immediately following the previous month of
service, Operator shall invoice Company for the actual Cash
Operating Costs for the immediately
-5-
prior month. Company shall pay to Operator the amount of such
invoice, payable upon receipt.
Section 4. ACCOUNTING
Operator shall maintain accurate accounts of all expenditures and liabilities
incurred by it in operating, maintaining and repairing the Facilities and shall
render a monthly statement to Company of all such expenditures and liabilities.
The failure to include any item in the current monthly statement rendered for
the month in which the same was incurred or expended shall not preclude such
item from being brought forward and included in any subsequent monthly
statement. All books, records and accounts shall be open to inspection and audit
by Company or Company's authorized representatives at all reasonable times
during business hours.
Section 5. BUDGETS AND FORECASTS
On or before November 1 of each year, Operator shall prepare and submit to
Company for review, approval, or modification the following annual budgets and
forecasts:
A. Capital Commitment Budget
The Capital Commitment Budget shall consist of an itemization
of commitments for each capital project equal to or in excess
of $ 25,000 (large projects) and a combined total of all Items
less than $ 25,000 (small projects) for the following calendar
year. Supporting justification shall be included for each
large project. Supporting justification will not be required
for small projects.
B. Capital Expenditure Forecast
The Capital Expenditure Forecast shall identify separately all
expenditures for capital items from prior budgets which are
not yet complete and all capital items anticipated to be
approved in the pending budget. Large projects shall be listed
individually and small projects may be combined. The forecast
shall indicate expenditures by quarter for the following
calendar year and indicate any appropriate carryover in
subsequent years.
C. Major Maintenance Budget
The Major Maintenance Budget shall consist of an itemization
of each maintenance project equal to or in excess of $ 25,000
(large projects) and a combined total of all items less than $
25,000 each (small projects) for the following calendar year.
Supporting justification shall be included for each large
project.
D. Operating Expense Budget
The Operating Expense Budget shall identify for the following
calendar year the
-6-
expected Operating Expenses including Direct Costs, Management
Fee, and Major Maintenance items.
Company may at any time supplement or amend the budgets and forecasts as
necessary to carry out the purposes of this Agreement.
Section 6. EXPENDITURE AUTHORITIES
A. Projects or Expenses not Exceeding $ 25,000
The Operator shall have the authority to make expenditures for
any individual capital project, major maintenance project or
operating expense not exceeding $25,000 to the extent that
Operator deems such expenditures necessary and appropriate for
the operation or maintenance of the Facilities. The sum of any
such expenditures may not, during any Year, exceed the amounts
indicated for all such projects or expenses in the budget
which has been approved by Company for that Year.
B. Projects or Expenses in Excess of $25,000
The Operator shall have the authority to make expenditures for
any individual capital project, major maintenance project or
operating expense in excess of $ 25,000 if such project or
expense was specifically identified in an approved budget and
Company has approved an AFE for the project. The amount of the
Operator's authority under this subsection may be overrun by
the greater of 10% or $10,000 without seeking prior approval
by Company; provided, however that such overrun does not cause
any of the Capital Expenditure Forecast, Major Maintenance
Forecast or Operating Expense Forecast approved by the Company
to be exceeded.
C. Emergencies
In an emergency, the Operator may take such actions and make
such expenditures as may be reasonably necessary, under laws,
rules, regulations, orders or good industry practices, in
order to cure such emergency. This shall be true whether or
not the expenditure is within an approved budget or the action
has prior approval of Company. In the event of such an
emergency, the Operator shall give telephone notice or
otherwise contact Company as soon as practicable and advise it
of the circumstances of such emergency, the actions taken or
proposed and the expenditures made, incurred, committed, or
proposed. All expenditures made pursuant to this Section 6.C.
shall be treated as Cash Operating Costs hereunder.
Section 7. TERM
This Agreement shall take effect as of the day and year first above written and
shall continue
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until canceled on 180 days prior written notice by either Party which such
notice may be given for any reason or no reason in the sole discretion of either
Party.
Upon termination of this Agreement, Company shall pay Operator the amounts
chargeable to Company hereunder as of the date of termination which have not
already been paid by Company; Company shall also reimburse Operator for the full
amount of any obligations or commitments Operator has made in the interest of
performing the services hereunder in accordance with the annual budget and any
approved projects which were not paid by Company prior to the date of such
termination or, if agreeable to Operator, Company may assume such obligations or
commitments. Upon termination of this Agreement, Operator shall turn over to
Company all records, data, and information pertaining to operations hereunder,
as well as materials, equipment, facilities, and operating supplies on hand
which had been purchased by Company or in its name. Termination of this
Agreement shall not affect the rights and privileges or duties, liabilities and
obligations of either Party which arose or accrued prior to the date of
termination.
Section 8. INSURANCE
Operator shall procure and maintain all insurance required by applicable law or
regulation for operation of the Facilities, including but not limited to
Workers' Compensation and Employer's Liability Insurance in accordance with all
applicable state, federal, and maritime laws. Where permitted, Operator may
fulfill its Workers' Compensation obligations by approved self-insurance and
shall charge Company its actual costs of self-insurance which shall not exceed
Insurance Manual Rates applicable to such operations in the place where the same
are performed. NEWCO will maintain its own insurance for loss or damage.
No other insurance shall be carried by Operator for the account of Company
without prior approval from Company.
Section 9. INDEMNITY
Company ("Indemnitor") shall indemnify and save harmless Operator, its
affiliates, agents and employees ("Indemnitees") in its or their role as
Operator from and against any and all loss, damage, injury, liability, expense
(including reasonable attorney's fees), and claims thereof which arise from any
injury to or death of a person, including third parties, Indemnitor, its agents
or employees, but excluding Indemnitees, from loss of or damage to property or
from penalties imposed or proceedings brought by government agencies, resulting
directly or indirectly from any operations under or pursuant to this Agreement,
including, but not limited to, the use of equipment provided by others. The
indemnity provided by Indemnitor shall remain in full force and effect
regardless of the passive, active or concurrent negligence of, and regardless of
whether liability without fault is imposed or sought to be imposed on, one or
more of the Indemnitees. However, such indemnity shall not be given effect to
the extent that such indemnity is void or otherwise unenforceable under
applicable law in effect or validly retroactive to the date of the Agreement.
Further excepted from such indemnity shall be any such loss, damage, injury,
liability or claim which is the result of the gross negligence or willful
misconduct of an Indemnitee. Operator shall give Company immediate notice of any
suit brought against Operator with respect to which Company is or may be
obligated to indemnify Operator hereunder.
-8-
Operator shall indemnify and save harmless Company, its affiliates, agents and
employees in its or their role as owner of Facilities from and against all loss,
damage, injury, liability, expense (including reasonable attorney's fees), and
claims thereof which arise from any injury to or death of agents or employees of
Operator, or from loss of or damage to property of Operator resulting directly
or indirectly from any operations under or pursuant to this Agreement. The
indemnity provided by Operator shall remain in full force and effect regardless
of the passive, active or concurrent negligence of, and regardless of whether
liability without fault is imposed or sought to be imposed on Company. However,
such indemnity shall not be given effect to the extent that such indemnity is
void or otherwise unenforceable under applicable law in effect or validly
retroactive to the date of this Agreement. Further excepted from such indemnity
shall be any such loss, damage, injury, liability or claim which is the result
of the gross negligence or willful misconduct of Company. Company shall give
Operator immediate notice of any suit brought against Company with respect to
which Operator is or may be obligated to indemnify Company hereunder.
Section 10. CONFIDENTIALITY
A. Each Party agrees that it will maintain this Agreement, all terms and
conditions of this Agreement and all other Confidential Information (as
hereinafter defined) in strictest confidence and that it will not cause
or permit disclosure of Confidential Information to any third Party
without the express written consent of the other Party hereto.
Disclosures of Confidential Information otherwise prohibited by this
Section 10 may be made by either Party; (i) to the extent necessary for
such Party to enforce its rights hereunder against the other Party;
(ii) to the extent a Party is contractually or legally bound to
disclose financial information to a third Party (such as a shareholder
or commercial lender); (iii) only to the extent to which a Party hereto
is required to disclose all or part of this Agreement by a statute or
by the order of a Court, agency, or other governmental body exercising
jurisdiction over the subject matter hereof, by order, by regulations,
or by other compulsory process (including, but not limited to,
deposition, subpoena, interrogatory, or request for production of
documents); (iv) to the extent required by the applicable regulations
of a securities or commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the provisions of this
Section 10). "Confidential Information" shall mean any information
proprietary to either Party and maintained by it in confidence or as a
trade secret, including, without limitation, business plans and
strategies, proprietary software, financing statements, customer or
client lists, personnel records, analysis of general energy market
conditions, sales, transportation and service contracts and the
commercial terms thereof, relationships with current and potential
business partners, supplies customers, service providers and financial
sources, data base contents and valuable information of a like nature
relating to the business of such Party. It is understood and agreed
that Confidential Information shall not include information of a Party
that (i) was generally available to the public at the time of
disclosure to the other Party, (ii) after the time of disclosure to the
other Party, becomes generally available to the public, (iii) the Party
receiving the information can know that the information was in its
possession at the time of disclosure, or (iv) was rightfully acquired
by the recipient from third Persons who did not themselves obtain such
information under a confidentiality or other similar agreement with the
disclosing Party.
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B. If either Party is or becomes aware of a fact, obligation, or
circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Section 10, it shall so
notify the other Party promptly and shall provide documentation or an
explanation of such disclosure as soon as it is available. Each Party
further agrees to cooperate to the fullest extent in seeking
confidential status to protect any Confidential Information so
disclosed.
C. The Parties hereto acknowledge that independent legal counsel may, from
time to time, be provided with a copy of this Agreement and agree that
such disclosure does not require consent by the other Party, provided
that such counsel agrees to be bound by the provisions of this Section
10.
D. Each Party will be deemed solely responsible and liable for the actions
of its employees, independent contractors, officers, agents and
Affiliates for maintaining the confidentiality commitments of this
Section 10, but will be required in that regard only to exercise such
care in maintaining the confidentiality of the Confidential Information
as such Party normally exercises in preserving the confidentiality of
its other commercially sensitive information.
Section 11. FORCE MAJEURE
A delay in or failure of performance of either Party hereto shall not constitute
default, nor shall either Party be held liable for loss or damage arising from
such delay or failure to the extent such delay, failure, loss or damage is
caused by Force Majeure.
The Party claiming Force Majeure as an excuse for delay in or failure of
performance shall immediately notify the other Party of the event and any steps
being taken to remove the impediment to performance.
Force Majeure shall not prevent either Party from terminating this Agreement
under Section 7.
Section 12. ASSIGNMENT
This Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the Parties hereto; provided, however, that such
Agreement and the obligations of the Parties hereunder shall not be assignable
by either Party hereto without the express prior written consent of the other
Party hereto, except that any Party may assign this Agreement without consent,
including the performance thereof, in whole or in part to (1) an Affiliate of
the Party or the Party's shareholders; (ii) the successor of all or
substantially all the Party's business and assets; or (iii) a corporation which
such Party may merge into or be consolidated in. An assignment hereunder shall
not be effective unless and until the assignee agrees to be bound by all the
terms and conditions of this Agreement. Further, no assignment hereunder shall
relieve the assignor of any duties, liabilities or obligations accruing
hereunder before the effective date of the assignment. Any assignments
prohibited hereunder shall be void. This Agreement shall not be assignable by
operation of law and shall not become an asset in any bankruptcy or receivership
proceedings.
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Section 13. NOTICES
Any notice, request, consent, approval or other similar communication of a
routine nature required or permitted under this Agreement shall be in writing
(including facsimile) and shall be deemed to have been properly given or
delivered to a Party when delivered personally to the person designated below to
receive such communication for each Party or when sent by telegram or United
States mail with postage prepaid and properly addressed to the Party to whom
given. Any such notice or other communication sent or mailed shall be deemed
given at the time it is received by the office of the individual to whom sent.
For purposes hereof the proper addresses of the Parties (unless otherwise
designated in writing which each Party may do from time to time) shall be as
follows:
If to Company:
Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President
Telecopy: (713) 507-
with a copy to:
Vice President & General Counsel
Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Phone: (713) 507-3725
Telecopy: (713) 507-6834
If to Operator:
Chevron Pipe Line Company
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
Attention: Corridor Team Leader
Section 14. GOVERNING LAW
The validity, nature, obligations, effect and construction of this Agreement
shall be governed by the laws of the State of Texas.
Section 15. ATTACHMENTS
Attachment I, Attachment II, and Attachment III attached hereto are incorporated
in and made a part of this Agreement. In the event of any inconsistency between
the Attachments and this
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Agreement, the Agreement shall control.
Section 16. GIFTS PROHIBITED
The Parties shall maintain complete and accurate records in connection with any
commission, fee, rebate, gift or entertainment of significant cost or value in
connection with the performance of this Agreement and all transactions related
thereto for at least twenty-four months from the date of invoice to Company and
Operator. No director, officer, employee or agent of any Party hereto shall give
or receive any commission, fee, rebate, gift or entertainment of significant
cost or value in connection with the performance of this Agreement.
Section 17. FEDERAL COMPLIANCE
A. Insofar as applicable hereto, each Party hereto shall comply
with Executive Order No. I1246, as amended by Executive Order
No. I1375, and the rules and regulations issued thereunder, to
ensure that applicants are employed, and that employees are
treated during employment without regard to their race, creed,
color, sex or national origin. Also, if applicable, each Party
hereto shall comply with all provisions of the Vietnam Era
Veterans' Readjustment Assistance Act of 1974 and the rules
and regulations issued thereunder, including 41 C.F.R.,
Chapter 60, Part 60-250. Each Party hereto shall also, if
applicable, comply with all provisions of the Rehabilitation
Act of 1973, and the rules and regulations issued thereunder
including 41 C.F.R., Chapter 60, Part 60-74. Operator agrees
and covenants that none of its employees or employees of its
subcontractors who provide services to Company pursuant to
this Agreement are unauthorized aliens as defined in the
Immigration Reform and Control Act of 1986. All acts, orders,
rules and regulations hereinabove referred to are hereby
incorporated by reference unless this Agreement is excepted by
appropriate federal law, rules, regulations or orders.
B. Company and Operator shall comply with all laws and
regulations applicable to Company and Operator relating to
Facilities hereunder, including but not limited to any
regulations of the United States Department of Transportation
applicable to facilities operated by Company that are
connected to or a part of Facilities hereunder.
Section 18. SECTION HEADINGS
The headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
Section 19. WAIVER
No waiver by either Party of any breach of any of the terms and conditions
contained in this Agreement shall be construed as a waiver of any subsequent
breach of the same or any other terms or conditions.
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Section 20. ENTIRE AGREEMENT
This Agreement and its Exhibits constitute the sole and entire Agreement among
the Parties pertaining to the subject matter hereof. Effective as of the
commencement of the term hereof, this Agreement supersedes and cancels any and
all other prior or contemporaneous oral or written agreements or understandings
between or assumed by the Parties or any of them with respect to the foregoing
matters or any part thereof. No amendments to this Agreement shall be effective
unless in writing and executed by a duly authorized representative of each
Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first above written.
COMPANY:
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: Warren Petroleum, G.P., Inc.
Its General Partner
By:
Its:
OPERATOR:
CHEVRON PIPE LINE COMPANY
By:
Its:
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ATTACHMENT I
OPERATING AGREEMENT
ACCOUNTING PROCEDURE
1. DEFINITIONS
Unless defined otherwise below, terms used in this Accounting Procedure
shall have the same meaning as defined in the Agreement.
"Management Fee" means the management fees referenced in Section 2.B.
of this Attachment.
"Person" means any individual, partnership, association, trust,
corporation, government authority or other entity.
"Personal Expenses" means travel expenses and other reasonable
reimbursable expenses of employees in the operation and maintenance of
Facilities and in any other activities required of the Operator
pursuant to this Agreement; Operator's Affiliate(s) and employees
covered under the Management Fee, when such Affiliates and employees
perform activities pursuant to this Agreement.
2. COSTS
A. DIRECT COSTS
Operator shall charge Company with the following items to the
extent such charges are incurred for the operation and
maintenance of Facilities and in any other activities required
of the Operator pursuant to the Agreement:
1. LABOR AND BENEFITS
a. Salaries and wages of Operator's employees
(or employees of Operator's Affiliate)
directly assigned to the operation and
maintenance of Facilities, including that
portion of such employees' time related to
ancillary activities such as training
required by Operator, and in any other
activities required of the Operator pursuant
to the Agreement.
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CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
b. Overhead related to direct labor salaries
* and wages, to be calculated as [REDACTED] of
the amount provided for in A.1.a. above.
c. Operator's cost of all payroll taxes, and
benefits and allowances and any other
payment paid or contributed by the Operator
which is measured by Operator's employees'
compensation; the above to include without
limitation F.I.C.A., Operator's cost of
holiday, vacation, sickness and disability
and other customary allowances, Operator's
current costs of established plans for
employees' group life insurance,
hospitalization, retirement, stock purchase,
and other benefit plans of a like nature.
Such costs will be charged on a percentage
assessment rate on the amount of salaries
and wages chargeable to the Company under
Paragraph 1.a. of this Section. The
percentage assessment rate shall be based on
the Operator's actual cost experience for
the preceding quarter and adjusted for any
known modification.
2. EMPLOYEE EXPENSES
a. Reasonable Personal Expenses of those
employees whose salaries and wages are
chargeable to the Company under Paragraph
1.a. of this Section, and for which expenses
the employees are reimbursed under the
Operator's usual practices.
b. Reasonable Personal Expenses of those
employees whose activities are chargeable to
the Company through the Management Fee
described in Section 2.B. of this Attachment
I, when such activities are required of the
Operator pursuant to the Agreement and for
which expenses are reimbursed under the
Operator's usual practices.
3. MATERIALS AND SUPPLIES
Material purchased or furnished by Operator for use
in the operation and maintenance of Facilities shall
be charged to the Company at the price paid by
Operator after deduction of all discounts received.
Cost of warehousing and handling material shall be
chargeable to the Company. The accumulation of
surplus stocks shall be avoided, and if surplus
stocks are accumulated, such stocks shall be timely
disposed of. Proceeds from such disposition shall be
credited to the Company at the time they are received
by Operator. Operator does not warrant the material
furnished. In the case of material found to be
defective, or returned to a vendor or the Operator
for any other reason, Operator shall credit the
Company when adjustment is received by Operator.
-16-
4. CONTRACTS AND SERVICES
The cost of contracts and subcontracts, contract
services (including those for technical personnel),
professional consultants, equipment, and utilities
employed in the operation and maintenance of the
Facilities under the general direction of Operator.
5. EQUIPMENT FURNISHED BY OPERATOR
a. Use of equipment owned by Operator at rates
commensurate with costs of ownership and
operation. Such rates shall include costs of
maintenance, repairs, other operating
expense, insurance, taxes, depreciation, and
interest on unrecovered investment at the
prime rate charged by the Citibank N.A. of
New York, New York on ninety day loans to
substantial and responsible commercial
borrowers, or the maximum rate charged by
law, whichever is less. In lieu of rates
based on costs of ownership and operation of
equipment, Operator may elect to use average
commercial rates prevailing in the immediate
area of Company facilities.
b. Whenever requested, Operator shall inform
Company in advance of the rates it proposes
to charge.
6. LEGAL EXPENSES
Expenses of investigating litigation or claims,
incurred in or resulting from the operation and
maintenance of Facilities under the Agreement;
provided, however that no direct charge for services
of Operator's legal staff or fees or expense of
attorneys shall be made unless previously agreed to
by Company. All other legal expense incurred by
Operator hereunder is considered to covered by the
overhead provisions of Section 2.B. below, unless
otherwise agreed to by Company.
7. TAXES
All taxes of every kind and nature assessed or levied
upon, or in connection with the Company operations,
property or Facilities and which have been paid for
the benefit of Company, excluding any income or
franchise taxes.
8. INSURANCE
In accordance with Section 8 of the Agreement, net
premiums paid for insurance required by law or by the
Company to be carried for operation, maintenance and
repair of Facilities and for the protection of the
Company.
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9. COMMUNICATIONS
Costs of purchasing, leasing, installing, operating,
and maintaining communications equipment and services
necessary for the conduct of Facilities' operation
and maintenance.
10. ECOLOGICAL AND ENVIRONMENTAL
Costs incurred for the benefit of the Company as a
result of statutory regulation for archeological and
geophysical surveys relative to the identification
and protection of cultural resources, or other
ecological surveys as may be required by regulatory
authority. Also, costs to provide or have available
pollution containment and removal equipment, plus
costs of actual control, cleanup and resulting
responsibilities of oil spills as required by
applicable laws and regulations.
11. PERMITS AND RIGHT-OF-WAY
Costs incurred in obtaining or maintaining permits,
licenses, leases, certificates, rights-of-way,
easements, and other similar items necessary for the
operation or maintenance of the Facilities.
12. DISMANTLING, REMOVAL, AND RESTORATIVE COSTS
Costs incurred for dismantling, removal, and
restoration of Company property to the extent such
costs are incurred.
13. RENTALS
Rentals paid by Operator for the benefit of the
Company in the conduct of Facilities' operation and
maintenance.
14. OTHER EXPENDITURES
Any other expenditures directly attributable to
Facilities' operation and maintenance not covered and
dealt with in the foregoing provisions of this
Section 2.A., and which are incurred by the Operator
in the necessary and proper conduct of Facilities'
operation and maintenance, and which are:
(a) within the scope of the Agreement and
(b) are included in the approved operating
budget.
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15. DISCOUNTS AND ALLOWANCES
Operator shall take advantage of and credit to the
Company all cash and trade discounts, freight
allowances and equalization, annual volume and other
allowances, credits, salvages, commissions, insurance
discount dividends and retrospective premium
adjustments, and other such items which accrue.
B. MANAGEMENT FEE
The purpose of this Section 2.B. is to provide for the
reimbursement of Operator's overhead in conjunction with
services rendered. Operator shall charge the Company as
follows to cover any portion of costs and expenses resulting
from the performance of services for Facilities not otherwise
chargeable under Section 2.A. herein:
1. OPERATOR'S MANAGEMENT FEE
Operator shall receive as an annual charge,
hereinafter referred to as "Operator's Management
Fee" to cover all of Operator's overhead and indirect
costs incurred in the performance of services for the
Facilities. Such Operator's management duties
hereunder shall not be subcontracted by Operator to
any other entity, without prior approval of Company.
The Operator's Management Fee shall be established
pursuant to the Operating Expense Budget submitted
and approved annually under Section 5 of the
Operating Agreement.
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ATTACHMENT II
PIPELINE FACILITIES
1. SHELL CHEM. GRADE PROPYLENE (WARREN "B"):
This 6" line runs from the Warrengas Term. @ Galena Park to Arco Jct. where it
ties into an 8" line that is leased from Shell. The segment leased from Shell
runs from Arco Jct. to the Shell tie-in @ Witter St. (3.27 mi.)17,291' of
6",.219 w.t.,1960, (Warren Pet.) This line segment includes 794' of pipe leased
from Arco Pipe Line Co. for the Houston Ship Channel Crossing, referenced as the
#11-8" line in the Arco Tunnel. (1.6 mi.)8,530' of 8",no w.t.,1942, (Shell Lease
Line)
2. ARCO JCT. LINE (WARREN "C"):
This 6" line runs from Arco Jct. to Warrengas and carries various LPG'S.
(2.82mi.)14,870' of 6",.219 w.t.,1954 This line segment includes 753' of pipe
leased from Arco Pipe Line Co. for the Houston Ship Channel Crossing, referenced
as the #2-6" line in the Arco Tunnel.
3. GATX LINE ("C"LATERAL):
This 6" line runs from the Warrengas Terminal, under the Ship Channel and
through GATX to a connection on the Utility Line/South Route at the Port
Terminal R.R. It is used deliver various LPG'S to GATX and Crown Pet. (1.84
mi.)9,714' of 6",.280 w.t.,1987
4. UTILITY LINE (SOUTH ROUTE FROM GATX CONNECTION TO ARCO JCT.):
This 6" line is used for deliveries to Crown Pet. and as the loop back to
Warrengas Terminal from Arco Jct. through the GATX Line. (also called Arco Jct.
to Mobil in Feedstock Man.)various LPG'S (2.86 mi.)15,079' of 6",.250 w.t.,1954
5. SOUTH ROUTE (WARREN "D" AND BAYTOWN "C")
This is a 6"/8" line from Warren Mont Belvieu through Baytown and the Exxon BOP
Plant, to the Warrengas Galena Park Terminal. The channel crossing at Warrengas
is made through an 8" line laid in 1992 (de-bottleneck project) along the GATX
east fenceline and the east property line of Huntco Steel then through one of
the five lines installed in the Ship Channel Project. This line in conjunction
with the Deer Park to Texas City line delivers isobutane from Warrengas Terminal
to the Amoco and Marathon Plants in Texas City. (27.2 mi.)143,625' of 6"/8",.280
w.t.,1954 (Warren South Route)
6. CEDAR BAYOU DOCK LINE:
This is an idle 8" line that is tied into the South Route @ approx. M.P. 2 and
runs southeast of Hwy. 146 to the old Mobay Plant and then west a short distance
to the Warren Cedar Bayou Dock. (3.7 mi.)19,552' of 8",.250 w.t.,1956
7. NORTH ROUTE (WARREN "E" LINE):
This is an 8" line that runs north and west from the Warren Terminal @ Mt.
Belvieu to the San Jacinto River Crossing at the Lyondell Refinery, and enters
the Warrengas Terminal
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from the north. This line is used to deliver various LPG Products. (24.22
mi.)127,869' of 8",.250 w.t.,1957
8. PHIBRO LINE:
This 4" line runs from Arco Jct. through the Lyondell-Citgo Refinery, under Sims
Bayou and terminates in the Phibro Plant. This line is currently leased to
Phibro and the lease agreement stipulates that they be responsible for the
operation and maintenance of this system. (2.5 mi.)13,151' of 4",.188 w.t.,1956
9. 6" PHIBRO LINE:
This 6" line runs from Arco Jct. through the Lyondell-Citgo Refinery, under Sims
Bayou and terminates in the Phibro Plant. Various LPG'S (2.5 mi.)13,151' of
6",.280 w.t.,1956
10. FANNETT TO PT. ACRES (OLD FRIO PIPELINE):
This is an 8" line that runs from the Fannett Terminal to Pt. Acres. (16.18 mi.)
85405' of 8",.250 w.t.,1958
11. TENNECO LINE (TO NITEMARE JCT.):
This 8" line runs from the Warren Mt. Belvieu Terminal, north along Hwy.146 to
Nitemare Jct. It is used to deliver and receive various LPG Products. (1.01
mi.)5,316' of 8",.322 w.t.,1977
12. ARCO # 1 LINE (TO NITEMARE JCT.):
This is a 6" line that runs from the Warren Mt. Belvieu Terminal, north along
Hwy. 146 to Nitemare Jct. It is used to deliver and receive LPG Products. (1.02
mi.)5,402' of 6",.250 w.t.,1956
13. DOW PRODUCTS LATERAL:
This 6" lateral runs northwest from the Warren Mt. Belvieu Terminal, and ties
into a Dow Pipeline approx. 1,000' northwest of Winfree Rd. and the S.P.RR
Tracks. This line is in E.P. Mix Service. (1.01 mi.)5,319' of 6",.432 w.t.,1972
14. 6"MAG. LINE (NITEMARE JCT.):
This is a 6" line that runs from the Warren Mt. Belvieu Terminal, north along
Hwy. 146 to nitemare jct. It is used to deliver and receive various LPG
products. (1.02 mi.)5,421' of 6",.250 w.t.,1958
15. 6" OXYCHEM TIE-IN (PLACID LINE):
This is a 6" line that runs from the Warren Mt. Belvieu Terminal, north to the
Oxychem meter sta. on F.M.1942 and Fitzgerald Rd. (1.7 mi.)9,016' of 6",.280
w.t.,1979
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16. 6" ARCO BLACK LAKE LINE (PLACID LINE):
This line and the Oxychem line run parallel north to the entrance of the old
Placid Refinery. This line is used for LPG's. (2.3 mi.)12,098' of 6",.280
w.t.,1979
17. 4" TEXAS PETRO-CHEM LPG LATERAL:
This is a short lateral that runs from Arco Jct. to a Texas Petro-Chem line,
within the Lyondell-Citgo Refinery. Various LPG'S (.1 mi.) 829' of 4",.237 w.t.,
18. 4" UNOCAL LATERAL(INACTIVE)
This lateral is tied into the old LPG Gathering System east of Fannett Term.
(1.08 mi.)5,686' of 4",.237 w.t.,1989
21. 8"NATURAL GAS PIPELINE WARRENGAS TERMINAL ("A"LINE):
This line is used to transport fuel gas from a gas utility to the Warrengas
Terminal at Galena Park. (1.79 mi.)9,439' of 8",.250 w.t.,1946
22. 6"/8" DEER PARK TO TEXAS CITY (STERLING) ISOBUTANE
( ACQUIRED FROM CHEV CHEM IN 1996)
The Texas City deliveries are made through a section of the former 8"/6" Chevron
Chemical ethylene system , Texas City Leg. This segment was converted from
ethylene to Iso Butane service in April 1995 and is tied into the South Route at
sta.+ 197+90. (27.35 mi.)144,436' of 8",.250 w.t.,1978 (CCC T.C. Leg to T.C.
PRS) I.(2.44 mi.)12,864' of 6",.280 w.t.,1952 (CCC T.C. PRS to Sterling)
23. 8"/6" WARREN-KOCH LINE
This is a new connection that, when completed, will provide a dedicated line
from Warren Mt. Belvieu to Koch's Meter Facility. Approx. 6,000' of new 8" was
recently laid from Warren north along Hwy. 146, then west along F.M. 1942 to tie
into an existing 6,820' segment of idle 6" Placid Line. From the tie-in point
approx. 3,500' of the idle 6" will be used to connect to Koch. (1.19 mi.)6,281'
of 8".322 w.t.,1995 (new lay) (.66 mi.)3,500' of 6",.280 w.t.,1979 (idle segment
to be used) (.63 mi.)3,320' of 6",.280 w.t.,1979 (idle 6" not used)
25. 8" CEDAR BAYOU TO WARREN LPG
(FROM LINE # 27 CONNECTION TO WARREN MT. BELVIEU)
This line is connected to Line # 27 on the east side of Cedar Bayou at the HL&P
corridor. The line runs northeast within the CPL 200' ROW, crosses the Southern
Pacific RR, (2 8"lines in a 24"casing,1 spare line) then enters the Warren
Property at the west fenceline. The line runs north along the fence to a point
just past the west gate, where it enters a swab trap and ties into the 8"sch.80
plant piping that Warren installed through the pipe rack.
-22-
(.79 mi.)4,158' of 8",.312 w.t. 1991 (CPL installed section)
26. 20" LPG IMPORT PIPELINE (ACQUIRED FROM CPL IN 1996)
A 20" OD x 0.344" wall thickness pipeline that runs 25.3 miles in Harris and
Chambers Counties from Warrengas - Galena Park to Warren Mont Belvieu Terminal
Storage Facility. Built in 1977. There are no intermediate connections or pump
stations on this pipeline. Warren furnishes pumping equipment at Galena Park and
Mont Belvieu.
27. 8" PRODUCTS PIPELINE (ACQUIRED FROM CPL IN 1996)
An 8" OD x 0.250" wall thickness pipeline that runs 23.5 miles in Harris and
Chambers Counties from Warrengas Galena Park - to Chevron Chemical Cedar Bayou
Plant with one interconnection to a Warren-owned pipeline at Cedar Bayou. Built
in 1957. Pumping is furnished by Warren at Galena Park and by Chevron Chemical
at Cedar Bayou.
-23-
ATTACHMENT III
MAP OF FACILITIES
-24-
EXHIBIT 10.61
GALENA PARK SERVICES AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of , 1996, by and between
Chevron Products Company ("CHEVRON PRODUCTS"), a division of Chevron U.S.A.
Inc., a Pennsylvania corporation ("CUSA") and Warren Petroleum Company, Limited
Partnership, a Delaware limited partnership ("WARREN LP"), (each a "Party" and
collectively the "Parties")
WHEREAS, CUSA and NGC Corporation ("NGC") have entered into certain agreements
(the "Merger Agreements") pursuant to which CUSA would contribute certain gas
gathering, processing, and other midstream assets and related liabilities of
CUSA's Warren Petroleum Company division ("Warren") and CUSA's Natural Gas
Business Unit to a newly formed corporation into which NGC would then be merged;
and
WHEREAS, immediately subsequent to the Merger, the gas gathering, processing,
and other midstream assets of Warren will be transferred to WARREN LP; and
WHEREAS, one such asset is the Warrengas Terminal described more specifically on
Exhibit 12 attached hereto and made a part hereof ("Warrengas"); and
WHEREAS, after the merger, Chevron will own and operate the Galena Park Light
Products Terminal described more specifically on Exhibit 13 attached hereto and
made a part hereof ("Terminal") and WARREN LP will own and operate Warrengas;
and
WHEREAS, CHEVRON PRODUCTS wishes WARREN LP to perform certain services detailed
on Exhibits 1-11 hereto ("WARREN LP Services"), and WARREN LP wishes CHEVRON
PRODUCTS to perform certain services detailed on Exhibit 5 attached hereto
("CHEVRON Services")(WARREN LP Services and CHEVRON Services described on the
attached Exhibits shall be referred to individually as a "Service" and
collectively as "Services"); and
WHEREAS, WARREN LP and CHEVRON PRODUCTS wish to perform such Services for each
other in accordance with the terms of this Agreement; and
WHEREAS, WARREN LP and CHEVRON PRODUCTS intend that the scope and quality of
each Service shall remain substantially the same as it was prior to this
Agreement; and
WHEREAS, CHEVRON PRODUCTS and WARREN LP desire to work together to develop a
relationship with the goal of creating a comprehensive, mutually satisfactory,
long-term relationship to fulfill commercial needs previously performed by and
among CUSA's Chevron Products Company, Warren Petroleum Company and Natural Gas
Business Unit and to operate facilities previously operated by such CUSA
business units;
NOW, THEREFORE, for the mutual benefit of the Parties and in consideration of
the mutual covenants and agreements hereafter set forth, and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1.0 SERVICES
1.1 WARREN LP SERVICES. During the term of this Agreement, WARREN
LP shall provide and CHEVRON PRODUCTS shall pay for the
Services generally described in Exhibits 1 through 11 attached
hereto. Except as expressly stated otherwise, such Services
shall be provided in accordance with the terms and conditions
hereof and of the Exhibits. WARREN LP shall not provide
Services hereunder for operation of any facility other than
the Terminal. From time to time, the Parties may mutually
agree to the addition, deletion or modification of the
Services provided by WARREN LP by amending this Agreement and
its Exhibits, which shall be incorporated herein by reference.
The WARREN LP Services included on the date of this Agreement
are more particularly described in the following Exhibits:
1: Emergency Response Services
2: Dock Services
3: Security Services
4: Communication Services
5: Flare System Services
6: Potable Water Services
7: Natural Gas Services
8: Electric Services
9: Mowing and Weed Control Services
10: Road Repair Services
11: Fencing and Security Lights Services
1.2 CHEVRON SERVICES. During the term of this Agreement, CHEVRON
PRODUCTS shall provide and WARREN LP shall pay for the
Services described in Exhibit 5 attached hereto. Except as
expressly stated otherwise, such Services shall be provided in
accordance with the terms and conditions hereof and of the
Exhibits. Services provided by Chevron shall not be made
available hereunder for operation of any facility other than
Warrengas. From time to time, the Parties may mutually agree
to the addition, deletion or modification of Services by
amending this Agreement and its Exhibits, which shall be
incorporated herein by reference.
1.3 PERFORMANCE OF SERVICES. The Party providing a Service
("Providing Party") to the other Party ("Receiving Party)
shall provide such Service in accordance with the requirements
set forth in this Agreement and in the applicable Exhibit.
Except as otherwise set forth herein or in an Exhibit,
Providing Party shall at all times have sole authority to
manage, direct and control the performance of any Service and
the resources used to provide it; provided, however, that such
Service must meet the warranties set forth herein.
1.4 ACCESS. Each Party shall obey all rules established by the
other Party while on the other Party's premises, shall comply
with all reasonable conditions imposed by or requests made by
the other Party, and shall remove any personnel or equipment
used to provide Services from the other Party's premises upon
the other Party's reasonable request. Each Party shall permit
the other Party's employees reasonable access to its property
for the purpose of providing all Services required under this
Agreement.
1.5 MAINTENANCE OF FACILITIES. Each Party shall, insofar as is
commercially reasonable and practicable, operate and maintain
the Terminal or Warrengas systems, as the case may be, in a
manner that will avoid or minimize the likelihood of a
disturbance originating from its system which might cause
impairment of the Services. The Providing Party shall maintain
all fixtures and equipment in all facilities used to provide
and deliver Services in accordance with the standards observed
by such Providing Party in its maintenance of similar other
United States facilities it owns or operates.
1.6 COMPLIANCE WITH LAW. The Providing Party shall at all times
comply with all laws, ordinances, rules and regulations
related to the Services. Except as expressly provided in this
Agreement, the Providing Party shall give all required
notices, shall procure and maintain all necessary governmental
permits, licenses and inspections necessary for its
performance of this Agreement, and shall pay all charges and
fees in connection therewith.
1.7 NOTIFICATION OF CERTAIN MATTERS. During the term of this
Agreement, CHEVRON PRODUCTS and WARREN LP shall promptly
notify each other of any matter or the occurrence of any event
which could reasonably be expected to have the potential to
effect materially the Services provided hereunder.
1.8 REPRESENTATIVES. CHEVRON PRODUCTS and WARREN LP shall each
appoint a representative (its "Authorized Representative") who
shall act as a liaison to manage all aspects of its
performance of this Agreement, including, without limitation,
operational, environmental, safety, maintenance, technical and
scheduling issues. The Authorized Representatives shall have
no power to amend this Agreement either in writing or by
informal agreement except as provided in Section 17.0 of this
Agreement. The Authorized Representatives shall meet on an "ad
hoc" basis and may delegate any specific duty or authority
under this Agreement. Any subsequent change of the Authorized
Representative shall be effective only upon written notice.
1.9 METERING UPGRADES. WARREN LP shall be responsible for
upgrading or installing replacement meters required to measure
the Services, and CHEVRON PRODUCTS shall reimburse WARREN LP's
capital and maintenance costs associated with any such upgrade
or installation. WARREN LP shall receive written approval from
CHEVRON PRODUCTS in advance of any material upgrade or
replacement of meters to the extent WARREN LP will demand
reimbursement from CHEVRON PRODUCTS.
2.0 ADJUSTMENTS
2.1 FEES. The Parties have agreed to use fixed fees equal to the
Parties' best estimate of operating expenses actually incurred
with respect to the Services provided under Exhibits 1, 3, 9,
and 11 of this Agreement, and may agree to use such fixed fees
with respect to services added to this Agreement in the
future. On January 1 of each year of this Agreement,
commencing on January 1, 1997, any such fixed fees shall be
adjusted using the Consumer Price Index for all Urban
Consumers - Houston Area, published bimonthly on even numbered
months by the U.S. Department of Labor, Bureau of Labor
Statistics, as compared to the base index of 140.9 on January
1, 1996. If such indices are no longer published or are
changed substantially in their method of measurement, then
there shall be substituted by mutual agreement of the parties
another index that as closely as practicable reflects the
changes that such tables currently measure. The adjusted fees
shall go into effect the first day of the month following the
first month of publication for the year and shall remain in
effect until the first day of the month following the first
month of publication for the following year.
2.2 OPERATING ADJUSTMENTS. Other than with respect to adjustments
in fees, which are discussed elsewhere in the Agreement, each
Party agrees to modify the Exhibits hereto when and to the
extent that the other Party significantly changes its Galena
Park operations; provided, however, that such modification
does not have a net negative economic or operational impact
upon the other Party. In the event of any such plant operation
changes, the Receiving Party shall be notified as soon as
reasonably possible, the Providing Party shall, subject to the
other provisions of this Agreement, use commercially
reasonable efforts to accommodate the Receiving Party; and the
parties shall cooperate to effectuate the intent of this
Section.
2.3 SHUT-DOWNS. Except in the case of shutdowns effected solely
for economic reasons, neither Party shall be obligated to
deliver or receive Services during scheduled or unscheduled
maintenance shutdowns of any facility to which production or
use of such Services relates. During shutdowns effected solely
for economic reasons, each Party shall continue to fulfill its
obligations to the extent of the Services requirements needed
by the other Party to continue its normal operations without
negative economic or operations impact, subject to the
termination rights of each Party under Section 4 below.
2.4 HARDSHIPS. In the event conditions change so that this
Agreement causes an economic or operational hardship to either
Party, such Party may request a redetermination of any
provision hereunder by giving written notice to the other
Party. The Parties shall then meet within thirty (30) days to
try in good faith to determine a revised provision based upon
principles of fairness and equity; provided, however, that
neither Party shall be obligated to change the then existing
provision unless agreed to in writing.
3.0 WARRANTIES.
3.1 GENERAL WARRANTY. The Providing Party warrants that the
Services shall meet the respective requirements set forth in
this Agreement and its Exhibits in all material respects and
shall meet the practices the Providing Party generally uses to
provide similar services at other United States facilities
that it owns and operates. THE PROVIDING PARTY DOES NOT MAKE,
AND EXPRESSLY DISCLAIMS, AND THE RECEIVING PARTY EXPRESSLY
WAIVES, ANY OTHER WARRANTIES WHATSOEVER (EXCEPT THOSE
WARRANTIES SET FORTH IN THE EXHIBITS), INCLUDING (WITHOUT
LIMITATION) ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, REGARDLESS WHETHER ORAL OR WRITTEN,
EXPRESSED OR IMPLIED, OR ALLEGEDLY ARISING FROM ANY USAGE OF
ANY TRADE OR ANY COURSE OF DEALING.
3.2 THIRD-PARTY SUPPLIERS. The Providing Party hereby assigns any
assignable warranties made by third-party suppliers for the
Services supplied by it under this Agreement. The Providing
Party shall cooperate with the Receiving Party in claims made
by the Receiving Party against any third-party supplier,
regardless of the warranty rights of any Party. The Receiving
Party hereby releases the Providing Party from claims arising
from a breach of such third-party warranties.
3.3 DUTY TO WARN OF PRODUCT HAZARDS. Both Parties acknowledge that
they are familiar with, and shall take all steps necessary to
inform, warn and familiarize their employees, agents,
customers and contractors who may be affected by the provision
or receipt of Services of all hazards and proper safety
procedures pertaining thereto. Each Party agrees to provide
the other Party with hazardous communication information,
including MSDS sheets, on an ongoing basis.
3.4 LIMITATION OF WARRANTY LIABILITY. In no event shall either
WARREN LP or CHEVRON PRODUCTS be liable to the other for any
incidental, consequential or punitive damages arising out of
any breach of the foregoing warranties, even if it has been
advised of the possibility of such damages, except to the
extent such damages are caused by its willful misconduct.
4.0 TERMINATION
4.1 GENERALLY. This Agreement shall terminate upon termination of
all of its Exhibits. Each Exhibit other than Exhibit 2 - Dock
Services shall continue until terminated as follows:
(a) by mutual agreement;
(b) by either Party upon eighteen (18) months' written
notice if such Party intends to abandon or
permanently cease all operations of the Terminal or
Warrengas, as the case may be, or any material part
thereof related to such Exhibit or the Services
provided pursuant thereto;
(c) upon thirty days' written notice by the Receiving
Party; or
(d) upon eighteen (18) months' written notice by the
Providing Party.
Exhibit 2 - Dock Services shall be terminated only by mutual
agreement or upon thirty days' written notice by CHEVRON
PRODUCTS.
4.2 SAFETY SUSPENSION. Each Party (a "Suspending Party") reserves
the right to suspend its obligations under this Agreement,
without prejudice to any other power, right or remedy it may
have if the Receiving Party conducts its operations hereunder
in a manner which the Suspending Party reasonably believes
jeopardizes the safety of its property or personnel, provided
that the suspension shall be limited to a period of time
reasonably necessary for the protection of the property and
personnel of the Suspending Party.
5.0 PAYMENT.
Invoices shall be sent on or before the 16th day of each month for Services
supplied during the prior month. The payment due date for invoices submitted
under this Agreement shall be thirty (30) days after issuance of the invoice. If
a legitimate dispute exists with respect to any payment claimed due, the claimed
payment shall be paid within the time frame set forth above pending resolution
of such dispute in accordance with Section 16, and upon such resolution any
disallowed portion of any such payment shall be refunded without interest.
6.0 INDEMNITY.
6.1 PERSONAL INJURY OR DEATH. EACH PARTY (THE "INDEMNIFYING
PARTY") SHALL DEFEND, INDEMNIFY, AND HOLD HARMLESS THE OTHER
PARTY AND ITS AFFILIATES, AND THEIR OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS, FROM AND AGAINST ANY CLAIM, LIABILITY,
LOSS, DAMAGE, OR EXPENSE (INCLUDING ATTORNEYS' FEES) ARISING
OUT OF THE FOLLOWING:
(A) ANY PERSONAL INJURY OR DEATH CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFYING PARTY,
ITS AFFILIATES OR THEIR EMPLOYEES OR AGENTS;
(B) EXCEPT TO THE EXTENT TO WHICH PARAGRAPH (A) APPLIES TO ANY
MATTER, ANY PERSONAL INJURY OR DEATH TO AN EMPLOYEE OF THE
INDEMNIFYING PARTY OR ITS CONTRACTORS, SUBCONTRACTORS OR
VENDORS;
(C) EXCEPT TO THE EXTENT WHICH PARAGRAPH (A) OR (B) APPLIES TO
ANY MATTER, ANY PERSONAL INJURY OR DEATH TO ANY PERSON WHILE
PHYSICALLY PRESENT ON THE PREMISES OF THE INDEMNIFYING PARTY;
THE FOREGOING INDEMNITY SHALL APPLY WHETHER OR NOT AN
INDEMNIFIED PARTY WAS OR IS ALLEGED TO BE ACTIVELY, PASSIVELY,
SOLELY OR CONCURRENTLY NEGLIGENT, AND WHETHER OR NOT LIABILITY
WITHOUT FAULT IS SOUGHT TO BE IMPOSED ON ANY PARTY.
6.2 PROPERTY DAMAGE OR LOSS. THE INDEMNIFYING PARTY SHALL BE
RESPONSIBLE FOR, AND SHALL DEFEND, INDEMNIFY, AND HOLD
HARMLESS THE OTHER PARTY AND ITS AFFILIATES, AND THEIR
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, FROM AND AGAINST
ANY CLAIM, LIABILITY, LOSS, DAMAGE, OR EXPENSE (INCLUDING
ATTORNEY'S FEES) ARISING OUT OF ANY PROPERTY DAMAGE CAUSED BY
THE ACTION OF THE INDEMNIFYING PARTY, ITS AFFILIATES OR THEIR
EMPLOYEES OR AGENTS.
6.3 WARRANTY INDEMNITY. THE PROVIDING PARTY SHALL DEFEND,
INDEMNIFY AND HOLD HARMLESS THE OTHER PARTY, ITS AFFILIATES
AND SUBSIDIARIES, AND THE OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS OF ANY OF THEM (EACH AN "INDEMNITEE") FROM AND AGAINST
ANY AND ALL LOSS, DAMAGE, INJURY, LIABILITY AND CLAIMS THEREOF
FOR INJURY TO OR DEATH OF ANY PERSON RESULTING FROM SUCH
PARTY'S PERFORMANCE OF OR FAILURE TO PERFORM SUCH SERVICES IN
VIOLATION OF THE WARRANTIES CONTAINED HEREIN. SUCH INDEMNITY
SHALL APPLY WHETHER OR NOT AN INDEMNITEE WAS OR IS CLAIMED TO
BE PASSIVELY, CONCURRENTLY OR ACTIVELY NEGLIGENT, AND
REGARDLESS OF WHETHER LIABILITY WITHOUT FAULT IS IMPOSED OR
SOUGHT TO BE IMPOSED ON ONE OR MORE OF THE INDEMNITEES. THIS
INDEMNITY SHALL NOT APPLY TO THE EXTENT THAT IT IS VOID OR
OTHERWISE UNENFORCEABLE UNDER APPLICABLE LAW IN EFFECT ON OR
VALIDLY RETROACTIVE TO THE DATE OF THIS AGREEMENT, AND SHALL
NOT APPLY WHERE SUCH LOSS, DAMAGE, INJURY, LIABILITY OR CLAIM
IS THE RESULT OF THE SOLE NEGLIGENCE OR WILLFUL MISCONDUCT OF
AN INDEMNITEE.
7.0 IMPROVEMENTS.
7.1 REGULATORY OR OPERATING IMPROVEMENTS. Both Parties recognize
that in order to meet future regulatory or operational
requirements, capital or maintenance improvements to the
systems used to provide Services hereunder may be necessary.
Such improvements could require future research and
development costs and capital expenditures. In the event that
regulatory or operational requirements require capital or
maintenance improvements to the systems in order to provide
Services hereunder, then the Parties shall negotiate in good
faith to develop an agreement to allocate, if appropriate,
such costs between the Parties on a fair and equitable basis;
provided, however, that the Party receiving Services shall be
entitled to elect not to receive such Services in its sole
discretion rather than to contribute to such capital or
maintenance improvements.
7.2 DISCRETIONARY IMPROVEMENTS. Both Parties further recognize
that either Party may desire similar improvements for other
reasons such as its anticipated needs. The other Party agrees
to consider any such proposal, but is under no legal or
equitable obligation with respect thereto.
8.0 REGULATION.
It is not the intent of the Parties to enter into an Agreement that
will subject a Providing Party to regulation under state or federal law
as a public utility (i.e., obligated by law to provide services or
products to any third party other than Receiving Party and its
Affiliates). In the event that either (i) there is any modification (or
change in government interpretation) of any applicable law or
regulation, or (ii) any notice or proceeding is sent or commenced by
any government authority such that this Agreement or any Exhibit to
this Agreement subjects or is alleged by such authority to subject
Providing Party to public utility regulation, then WARREN LP and
CHEVRON PRODUCTS shall restructure the provision of Services under the
applicable Exhibit, through negotiations conducted in good faith, in a
manner that will not subject Providing Party to such regulation.
Pending such restructuring, nothing in this Agreement shall require
Providing Party to become subject to such public utility regulation,
and Providing Party may suspend provision of the affected Services if
and to the extent necessary to not be subject to such regulation. In
the event that Providing Party is subjected to fines or costs or
otherwise incurs costs as a result of Providing Party's being subject
to such regulation, Providing Party shall promptly notify Receiving
Party thereof after Providing Party has received notice of any
prospective or actual fine and prior to paying any fine or cost and
provide Receiving Party an opportunity to verify the requirement for
the applicable amount. One-half of the amount of all such fines or
costs incurred by Providing Party shall be promptly reimbursed to
Providing Party by Receiving Party.
9.0. CONFIDENTIALITY
During the performance of this Agreement, each Party ("Recipient") may
gain access or possession of information belonging to the other Party
("Owner") that is confidential (a "Disclosure"). Recipient shall use
such information only for the purpose disclosed and shall use its
commercially reasonable efforts to avoid other use or disclosure of
such information unless required by law or governmental agency (in
which case Recipient shall provide Owner with as much advance notice as
possible of the legal or governmental requirement for disclosure, and
thereafter reasonably cooperate with Owner's attempts to avoid or
minimize the required disclosure or to maintain the confidential nature
of the information; provided, however, that all costs associated with
such efforts shall be borne by Owner) or consented to by Owner, which
consent shall not be unreasonably withheld. Confidential information
shall include business, technical, personnel and other information
designated as confidential, but shall not include information that is
or becomes publicly known without fault of the Recipient, was known to
Recipient and recorded in a writing prior to Disclosure, was
independently developed by the Recipient, or was received by Recipient
prior to its Disclosure. All confidential information shall be returned
to its Owner upon request.
10.0 TAXES.
Any sales, use, transfer or similar taxes, now or hereafter imposed,
levied or assessed by any governmental authority directly upon the
provision of the Services shall, if collectible or payable by the
Providing Party, be paid by the Receiving Party on demand by the
Providing Party. If the Receiving Party claims exemption from any of
the aforesaid taxes, then it shall furnish the Providing Party with a
properly completed exemption certificate. On items which are to be
resold, the Receiving Party shall furnish the Providing Party with a
properly executed resale certificate. If the Receiving Party holds a
Texas direct payment permit, it shall issue to the Providing Party a
properly completed direct payment exemption certificate and thereafter
hold harmless and indemnify the Providing Party for any sales or use
taxes assessed against the Providing Party by any taxing authority in
respect to any taxable sales, including the amounts of any penalties,
interest and reasonable attorneys' fees. Notwithstanding the foregoing,
this Section shall not apply to income, franchise or similar taxes
levied on or measured by a Party's net income.
11.0 FORCE MAJEURE.
11.1 Neither Party shall be in breach of its obligations hereunder
(except for the obligation to pay money due or alleged to be
due hereunder) to the extent that performance is prevented or
delayed as a result of any cause beyond its reasonable
control, including, without limitation: (i) labor
disturbances, whether or not involving the employees of the
Party concerned or otherwise, and whether or not the
disturbance could be settled by acceding to the demands of a
labor group; (ii) compliance with a request or order of a
person acting or purporting to act on behalf of any government
or government department or agency (including but not limited
to EPA or OSHA); (iii) shortage in raw material,
transportation, power, or manufacturing capacity, or (iv)
unscheduled downtime due to unexpected events, such as
equipment failure; provided, however, that the suspension of
performance shall be of no greater scope and of no longer
duration than is required, that the non-performing Party shall
give the other Party notice of the particulars of the
contingency as soon as possible, confirmed in writing within
five (5) business days of its occurrence, and that the
non-performing Party shall use commercially reasonable efforts
to reduce the scope and duration of the contingency or to
mitigate its effects.
11.2 Whenever performance is so affected by such a contingency,
performance shall be reduced in a manner which fairly
apportions the consequences of the contingency among all
customers (including affiliates). Providing Party shall not be
required to make purchases from third parties in order to
comply with this Section, but may do so in its sole
discretion.
11.3 Performance will be excused as provided above even though the
occurrence of the contingency in question may have been
foreseen or foreseeable at the time of contracting or
subsequently become foreseeable, except to the extent that,
having foreseen the occurrence of the contingency, a Party
fails to take action to avoid or minimize the scope or effect
of the event.
11.4 Performance suspended by the provisions of this Section need
not be made up later.
11.5 The provision of this Section shall apply to any casualty loss
or other accidental destruction to its facilities. Neither
Party shall be obligated to rebuild following casualty loss or
other accidental destruction to its facilities.
12.0 NOTICES.
Any notice required or permitted hereunder shall be deemed to be given
if delivered personally; five days after depositing the notice in
certified mail, postage prepaid; or telecopied with receipt
acknowledged and with a confirming copy sent by a nationally recognized
overnight commercial courier to the following addresses:
The address for CHEVRON PRODUCTS shall be:
12523 American Petroleum Road
P.O. Box 505
Galena Park, TX 77547
(713) 453-6618 (facsimile number)
Attn: Terminal Manager
The address for WARREN LP shall be:
[WARREN LP]
_________________________
_________________________
_________________________
_________________________(facsimile number)
Attn:
Either Party may change its notice address by notifying the other in writing of
such change, which shall be effective fifteen (15) days after the giving of such
notice.
<PAGE>
13.0 CONFLICT OF INTEREST.
Neither Party shall give any director, employee or representative of
the other Party any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement, or enter
into any other business arrangement with any director, employee or
representative of the other, without prior written notification to the
other Party. Any representative(s) authorized by either Party may cause
an audit of any and all records of the other Party as necessary and
proper to verify that there has been compliance with this Section.
14.0 RIGHT TO AUDIT.
Each Receiving Party may from time to time, but not more often than
annually, make an audit of all records of the other and its
subcontractors and vendors, to the extent the Providing Party has such
right and can assign or transfer it, in connection with all costs upon
which prices under this Agreement are based. Such audit may also cover
the Party's procedures and controls with respect to such costs. Upon
completion of this audit, any compensation due hereunder as shown by
the audit shall be paid, except that the Providing Party may contest
the audit findings by providing written notice to the Receiving Party.
In such case, the dispute shall be resolved in accordance with Section
16.0 of this Agreement. Any amount by which the total payment exceeds
the amount due as shown by the audit shall be returned. Any amount not
audited within two years from the date payment was made shall be deemed
correct and accepted and shall not be subject to further audit or
refund obligations.
15.0 ASSIGNMENT.
Neither Party shall voluntarily assign its rights nor delegate its
duties under this Agreement, nor any part of such rights or duties,
whether directly or indirectly, without the prior written consent of
the other Party except as follows:
(a) either Party shall have the right to assign its rights under
this Agreement to an Affiliate without the consent of the
other Party.
(b) CHEVRON PRODUCTS' rights and obligations under this Agreement
shall automatically and without further act be assigned to and
assumed by any subsequent purchaser of the Terminal without
the consent of WARREN LP.
(c) WARREN LP's rights and obligations under this Agreement shall
automatically and without further act be assigned to and
assumed by any subsequent purchaser of Warrengas without the
consent of CHEVRON PRODUCTS.
An assignment of rights and delegation of obligations hereunder shall
become effective upon delivery to the other Party of a properly
executed assignment and assumption agreement evidencing the assignment
and delegation.
16.0 DISPUTES.
In the event a dispute arises with respect to this Agreement, the
parties shall endeavor in good faith to resolve the dispute. Such
endeavors shall include referral of the dispute to the Authorized
Representatives and, if not resolved there, to an appropriate vice
president of each Party. In addition, each Party agrees to consider the
use of mediation, arbitration and other alternative dispute resolution
methods. Any dispute or claim arising out of or relating to this
Agreement (including without limitation claims for breach or violation
of this Agreement) which has not otherwise been resolved shall be
referred to and finally resolved by binding arbitration in Houston,
Texas. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
and by a single arbitrator. No arbitration award shall provide for the
award of punitive damages. Any arbitration award shall be subject to
the limitations of liability set forth in this Agreement. Judgment on
any arbitration award may be entered in any court of appropriate
jurisdiction.
17.0 INTEGRATION, AMENDMENTS AND WAIVER.
This Agreement integrates the entire understanding between the parties
with respect to the subject matter covered. It supersedes all prior and
contemporaneous understandings, drafts, discussions or statements,
whether oral or in writing, expressed or implied, dealing with the same
subject matter. It may not be amended or modified in any manner
including, without limitation, a course of performance or course of
dealing between the Parties, except by a written agreement signed by
both Parties which expressly amends this Agreement. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver unless expressly provided.
18.0 INDEPENDENT RELATIONSHIP.
Nothing contained in this Agreement shall be construed to create an
association, trust, partnership or joint venture or impose a trust or
partnership duty, obligation or liability on or with regard to either
Party.
19.0 GOVERNING LAW.
Any questions concerning the interpretation and enforcement of this
Agreement shall be governed by the laws of the State of Texas, without
regard for provisions concerning choice of law.
20.0 UNEFORCEABILITY.
If any section or provision of this Agreement or any exhibit shall be
determined to be invalid by applicable law, then for such period of
time that same is invalid, it shall be deemed to be deleted from this
Agreement and rewritten as a valid and enforceable provision that comes
as close as possible to the meaning of the invalid or unenforceable
provision. The remaining portions of this Agreement shall remain in
full force and effect.
21.0 THIRD-PARTY BENEFICIARIES.
There are no intended third party beneficiaries to the Agreement and
nothing in this Agreement shall entitle any person other than CHEVRON
PRODUCTS or WARREN LP and their respective successors and assigns
permitted hereby to any claim, cause of action, remedy or right of any
kind.
WARREN LP CHEVRON PRODUCTS COMPANY, A DIVISION OF
CHEVRON U.S.A. INC.
By: By:
Title: Title:____________________________
<PAGE>
EXHIBIT 1
EMERGENCY RESPONSE SERVICES
1.0 DEFINITIONS.
1.1 "Emergency Response Equipment" shall mean the Fire Water
System, qualified emergency response personnel, encapsulated
suits, hazardous release equipment, oil spill containment
booms and deployment equipment, extinguishers, hose carts,
SCBA equipment, and other equipment necessary or desirable to
respond to emergencies occurring at the Terminal.
1.2 "Fire Water" shall mean the raw water that has been pumped by
equipment maintained and operated by WARREN LP from the
Houston Ship Channel into the Fire Water System to a nominal
pressure of 150 psig.
1.3 "Fire Water System" means an underground piping and
distribution system, hydrants, fire monitors, tank deluge
system, water cannons, the supervisory and control systems,
the six Fire Water pumps, and related equipment for the
purpose of delivering Fire Water throughout the Terminal.
1.4 "Hydrocarbon Leak Detection System" means a system maintained
by WARREN LP to detect the release of hydrocarbon in the
CHEVRON PRODUCTS tank field, including the central operations
computer and applicable software.
1.5 "Joint Emergency Response Plan" shall mean the plan prepared
by CHEVRON PRODUCTS and WARREN LP and approved by the United
States Coast Guard and the Texas General Land Office, for the
purpose of defining and describing incident response
operations associated with spills of CHEVRON PRODUCTS product
which could enter the water at Warrengas or the Terminal.
2.0 SCOPE OF SERVICES. WARREN LP shall:
(a) provide all Services reasonably necessary to respond to emergencies
at the Terminal as required under the Joint Emergency Response Plan;
(b) maintain and operate the Emergency Response Equipment in accordance
with the warranty set forth in the body of this Agreement;
(c) supply CHEVRON PRODUCTS with Fire Water through the Fire Water
System for fire control and other purposes;
(d) maintain those portions of the Fire Water System not on the
Terminal Property and conduct weekly performance tests of the entire
Fire Water System;
(e) inspect, maintain, test, repair and continuously monitor the
Hydrocarbon Leak Detection System;
(f) maintain all Emergency Response Equipment in accordance with the
manufacturer's service schedule and repair it in accordance with
recommended practices; and
(g) maintain membership in CCA and CIMA organizations to secure and
provide assistance during emergency response incidents involving the
Terminal.
3.0 EMERGENCY RESPONSE ORGANIZATION.
WARREN LP shall provide, or cause to be provided, an organization of
qualified emergency response personnel. CHEVRON PRODUCTS shall have
representatives on the response organization. The response organization
shall:
(a) provide or cause to be provided all Services reasonably necessary
to respond to emergencies at the Terminal as required under the Joint
Emergency Response Plan;
(b) respond to alarms and other emergency calls in accordance with the
procedures set forth in the Joint Emergency Response Plan;
(c) respond to medical emergencies, hazardous releases and rescue
situations as detailed in the Joint Emergency Response Plan;
(d) conduct regularly scheduled emergency drills; and
(e) maintain membership in the CCA and CIMA organizations and regularly
participate in incident preparation drills/planning exercises.
CHEVRON PRODUCTS shall participate in all emergency response drills
related to the Terminal. CHEVRON PRODUCTS' participation in any other
emergency response drill or organization shall be voluntary. Emergency
response personnel shall be allowed entry into both facilities.
4.0 FEES.
CHEVRON PRODUCTS shall pay WARREN LP the total sum of $17,700 a year
for the provision of Emergency Response Services, subject to Sections
7.1 and 7.2 of this Agreement relating to improvement. $2,700.00 of
this amount represents CHEVRON PRODUCTS' portion of membership dues in
CCA and CIMA. CHEVRON PRODUCTS will continue to bear twenty percent of
the cost of membership in such organizations. Therefore, this portion
of the fee shall increase in conjunction with the increase of
membership dues in such organizations rather than in accordance with
the procedures contained in Section 2.1 of this Agreement. In the event
WARREN LP responds to an actual emergency for CHEVRON PRODUCTS, all
direct costs incurred by WARREN LP for equipment, supplies, and
contract labor related to such response shall be paid by CHEVRON
PRODUCTS. Any direct costs incurred by WARREN LP to repair the
Hydrocarbon Leak Detection System on the Terminal property shall be
borne by CHEVRON PRODUCTS.
5.0 ADDITIONAL TERMS AND CONDITIONS.
Each Party (the "Releasing Party") hereby releases the other Party from
any liability whatsoever, arising in connection with the other Party's
performance of emergency response services hereunder in response to
alarms and other emergency calls to premises or facilities operating
primarily for the benefit of the Releasing Party; provided, however,
such release shall not apply to the willful misconduct of the other
Party.
<PAGE>
EXHIBIT 2
DOCK SERVICES
1.0 SCOPE OF SERVICES.
WARREN LP shall operate, maintain and provide qualified personnel for
the dock facilities at Galena Park and coordinate the scheduling at
docks 2 and 3 for all CHEVRON PRODUCTS' offloading requirements,
including but not limited to performing the following:
(a) The dock facilities shall remain open for the offloading of barges
at all times at CHEVRON PRODUCTS' request, upon CHEVRON PRODUCTS'
adherence to the Scheduling Procedure contained in Section 2.0 of this
Exhibit.
(b) WARREN LP shall maintain a spill prevention control and containment
plan and shall coordinate with CHEVRON PRODUCTS with respect to the
implementation of the Joint Emergency Response Plan.
(c) WARREN LP shall coordinate vessel activities of docks 2 and 3 to
include coordinating the arrival of barges, arranging berthing,
receiving barges for discharge, connecting unloading systems,
furnishing qualified dock personnel, participating in pre-transfer
conferences, monitoring dock facilities during discharge, and releasing
barges.
(d) CHEVRON PRODUCTS shall be responsible for hiring independent
inspectors. WARREN LP shall notify Chevron and Chevron's inspectors of
barge arrival.
(e) WARREN LP shall maintain the #2 and #3 dock facilities in a
condition suitable to meet CHEVRON PRODUCTS' shipping requirements for
the performance of this Agreement.
(f) WARREN LP shall maintain two CHEVRON PRODUCTS-owned active product
transfer pipelines connecting docks two and three to the Terminal for
Avgas and Motor fuels, and associated valving. WARREN LP shall obtain
written approval from CHEVRON PRODUCTS prior to performing repairs to
such pipelines for which CHEVRON PRODUCTS will be billed. WARREN LP
shall notify CHEVRON PRODUCTS before testing or performing maintenance
on such pipelines. WARREN LP shall perform annual USCG hydrotesting and
VOC monitoring. WARREN LP shall maintain applicable documentation and
provide copies to CHEVRON PRODUCTS upon request.
WARREN LP shall have no obligation to provide CHEVRON PRODUCTS with
barges under this Agreement. All CHEVRON PRODUCTS barges offloaded at
the docks shall be in compliance with all applicable rules and
regulations.
2.0 SCHEDULING PROCEDURE.
CHEVRON PRODUCTS' Logistics and Trading Group ("L and T Group") will
provide notice to the Logistics Specialist at Warrengas as far in
advance as possible, but not less than 48 hours, of a forty-eight (48)
hour window for the arrival of each CHEVRON PRODUCTS barge at the
WARREN LP docks (the "Preliminary Arrival Window"). No longer than four
hours after receipt of CHEVRON PRODUCTS' Preliminary Arrival Window
nomination, WARREN LP shall advise CHEVRON PRODUCTS of the availability
of dock space in the Preliminary Arrival Window requested by CHEVRON
PRODUCTS. If dock space is unavailable in the Preliminary Arrival
Window, WARREN LP shall notify CHEVRON PRODUCTS of the first available
arrival time. However, it is the intent of the Parties that all
possible actions should be taken to minimize CHEVRON PRODUCTS demurrage
assuming CHEVRON PRODUCTS has provided WARREN LP with the requisite
forty-eight (48) hour advance notice. CHEVRON PRODUCTS shall continue
to update WARREN LP regarding the progress of the CHEVRON PRODUCTS
vessel and any information indicating that the vessel will arrive
outside of the Preliminary Arrival Window as soon as CHEVRON PRODUCTS
obtains such information. Within twenty-four hours prior to the
beginning of the Preliminary Arrival Window, CHEVRON PRODUCTS' L and T
Group shall coordinate with WARREN LP to establish a Final Arrival
Time.
3.0 DEMURRAGE. Each Party shall coordinate with the other Party to minimize
demurrage to the extent possible. WARREN LP will make all reasonable
efforts to accommodate arriving Chevron vessels within the Preliminary
Arrival Window requested by Chevron. Once a Final Arrival Time has been
mutually established, demurrage to Chevron resulting from
unavailability of dock space at the Final Arrival Time or within four
hours thereafter shall be for WARREN LP's account. Demurrage charges on
the CHEVRON PRODUCTS vessel resulting from the delayed arrival of a
CHEVRON PRODUCTS vessel by more than four hours shall be for CHEVRON
PRODUCTS' account. WARREN LP shall make reasonable efforts to minimize
demurrage charges for CHEVRON PRODUCTS barges arriving outside of the
Final Arrival Time window, but shall not have any demurrage exposure to
CHEVRON PRODUCTS in such instances. WARREN LP shall not be responsible
to CHEVRON PRODUCTS for demurrage due to delays related to operations
problems with respect to product pumping or shore tankage and receipt
of product.
4.0 FEES. CHEVRON PRODUCTS shall compensate WARREN LP One-half cent per
gallon of product unloaded for performing the Dock Services based on
the shore tank receiving gauge. CHEVRON PRODUCTS shall reimburse WARREN
LP for direct costs incurred by WARREN LP for the repair and
maintenance of CHEVRON PRODUCTS' dock product transfer pipelines.
<PAGE>
EXHIBIT 3
SECURITY SERVICES
1.0 SCOPE OF SERVICES. WARREN LP shall provide security services to protect
Terminal personnel and property. This shall include after-hours
monitoring of the facility by WARREN LP personnel, access screening per
CHEVRON PRODUCTS instruction, monitoring and controlling the traffic
flow into and out of the Terminal, notifying CHEVRON PRODUCTS of any
emergencies and providing support in such situations, serving as a
staging area for emergency response equipment, and closely controlling
access to the Terminal.
2.0 FEES.
CHEVRON PRODUCTS shall compensate WARREN LP a total of $20,000 a year
for the provision of Security Services.
<PAGE>
EXHIBIT 4
COMMUNICATIONS SERVICES
1.0 DEFINITION.
"Radio System" shall mean the radio antenna, computers, repeater
stations, mobile units, and base stations (but not including handsets)
used by WARREN LP and CHEVRON PRODUCTS for communication within and
between the Terminal and Warrengas and used in connection with the
WARREN LP 800 Mhz FCC license.
2.0 SCOPE OF SERVICES.
WARREN LP shall maintain and operate the Radio System and the
applicable FCC license, and shall provide service to CHEVRON PRODUCTS.
CHEVRON PRODUCTS shall procure the radios. CHEVRON PRODUCTS currently
uses 9 radios. WARREN LP shall allow CHEVRON PRODUCTS to increase its
number of radios if the Radio System can accommodate the increase.
CHEVRON PRODUCTS' use of WARREN LP's Radio System shall be limited to
the business purposes of CHEVRON PRODUCTS and its Affiliates.
<PAGE>
EXHIBIT 5
FLARE SYSTEM SERVICES
1.0 DEFINITIONS.
1.1 "High Pressure Flare System" shall mean the Warrengas flare (North)
and associated system including the knockout tank.
1.2 "Low Pressure Flare System" shall mean the Terminal flare (South)
and associated system including the knockout tank and the flare
manifold for tanks W-17 through W-21.
2.0 SCOPE OF SERVICES. CHEVRON PRODUCTS shall operate and maintain for the
benefit of both parties the Low Pressure Flare System.
WARREN LP shall operate and maintain for the benefit of both parties
the High Pressure Flare System.
WARREN LP shall provide electricity and natural gas to both the High
Pressure Flare System and the Low Pressure Flare System free of charge.
3.0 OPERATING RULES. The parties shall adhere to the Operating Procedure
entitled "Switching to Chevron Flare System." Neither Party shall
perform work on either system without the approval of the other Party.
The Party operating each respective system shall obtain and maintain
any and all permits required by any governmental authority relating to
such system. Liability for repair and replacement of the Flare Systems
shall be governed by Sections 3.0 and 6.0 of this Agreement.
<PAGE>
EXHIBIT 6
POTABLE WATER SERVICES
1.0 DEFINITIONS. The terms used in this exhibit shall have the following
meanings:
1.1 "Potable Water" shall mean drinking water purchased from the City
of Houston and supplied to CHEVRON PRODUCTS at a minimum of 40 PSIG.
1.2 "PSIG" shall mean pounds per square inch gauge.
1.3 "Potable Water Facility" shall mean facilities used to deliver
Potable Water to CHEVRON PRODUCTS from the City of Houston water main.
2.0 SCOPE OF SERVICES.
2.1 WARREN LP agrees to supply the Terminal's requirements of Potable
Water for the term of this agreement.
2.2 WARREN LP shall be responsible for the operation and maintenance of
the entire Potable Water Facility.
3.0 METERING.
CHEVRON PRODUCTS' Potable Water usage shall be measured by a meter
located on the 3 inch water line by which Potable Water is provided to
CHEVRON PRODUCTS.
WARREN LP shall inspect, test, and calibrate such meter at least once
per year, as agreed by the parties, and any inaccuracy disclosed by
such test shall be promptly corrected. Either Party shall have the
right to have the meter tested at any time at its expense. The
Authorized Representative of each Party shall be afforded a reasonable
opportunity to be present at all meter inspections and tests. If at any
time a meter device is found inaccurate by more than 1%, an adjustment
shall be made to compensate for the effect of such inaccuracy on any
unpaid invoice.
If at any time the meter should fail to register or its registration
should be so erratic as to be meaningless, the quantities such meter
was intended to record shall be determined based on the previous
representative monthly average usage per day.
4.0 RATES.
WARREN LP shall read the CHEVRON PRODUCTS meter on a monthly basis and
shall bill CHEVRON PRODUCTS for the amount of water used by CHEVRON
PRODUCTS at the same rate that WARREN LP is billed by the City of
Houston.
<PAGE>
EXHIBIT 7
NATURAL GAS SERVICES
1.0 DEFINITIONS. The terms used in this exhibit shall have the following
meanings:
1.1 "Natural Gas" shall mean natural gas supplied by WARREN LP to
CHEVRON PRODUCTS to heat the shop and office facilities at the
Terminal.
1.2 "Natural Gas Facility" shall mean facilities used to distribute
Natural Gas to the Terminal.
2.0 SCOPE OF SERVICES.
2.1 WARREN LP agrees to supply the Terminal's requirements of Natural
Gas for the term of this agreement.
2.2 WARREN LP shall be responsible for the operation and maintenance of
the entire Natural Gas Facility.
3.0 METERING.
CHEVRON PRODUCTS' Natural Gas usage shall be measured by a meter
located on the one-inch supply line by which WARREN LP supplies gas to
CHEVRON PRODUCTS. WARREN LP shall inspect, test, and calibrate such
meter at least once per year, as agreed by the parties, and any
inaccuracy disclosed by such test shall be promptly corrected. Either
Party shall have the right to have the meter tested at any time at its
expense. The Authorized Representative of each Party shall be afforded
a reasonable opportunity to be present at all meter inspections and
tests. If at any time a meter device is found inaccurate by more than
1%, an adjustment shall be made to compensate for the effect of such
inaccuracy on any unpaid invoice.
If at any time the meter should fail to register or its registration
should be so erratic as to be meaningless, the quantities such meter
was intended to record shall be determined based on the previous
representative monthly average usage per day.
4.0 RATES.
WARREN LP shall read the CHEVRON PRODUCTS meter on a monthly basis and
shall bill CHEVRON PRODUCTS for the amount of Natural Gas used by
CHEVRON PRODUCTS at WARREN LP's cost.
<PAGE>
EXHIBIT 8
ELECTRIC SERVICES
1.0 DEFINITIONS. The terms used in this exhibit shall have the following
meanings:
1.1 "Electric Facility" shall mean facilities used to transmit or
distribute electricity to the Terminal.
1.2 "Electric Service" shall mean the supply of Energy by WARREN LP to
CHEVRON PRODUCTS at the Terminal under this Agreement.
1.3 "Energy" shall mean electric energy expressed in kilowatt-hours
delivered by WARREN LP to CHEVRON PRODUCTS.
1.4 "Forced Outage" shall mean any outage that fully or partially
curtails the electric output of the Electric Facility, other than an
outage caused by a Force Majeure event or scheduled maintenance.
1.5 "HLP" shall mean Houston Lighting and Power.
1.6 "KW" shall mean one kilowatt (1000 watts) of electricity.
1.7 "KWH" shall mean one kilowatt-hour of electricity.
1.8 "Metering Facility" shall mean that meter located at the power
distribution building, and associated equipment necessary for measuring
Energy deliveries by WARREN LP to CHEVRON PRODUCTS at the Terminal and
for determining CHEVRON PRODUCTS' payments to WARREN LP.
2.0 SCOPE OF SERVICES.
2.1 WARREN LP shall supply to CHEVRON PRODUCTS and CHEVRON PRODUCTS
shall take and pay for the full electrical requirements of the Terminal
for the term of this Agreement.
2.2 WARREN LP shall be responsible for the operation and maintenance of
the Electric Facility outside of the Terminal Property.
2.3 WARREN LP shall provide Energy free of charge to CHEVRON PRODUCTS
for CHEVRON PRODUCTS' operation of its tank farm lighting, security
lighting, cathodic protection, sewage plant, flare, and lift pump
station.
3.0 METERING. WARREN LP shall inspect, test, and calibrate the Metering
Facilities at least once per year, as agreed by the parties, and any
inaccuracy disclosed by such test shall be promptly corrected. Either
Party shall have the right to have the meter tested at any time at its
expense. The Authorized Representative of each Party shall be afforded
a reasonable opportunity to be present at all meter inspections and
tests. If at any time a meter device is found inaccurate by more than
1%, an adjustment shall be made to compensate for the effect of such
inaccuracy on any unpaid invoice.
If at any time the meter should fail to register or its registration
should be so erratic as to be meaningless, the quantities such meter
was intended to record shall be determined based on the previous
representative monthly average usage per day.
4.0 FORCED OUTAGES. In the event of a Forced Outage, WARREN LP shall make
all reasonable efforts to restore the full Electric Service to any
affected area as soon as reasonably possible.
5.0 RATES. CHEVRON PRODUCTS shall reimburse WARREN LP for the total KWH of
Energy measured to CHEVRON PRODUCTS through the CHEVRON PRODUCTS meter
at the rate charged to WARREN LP by HLP for such Energy. CHEVRON
PRODUCTS shall also reimburse WARREN LP for a percentage of the
allocable facility or base charges based on actual consumption.
<PAGE>
EXHIBIT 9
MOWING AND WEED CONTROL SERVICES
1.0 SCOPE OF SERVICES. WARREN LP shall provide all services necessary to
maintain the grounds of the Terminal including, without limitation,
mowing the grass on a weekly basis or as seasonably required and
performing weed control as seasonably required. CHEVRON PRODUCTS shall
be responsible for landscaping in the vicinity of the CHEVRON PRODUCTS
office.
2.0 FEES. CHEVRON PRODUCTS shall compensate WARREN LP $13,000 per year.
<PAGE>
EXHIBIT 10
ROAD REPAIR SERVICES
1.0 SCOPE OF SERVICES. WARREN LP shall maintain and repair that portion of
American Petroleum Road between Federal Road and the entrance to the
Terminal.
2.0 FEES. CHEVRON PRODUCTS shall reimburse WARREN LP for twenty percent of
the direct repair and maintenance costs incurred by WARREN LP.
<PAGE>
EXHIBIT 11
FENCING AND SECURITY LIGHTS SERVICES
1.0 SCOPE OF SERVICES. WARREN LP shall maintain and promptly repair all
fencing throughout and surrounding Warrengas and the Terminal. WARREN
LP shall maintain and repair all security lighting throughout the
property other than that located at the Terminal.
2.0 FEES. CHEVRON PRODUCTS shall compensate WARREN LP $3,000 per year.
<PAGE>
EXHIBIT 12
DESCRIPTION OF WARRENGAS
<PAGE>
EXHIBIT 13
DESCRIPTION OF THE TERMINAL
<PAGE>
Exhibit 10.62
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
VENICE COMPLEX
OPERATING AGREEMENT
______________ 1, 1996
BETWEEN
CHEVRON U.S.A. INC.
AND
WARREN PETROLEUM COMPANY
<PAGE>
1. Definitions...............................................................1
2. Term......................................................................3
3. Operating Services........................................................5
4. Operating Fee and Other Overhead..........................................8
5. Operating Expenses........................................................9
6. Accounting Procedures....................................................13
7. Reports..................................................................17
8. Relationship of the Parties..............................................18
9. Force Majeure............................................................19
10. Dispute Resolution......................................................20
11. Bond....................................................................22
12. Liens...................................................................22
13. Notices.................................................................22
14. Assignment..............................................................23
15. Early Termination of Agreement..........................................23
16. Transition upon Termination.............................................24
17. Confidentiality.........................................................24
18. Miscellaneous...........................................................25
VENICE COMPLEX
OPERATING AGREEMENT
THIS AGREEMENT is dated as of ______________ 1, 1996, by and between
CHEVRON U.S.A. INC., a Pennsylvania corporation, hereinafter referred to as
"Chevron", and WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited
partnership, hereinafter referred to as "Contractor".
WITNESSETH:
WHEREAS, Chevron owns or controls the "Venice Complex" located in
Plaquemines Parish, Louisiana; and
WHEREAS, Chevron desires to hire Contractor to operate said Complex;
and
WHEREAS, Contractor is willing to operate said Complex for Chevron
under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement, the following words and terms shall have the
meanings here ascribed to them:
1.1. "Annual Budget" means an estimate of expenditures necessary to
operate the Venice Complex for a calendar year or portion
thereof.
1.2. "AFE" or "Authority for Expenditure" means a document prepared
by Contractor which indicates the costs and describes work to
be performed and the economics thereof.
1.3. "Affiliate" means any Person that directly or indirectly
through one or more intermediaries, controls or is controlled
by or is under common control with the Person specified. The
term "control" (including the terms "controlled by" or "under
common control with") means the possession, directly or in
-1-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
directly, of the power to direct or cause the direction of the
management and policies of a Person, whether through
ownership, by contract, or otherwise. Any Person shall be
deemed to be an Affiliate of any specified Person if such
Person owns 50% or more of the voting securities of the
specified Person, if the specified Person owns 50% or more of
the voting securities of such Person, or if 50% or more of the
voting securities of the specified Person and such Person are
under common control.
1.4. "Approved AFE" means an AFE executed by Chevron.
1.5. "Authorized Expenditures" means Expenditures set forth in an
Annual Budget, or in an Approved AFE, or otherwise authorized
as set forth under Section 5.3 hereof.
1.6. "Expenditures" means the cost and expenses of operating and
maintaining the Venice Complex.
1.7. "Month" means a calendar month.
1.8. "Operating Fee" means a monthly fee payable by Chevron to
Contractor for services rendered under this Agreement, which
* Operating Fee shall equal [REDACTED] as of the effective date
of this Agreement. Said Operating Fee shall compensate
Contractor for various duties as follows:
1.8.1. For duties pertaining to the onshore facilities of
the Venice Gathering Company, including without
limitation the Delta Gathering Station and its
* associated water disposal system, [REDACTED].
1.8.2. For duties pertaining to the Venice barge terminal
* and Venice storage wells, [REDACTED].
1.8.3. For duties pertaining to the Venice gas processing
plant, including without limitation the Venice
Stabilizer Plant and the Venice fractionation
* facility, [REDACTED]
1.8.4. For duties pertaining to the West Delta 41/117
* onshore tank battery, [REDACTED].
1.8.5. For duties pertaining to the Bastian Bay onshore tank
* battery, [REDACTED].
-2-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
1.8.6. For duties pertaining to the West Delta 27 onshore
* tank battery, [REDACTED].
1.8.7. For duties pertaining to the two West Bay pipeline
* scrubbers, [REDACTED].
If in accordance with Section 2.2 either party terminates this
Agreement as to one or more of the above facilities, then the
Operating Fee shall be reduced in accordance with the
above-described portions thereof.
1.9. "Venice Account" means that bank account referred to in
Section 6.1 hereof.
1.10. "Venice Complex" means that complex of facilities owned or
controlled by Chevron, located in Plaquemines Parish,
Louisiana, and illustrated on Exhibit "E", which Contractor
will be operating pursuant to this Agreement, including (1)
the Venice gas processing plant which includes the Venice
Stabilizer Plant adjacent thereto, (2) the Venice
fractionation facility, (3) the Venice barge terminal, (4) the
Venice storage wells, (5) the onshore facilities and equipment
of Venice Gathering Company, including without limitation the
Delta Gathering Station and its associated water disposal
system, (6) the West Delta 41/117 onshore tank battery owned
by Chevron, (7) the West Delta 27 onshore tank battery owned
by Chevron and Exxon Company, U.S.A., and previously operated
by Chevron in accordance with the joint operating agreement
between such owners, (8) the Bastian Bay onshore tank battery
previously operated by Chevron on behalf of Phillips Petroleum
Company in accordance with that certain Facility Operating
Agreement dated December 3, 1992, (9) two scrubbers connected
to gas pipelines entering the Venice Stabilizer Plant and the
Delta Gathering Station, respectively, from Chevron's and
Texaco's West Bay field, and (10) all appurtenant facilities
and equipment associated with each of the foregoing. The
Venice Gathering Company, its appurtenant facilities or
equipment (excluding such onshore facilities and equipment
addressed in (5) above), which system is connected to the
Venice Complex, shall be operated by Chevron.
2. TERM
2.1. PRIMARY TERM
Subject to Sections 2.2 and 2.4 below, the primary term of
* this Agreement shall be [REDACTED], commencing on
______________ 1, 1996 (or the effective date of the merger
forming Warren Petroleum Company from certain assets of NGC
Corporation and of Chevron U.S.A. Inc., if different
-3-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS
BEEN SEPARATELY FILED WITH THE COMMISSION.
* from the foregoing date), and ending on [REDACTED].
Thereafter, this Agreement shall continue in effect from year
to year (e.g., August 1 through July 31) unless terminated by
Chevron upon 90 days' notice prior to the termination of the
primary term or subsequent anniversary thereof.
2.2. PARTIAL TERMINATION OWING TO SALE OF FACILITIES
If Chevron sells in the aggregate 50% or more of its interest
in and to all or a substantial portion of the major facilities
forming a part of the Venice Complex as defined herein, then
either party may terminate this Agreement, as to such facility
or facilities in which such interest(s) have been sold. If
such a sale occurs within the first 12-month period during the
term of this Agreement, the terminating party shall give the
other party at least 60 days' prior written notice of such
termination with respect to the facility or facilities
affected. If such a sale occurs thereafter, the terminating
party shall give the other party at least 120 days' prior
written notice of such termination with respect to the
facility or facilities affected; provided, however, that only
60 days' prior written notice of such termination will be
required if such sale pertains to Chevron's share of West
Delta 27 onshore tank battery or the West Delta 41/117 onshore
tank battery. With respect to duties pertaining to the Bastian
Bay onshore tank battery, Chevron may terminate this Agreement
at any time upon at least 60 days' prior written notice to
Contractor. The obligation of each party to settle all
accounts and debts owed to the other party shall survive a
partial or full termination as contemplated in this Section
2.1.
2.3. EARLY TERMINATION OWING TO SALE OF FACILITIES
2.3.1. BY CHEVRON
If pursuant to Section 2.2 this Agreement has been
partially terminated with respect to duties
pertaining to the facilities identified in both
Sections 1.8.1. and 1.8.3., then for a period of 90
days after the effective date of the latter such
termination, Chevron shall have the right to
terminate this Agreement as to the remainder of
facilities and duties covered, by so notifying
Contractor in writing. If Chevron does not exercise
such right within such 90-day period, then this
Agreement shall remain in force in accordance with
the terms hereof. Any termination pursuant to this
Section 2.3.1 shall be effective on the first day of
the month next following a period of 90 days after
such notice of termination. The obligation of each
party to settle all accounts and debts owed to the
other party shall survive a partial or full
termination as contemplated in this Section 2.3.1.
-4-
2.3.2. BY CONTRACTOR
If pursuant to Section 2.2 this Agreement has been
partially terminated with respect to duties
pertaining to the facilities identified in both
Sections 1.8.2. or 1.8.3., then for a period of 90
days after the effective date of the latter such
termination, Contractor shall have the right to
terminate this Agreement as to the remainder of
facilities and duties covered, by so notifying
Chevron in writing. If Contractor does not exercise
such right within such 90-day period, then this
Agreement shall remain in force in accordance with
the terms hereof. Any termination pursuant to this
Section 2.3.2 shall be effective on the first day of
the month next following a period of 90 days after
such notice of termination. The obligation of each
party to settle all accounts and debts owed to the
other party shall survive a partial or full
termination as contemplated in this Section 2.3.2.
2.4. ECONOMIC OR OPERATIONAL HARDSHIP
If conditions change such that this Agreement causes, or could
reasonably be expected to cause a material long-term economic
or operational hardship to either party, upon the written
request of either party, Chevron and Contractor shall meet to
renegotiate in good faith such burdensome terms and provisions
so as to make them fair and equitable. Such renegotiations
shall occur within 30 days of the date of the non-requesting
party's receipt of such written request for such
renegotiations. If the parties are unable to agree on new
provisions to replace such burdensome terms and provisions
within 90 days of the non-requesting party's receipt of such
written request, the matter shall be submitted to the dispute
resolution procedures set forth in Section 10 hereof. If new
provisions are agreed upon or otherwise established under this
Section 2.4, such new provisions shall be as of the date of
such resolution, if such provisions are operational in nature,
or as of the date on which the notice commencing
renegotiations was given, if such provisions are economic in
nature.
3. OPERATING SERVICES
3.1. OPERATOR
Chevron hereby engages Contractor as an independent contractor
to perform the duties of operator of the Venice Complex as set
forth herein, and Contractor agrees to perform such duties and
act as operator pursuant to this Agreement.
3.2. EMPLOYEES
The number of employees used by Contractor in conducting
operations hereunder, their selection, the hours of labor, and
their compensation for services performed shall be determined
by Contractor. -5-
3.3. RESPONSIBILITIES
Contractor shall perform the duties of operator on behalf of
Chevron, as provided in Exhibit "D" of this Agreement.
3.4. ACCESS BY CHEVRON AFFILIATES
Contractor shall permit access at all reasonable times to the
Venice Complex for Chevron affiliates (e.g., Chevron Pipe Line
Company) for operation and maintenance of meters, pumps,
facilities and equipment located at the Venice Complex and
owned and operated by such affiliates; provided, however, that
Chevron's affiliates shall use reasonable efforts to schedule
and perform such activities in a manner designed to minimize
disruption or interference with Contractor's operations.
3.5. STANDARD OF CARE
Contractor shall perform the services as operator of the
Venice Complex in a safe, proper and workmanlike manner with
that degree of diligence and prudence which would be
reasonably and ordinarily exercised by experienced operators
engaged in a similar activity under similar circumstances and
conditions. Contractor shall do or cause to be done all such
acts and things within its control as may be reasonably
necessary to operate and maintain the Venice Complex in
compliance with the requirements of all applicable federal,
state, regional and local laws, rules, regulations and orders.
Contractor, in its capacity as operator pursuant to this
Agreement, shall assume no other liability to Chevron except
in the case of Contractor's gross negligence or willful
misconduct. Contractor's superintendent shall live near the
Venice Complex unless otherwise approved by Chevron.
3.6. INDEMNIFICATION
CONTRACTOR COVENANTS AND AGREES TO FULLY DEFEND, PROTECT,
INDEMNIFY AND HOLD HARMLESS CHEVRON, ITS OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS, FROM AND AGAINST EACH AND EVERY CLAIM,
DEMAND OR CAUSE OF ACTION AND LIABILITY, COST AND/OR EXPENSE
(INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS' FEES AND
EXPENSES INCURRED IN DEFENSE OF CHEVRON, ITS OFFICERS,
DIRECTORS, EMPLOYEES AND/OR AGENTS), FOR DAMAGE OR LOSS WHICH
MAY BE MADE OR ASSERTED BY CONTRACTOR'S OFFICERS, DIRECTORS,
EMPLOYEES AND/OR AGENTS OR WHICH MAY BE MADE OR ASSERTED BY
ANY SUBCONTRACTOR, SUBCONTRACTOR'S OFFICERS, DIRECTORS,
EMPLOYEES, AND/OR AGENTS, OR WHICH MAY BE MADE OR ASSERTED BY
ANY THIRD PARTY, CAUSED BY, ARISING DIRECTLY OUT OF OR IN
CONNECTION WITH CONTRACTOR'S AND ITS EMPLOYEES' GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
-6-
IT IS THE SPECIFIC INTENT OF THE INDEMNITY AGREEMENT THAT
CONTRACTOR FULLY DEFEND, INDEMNIFY, AND HOLD HARMLESS CHEVRON
FROM AND AGAINST ALL CLAIMS ARISING FROM (BUT ONLY TO THE
EXTENT OF) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
CONTRACTOR, ITS EMPLOYEES, SUBCONTRACTORS OR THEIR EMPLOYEES.
3.7. INSURANCE
As to all operations hereunder, Contractor shall maintain at
Chevron's expense, and shall require any subcontractors it may
engage to maintain, at all times during the term of this
Agreement, the insurance coverage set forth below with
companies satisfactory to Chevron with full policy limits
applying, but not less than, as stated. Chevron, its parent,
subsidiaries, and affiliated companies, co-owners and joint
venturers if any, and all of their employees, officers,
directors, and agents, shall be named as additional insureds
in each of the policies hereinabove described.
The minimum coverage shall be as follows:
3.7.1. Provide Worker's Compensation with employer's
liability limits as required by the State of
Louisiana.
3.7.2. Provide Auto Liability, including employer's
non-owned coverage, with minimum limits of
$1,000,000.
3.7.3. Provide General Liability coverage with minimum
limits of $1,000,000 bodily injury and property
damage each and in the aggregate to include broad
form property damage coverage.
3.7.4. Provide Umbrella Liability coverage with limits of at
least $5,000,000.
Each policy shall be endorsed to provide waiver of subrogation
rights in favor of Chevron, its subsidiaries and affiliates
and all other parties owning an interest in the Venice
Complex. To the extent permitted under law, Contractor may
self-insure against such losses, and shall bill Chevron for
provision of self-insurance at rates no greater than those
commonly available from third party insurers.
3.8. PERSONNEL AND INDEMNIFICATION
IF CHEVRON UNDERTAKES ANY CAPITAL PROJECT ON THE VENICE
COMPLEX UNRELATED TO THE WORK TO BE PERFORMED BY CONTRACTOR
PURSUANT TO THIS OPERATING AGREEMENT, CHEVRON RESERVES THE
RIGHT, AT ITS OPTION, TO USE ITS OWN TECHNICAL, ADMINISTRATIVE
AND SUPERVISORY PERSONNEL ON ANY SUCH CAPITAL PROJECT;
PROVIDED, HOWEVER, THAT CHEVRON AGREES TO INDEMNIFY AND HOLD
CONTRACTOR
-7-
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES AND
LIABILITIES ON ACCOUNT OF PERSONAL INJURY, DEATH OR PROPERTY
DAMAGE ARISING OUT OF CHEVRON'S NEGLIGENCE OR STRICT LIABILITY
IN CONNECTION WITH ANY SUCH CAPITAL PROJECT, EXCEPT IF AND TO
THE EXTENT ANY SUCH CLAIMS, LOSSES AND LIABILITIES WERE CAUSED
BY THE CONTRACTOR'S SOLE NEGLIGENCE.
4. OPERATING FEE AND OTHER OVERHEAD
4.1. OPERATING FEE
As consideration for the services rendered by Contractor
hereunder, Chevron shall pay to Contractor the Operating Fee.
4.2. CAPITAL IMPROVEMENTS
For any capital expenditure projects provided and managed by
Contractor, Contractor shall receive an overhead charge on
each project as follows:
* 4.2.1. For capital projects under [REDACTED] of the capital
* costs (not to exceed [REDACTED]).
* 4.2.2. For capital projects [REDACTED] of the portion of the
* capital costs over [REDACTED].
* 4.2.3. For capital projects over [REDACTED]
4.3. RENEGOTIATION OF OPERATING FEE
* Every [REDACTED] after the effective date of this Agreement,
either party shall have the option to open this Agreement
solely for the purpose of renegotiating the fees to be paid
for services rendered hereunder. To exercise such option, a
party shall provide to the other party written notification
(the "Renegotiation Notice") of its desire to renegotiate fees
for any or all services rendered hereunder at least 90 days
before the expiration of such 5-year period. In any such
renegotiations, the parties shall continue to recognize that
the fees to be paid for services rendered hereunder must
reflect the fair market value of comparable services provided
and received by third persons who are not affiliates of either
party in the area(s) where such services are being provided.
If, after negotiating in good faith for a period of 90 days
following the date of the Renegotiation Notice, the parties
are unable to agree upon a mutually satisfactory fee for the
services in question, the matter shall be submitted to the
dispute resolution procedures as provided in Section 10
hereof. During the period while such negotiations or dispute
resolution procedures are ongoing until a new fee is
-8-
agreed to or otherwise established as provided herein, the fee
for the services in question shall be determined in accordance
with the fee arrangement that was applicable immediately prior
to the date of the Renegotiation Notice. If a new fee is
agreed to or otherwise established under this Section 4.3,
such new fee shall be effective as of, and shall, if
necessary, be made retroactive to, the first day of the
applicable 5-year period immediately following the
Renegotiation Notice.
5. OPERATING EXPENSES
5.1. EXPENSES COVERED
Contractor, pursuant to Section 6 hereof, shall promptly pay
and Chevron shall reimburse Contractor for all of the
Authorized Expenditures of the Venice Complex on a
"when-and-as-paid" basis, including the following:
5.1.1. SALARIES AND WAGES
Salaries and wages of Contractor's employees employed
on the Venice Complex property in connection with
operations of or while in transit to or from the
Venice Complex. Other expenses associated with these
employees to the extent the employees' salaries and
wages are chargeable are also chargeable as follows:
5.1.1.1. Contractor's cost of holiday, vacation,
sickness, and disability benefits and other
customary allowances available to all
employees, but specifically excluding
severance compensation programs and all
employee relocation expenses. Such costs may
be charged on a "when-and-as-paid" basis or
by "percentage assessment" on the amount of
salaries and wages chargeable to the Venice
Account. If percentage assessment is used,
the rate shall be based on the Contractor's
recent cost experience.
5.1.1.2. Expenditures or contributions made pursuant
to assessments imposed by governmental
authority incurred by the Contractor
associated with salaries, wages, and
benefits charges to the Venice Account.
5.1.1.3 Reimbursable travel, meals and lodging of
these employees.
5.1.1.4. Government-mandated training, including the
wages, salaries, training course cost, and
reimbursable travel, meals, and lodging
incurred during the training session. The
cost of the training course will be limited
to prevailing commercial rates.
-9-
5.1.1.5. Contractor's cost of established plans for
employees' benefits.
5.1.2. OFFICE SUPPLIES
Cost of stationery and office supplies, cleaning,
repairing and maintaining of office equipment,
photostats, blueprints, etc. at the Venice Complex.
5.1.3. TELEPHONE
Telephone, telecopy and telegraph services, and
operating expenses of radio communication systems at
the Venice Complex.
5.1.4. DATA PROCESSING
Costs of data processing expenses, computer rental,
and other computer supplies at the Venice Complex.
5.1.5. TRUCK AND AUTOMOBILE
Lease, purchase, operation and maintenance expenses
and costs for vehicles approved by Chevron as
necessary for operations on the Venice Complex.
5.1.6. OUTSIDE SERVICES
Costs of contract and subcontract services (including
those for technical personnel), professional
consultants, equipment and utilities provided by
sources other than Contractor to the extent the
services are performed on the Venice Complex or any
portion thereof.
5.1.7. EQUIPMENT FURNISHED BY CONTRACTOR
5.1.7.1. PREVAILING COMMERCIAL RATE
Equipment located on the Venice Complex
owned by the Contractor shall be charged to
the Venice Account at the average prevailing
commercial rate for such equipment. If an
average commercial rate is used to bill the
Venice Account, Contractor shall adequately
document and support such rate and shall
periodically review and update the rate.
5.1.7.2. ACTUAL COST
In lieu of charges set forth in Section
5.1.7.1, or if a prevailing commercial rate
is not available, equipment owned by the
Contractor will be charged to the Venice
Account at the Contractor's actual cost.
Such costs may include all expenses which
would be chargeable pursuant to this Section
5.1.7, depreciation using straight line
depreciation method, interest on invest
-10-
ment (less gross accumulated depreciation)
not to exceed 10% per annum, and an element
of the estimated cost to dismantle and
abandon the equipment. Charges for
depreciation will no longer be allowable
once the equipment has been fully
depreciated. Actual cost shall not exceed
the average prevailing commercial rate in
the geographical area.
5.1.8. DAMAGES AND LOSSES TO VENICE COMPLEX PROPERTY
All costs and expenses necessary for the repair or
replacement of property at the Venice Complex made
necessary because of damages or losses incurred by
fire, flood, storm, theft, accident or other cause,
except those resulting from matters for which
Contractor has agreed to provide indemnification
pursuant to Section 3.6 hereof. Contractor shall
furnish Chevron with notice of damages or losses
incurred as soon as practicable.
5.1.9. TAXES
All taxes and similar impositions of every kind and
nature assessed or levied upon or in connection with
the Venice Complex. Penalties or fines and interest
assessed against Chevron resulting from the failure
of Contractor to submit reports to appropriate
agencies on a timely basis shall be borne by
Contractor unless due to actions or inactions of
Chevron.
5.1.10. MATERIAL AND FREIGHT
Materials (including supplies to fuel and maintain
Venice Complex equipment and vehicles) shall only be
purchased for or transferred to the Venice Complex in
accordance with an Annual Budget or Approved AFE, as
may be required for immediate use and as reasonably
practical and consistent with efficient and
economical operations. The accumulation of surplus
stocks shall be avoided.
5.1.11. UTILITIES
Costs for electrical power, water and any services
provided by a utility company used in the operation
of the Venice Complex.
5.1.12. TRAVEL EXPENSES
For Contractor's Houston-based personnel traveling
to, from and working at the Venice Complex, Chevron
agrees to reimburse Contractor for travel expenses,
at actual cost, for most economical class air fare,
lodging, meals, laundry, business related telephone
calls, taxis, car rental, reproduction, tolls,
parking, and upon prior approval from Chevron, any
other reasonable, necessary business-related
expenses. Under no circumstances does Chevron agree
to consent to or instruct Contractor or its em-
-11-
ployees to use non-commercial or non-scheduled
airlines for travel.
5.1.13. ECOLOGICAL AND ENVIRONMENTAL
Costs of surveys as well as pollution containment,
actual control and resulting responsibilities as
required by applicable laws or resulting from
statutory regulations.
5.1.14. OTHER EXPENDITURES
Any other expenditures not covered or dealt with in
the foregoing provisions of this Section 5.1 which is
authorized under an Annual Budget or an Approved AFE.
5.2. ANNUAL BUDGET
Chevron shall prepare and submit to Contractor the first
Annual Budget, setting forth estimated Expenditures (including
both capital and expensed costs) anticipated to be incurred
during the initial term hereof, and shall update such budget
as necessary. No later than August 1, 1997 and each August 1
thereafter, Contractor shall prepare and submit an Annual
Budget for the upcoming calendar year to Chevron for its
approval.
5.3. AUTHORITY FOR EXPENDITURE (AFE)
Contractor shall prepare and submit an AFE to Chevron for
approval before entering into any single commitment or
incurring any expenditure for any item exceeding $75,000, or
for any item currently estimated to cost in excess of 10% more
than originally estimated in an approved Annual Budget. Upon
approval of any such AFE by Chevron, Contractor shall be
authorized to enter into the commitment or incur the
expenditure on behalf of Chevron. If expenditures are
anticipated to exceed the authorized amount by a sum greater
than 10% of the authorized expenditure, Contractor shall
obtain Chevron's approval prior to committing or expending
such additional funds.
5.4. EMERGENCIES
Notwithstanding anything else in this Agreement to the
contrary, Contractor is authorized, on behalf of Chevron, to
make any expenditure or incur commitments for expenditures or
take those actions it deems necessary in the case of an
emergency to safeguard lives or property or to prevent
pollution or other environmental damage. Contractor shall
promptly notify Chevron of any such circumstance and of the
amount of expenditures and commitments for expenditures so
made and incurred and actions so taken, which notification
shall be confirmed in writing.
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6. ACCOUNTING PROCEDURES
6.1. VENICE ACCOUNT
Contractor shall establish and maintain, and Chevron shall
fund, a separate interest-bearing bank account ("Venice
Account") in the name of Contractor from which Contractor
shall pay all Authorized Expenditures of the Venice Complex
provided for in this Agreement. All interest accumulated in
the account will be used to reduce the amount of funds Chevron
must deposit in the account to maintain the level of funding
described below. If for any reason the funds in the Venice
Account are lost or rendered unusable through the fault of
Contractor or its employees, Contractor agrees to fully
indemnify, protect and render whole Chevron from any such loss
by immediately restoring such funds to or by other account
funding acceptable to Chevron. Contractor shall furnish
Chevron monthly statements concerning the Venice Account,
which statements shall set forth all debits and credits
(including interest credited) and any other significant
account activities.
6.2. FUNDING
Chevron shall initially deposit in said account an amount
equal to three months' estimated Expenditures and two months'
estimated gas purchase expenses (including but not limited to
fuel, plant thermal reduction, product settlement costs, and
other miscellaneous gas-related expenses, but excluding
purchase of gas for resale), as set forth in the Annual
Budget. In addition, Chevron shall deposit in said account an
amount equal to the next 3 months' estimated expenditures for
any approved AFE. The parties intend that there should be at
all times in said Venice Account sufficient money to allow
Contractor to pay all Authorized Expenditures as they become
due. For the first three months of operation, Chevron agrees
to maintain at least two months' estimated Expenditures in
said account at all times. The parties hereto agree that prior
to the end of the first three months, and prior to the end of
each calendar year, they will negotiate in good faith to
establish a revised level of funding consistent with the
intent expressed in this Section 6.2, and which reflects the
actual operating requirements of Contractor.
6.3. STATEMENTS AND INVOICES
Contractor shall render a statement to Chevron on or before
the last day of each Month for the preceding Month. Such
invoices shall provide detail sufficient to identify the
Authority for Expenditure, various facility costs, and all
charges and credits summarized by appropriate categories of
investment and expense, and such other information as Chevron
may require.
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6.4. ADJUSTMENTS
6.4.1. INITIATED BY CHEVRON
Reimbursement of any Expenditure shall not prejudice
the right of Chevron to protest or question the
correctness thereof; provided, however, all
statements related to expenditures rendered to
Chevron by Contractor shall conclusively be presumed
to be true and correct after 24 months from the
rendition thereof, unless within the said period
Chevron takes specific detailed written exception
thereto and makes claim on Contractor for adjustment.
6.4.2. INITIATED BY CONTRACTOR
Except for (1) physical inventories or (2)
governmental or regulatory audits, all adjustments
initiated by Contractor are limited to the 24-month
period following the rendition of the statement in
which the original charge appeared or should have
appeared.
6.5. AUDITS
6.5.1. RIGHT OF AUDIT
Chevron, upon notice in writing to Contractor, shall
have the right to audit Contractor's accounts and
records relating to the Venice Complex for any
calendar year within the 24-month period described in
Section 6.4; provided, however, conducting an audit
shall not extend the time for the taking of written
exception to and the adjustment of accounts. Chevron
shall make every reasonable effort to conduct an
audit in a manner which will result in a minimum of
inconvenience to the Contractor. Contractor shall
bear no portion of Chevron's audit cost incurred
under this Section 6.5.1 unless agreed to by the
Contractor. The audits shall not be conducted more
than once each year without prior approval of
Contractor, except upon the resignation or removal of
the Contractor. Chevron's audit report shall be
issued within 180 days after completion of the audit
field work; provided, however, the 180-day time
period shall not extend the 24-month period for
adjustments. Failure to issue the report within the
prescribed time will preclude Chevron from taking
exception to any charge billed within the time period
audited.
6.5.2. TOLLING OF STATUTE OF LIMITATIONS
A timely filed audit report or any timely submitted
response thereto shall suspend the running of any
applicable statute of limitations regarding claims
made in the audit report. While any audit claim is
being resolved, the applicable statute of limitations
will be suspended, but only with respect to the
issues covered by that audit claim; provided,
however, the failure to comply with the
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deadlines provided herein shall cause the statute to
commence running again.
6.5.3. CONTRACTOR'S RESPONSE TO EXCEPTIONS
Contractor shall allow or deny all exceptions in
writing to an audit report within 180 days after
receipt of such report. Any denied exception shall be
accompanied by Contractor's substantive justification
for such denial. Failure to respond to an exception
within substantive information on denials within the
time provided will result in the Contractor's paying
interest on that exception, if ultimately granted,
from the date of the audit report, at an average rate
which is afforded the Venice Account for the period
in question.
6.5.4. SUBSEQUENT RESPONSES
Chevron shall reply to the Contractor's response to
an audit report within 90 days of receipt, and the
Contractor shall reply to Chevron's follow-up
response within 90 days of receipt. If Chevron does
not provide a substantive response to an exception
within 90 days, that unresolved audit exception shall
be disallowed. If the Contractor does not provide a
substantive response to Chevron's follow-up response
within 90 days, that unresolved audit exception will
be allowed and credit given the Venice Account.
6.5.5. AUDIT RESOLUTION CONFERENCE
Chevron or Contractor may call an audit resolution
conference for the purpose of resolving audit issues
and exceptions that are outstanding at least 18
months after the date of the audit report. The
meeting within require one month's prior written
notice to the other party and will be held at
Contractor's offices or any other mutually
agreed-upon location. Each party shall compel the
attendance of its representative(s) responsible for
the area(s) in which the exceptions are based and who
have authority to resolve issues on behalf of its
company. Chevron and Contractor will make good faith
efforts to resolve outstanding issues, and each party
will be required to present substantive information
supporting its position. Audit resolution conferences
may be extended over multiple meetings by mutual
agreement of the parties.
6.5.6. FINAL RESOLUTION
ALL DISPUTES ARISING UNDER THIS SECTION 6.5 THAT ARE
NOT OTHERWISE RESOLVED AS PROVIDED HEREIN SHALL BE
SUBMITTED TO THE DISPUTE RESOLUTION PROCEDURES AS SET
FORTH IN SECTION 10 HEREOF. TO THE EXTENT THAT ANY
SUCH UNRESOLVED DISPUTE HAS
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NOT BEEN SUBMITTED TO SUCH DISPUTE RESOLUTION
PROCEDURES WITHIN 25 MONTHS AFTER THE EVENT CAUSING
THE DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE
BEEN DISCOVERED, THE PARTY ASSERTING THE CLAIM IN
DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM
AND ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
6.6. INVENTORIES
The Contractor shall maintain records of "Controllable
Material" charges to the Venice Account, as defined in the
Council of Petroleum Accountants Societies ("COPAS") Material
Classification Manual, with sufficient detail to perform the
physical inventories requested unless directed otherwise by
Chevron. Adjustments to the Venice Account by the Contractor
resulting from a physical inventory of Controllable Material
are limited to the six months following the taking of the
inventory. Charges and credits for overages or shortages will
be valued for the Venice Account based on a price which
reflects 75% of current new condition prices in effect on the
date of physical inventory unless Chevron or Contractor can
prove that another material condition (as defined by the
aforesaid COPAS manual) applies.
6.6.1. DIRECTED INVENTORIES
With an interval of not less than five years,
physical inventories shall be performed by the
Contractor upon written request by Chevron. When
directed inventories are performed, Chevron and
Contractor shall be governed by such inventory.
6.6.2. NON-DIRECTED INVENTORIES
6.6.2.1. BY CONTRACTOR
Periodic physical inventories that are not
requested by Chevron may be performed by the
Contractor at the Contractor's discretion.
6.6.2.2. BY CHEVRON
Chevron may conduct a physical inventory at
reasonable times with prior notification to
the Contractor. Such inventories shall be
conducted at the sole cost and risk of
Chevron.
6.6.2.3. OTHER INVENTORIES
Other physical inventories may be taken
whenever there is any sale or change of
interest. When possible, Chevron will notify
Contractor at least 30 days prior to the
anticipated closing date. When there is a
change in Contractor, an inventory by the
former and new Con
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tractor should be taken. The expenses of
conducting such other inventories shall be
charged tothe Venice Account.
6.7. ACCOUNTING
Contractor shall provide all accounting services associated
with Contractor's responsibilities hereunder and required for
the operation of the Venice Complex, including but not limited
to gas measurements, allocations, data gathering, owner
inquiries, cost and expense accounting, property accounting,
and joint interest accounting with billings. In addition, a
set of cash receipts and disbursement statements will be
provided to Chevron monthly for proper consolidation into its
records.
7. REPORTS
No later than the last day of each month, Contractor shall provide
Chevron the following reports applicable to the preceding month, based
on the best data available at the time of preparation and subject to
revision based on acquisition of more accurate data:
7.1. Monthly shipping reports, supported with appropriate
production, shipping and testing data, showing movement of
products out of the Venice Complex and the quantities of each
product.
7.2. Monthly operating expense report, including (insofar as is
reasonably practicable given Contractor's current reporting
capabilities) a line-by-line comparison of actual expenses to
Annual Budget expenses.
7.3. Monthly income/expense statement including a separate
statement for (1) the Venice plant and fractionator, (2) the
Venice barge terminal and storage wells, and (3) the Venice
Gathering Company (both onshore and offshore facilities).
7.4. Monthly balance report for the Venice Gathering Company,
indicating on both an Mcf and MMBtu basis all receipts into
and deliveries from said system.
7.5. Monthly progress report comparing actual expenditures to
Approved AFE estimates.
7.6. Monthly overtime expense report.
7.7. Monthly safety report, summarizing the safety record for the
month and for the calendar year to date, as required by OSHA;
7.8. Monthly report of environmental incidents, including
year-to-date data;
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7.9. Monthly report concerning any government agency inspections,
inquiries, citations, or other action;
7.10. Monthly operational report on runtime, major repairs, key
operating parameters and other operational details materially
affecting plant operations.
7.11. Monthly plant allocation statement, including but not limited
to the following:
7.11.1. Summary of plant production by component.
7.11.2. Gas volumes and analyses of all plant inlet, plant
outlet, plant bypass streams, plant fuel, plant
flare, and field delivery points.
7.11.3. Gross and net products by component for each
producer.
7.11.4. Plant balance report showing plant inlet, plant fuel,
plant flare, product shrinkage and plant residue (MCF
and MMBtu).
7.11.5. Statement of all volumes (MCF, MMBtu, and gallons)
due each producer.
7.11.6. Summary of product recovery efficiencies by
component.
7.12. Monthly gas gathering statement showing volumes scheduled on
the Venice Gathering Company system and allocated to each
producer or shipper.
8. RELATIONSHIP OF THE PARTIES
8.1. INDEPENDENT CONTRACTOR
The parties intend that Contractor shall be an independent
contractor in its activities as operator, and that Chevron
shall have no control over Contractor's day-to-day operations,
but may only specify expected results. It is understood and
agreed that the relationship of the parties hereto is purely
contractual and does not establish any agency, fiduciary or
other type of relationship.
8.2. WITHHOLDING OF TAXES
Contractor shall be solely responsible for withholding and
paying all federal, state and local income and employment
taxes in connection with its employees.
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9. FORCE MAJEURE
9.1. SUSPENSION OF OBLIGATIONS
In the event of either party hereto being rendered unable,
wholly or in part, by force majeure to carry out its
obligations under this Agreement (other than the payment of
money due), it is agreed that on such party's giving notice
and full particulars of such force majeure, in writing, or by
telephone (confirmed in writing at the earliest practicable
opportunity) to the other party as soon as reasonably
practicable after the occurrence of the cause relied on, then
the obligations of the party giving such notice, insofar as
they are affected by such force majeure, shall be suspended
during the continuance of any inability so caused but for no
longer period, and the adverse impacts of such cause shall as
far as possible be remedied with all reasonable dispatch.
9.2. DEFINITION
The term "force majeure" as used herein shall mean acts of
God, strikes, lockouts, or other industrial disturbances, acts
of the public enemy, wars, blockades, insurrections, riots,
epidemic, landslides, lightning, earthquakes, fires,
tornadoes, hurricanes, storms or tornado, hurricane or storm
warnings which in any party's judgment require the
precautionary shutdown of the Venice Complex or any operating
units thereof, floods, washouts, arrests or restraints of the
government, either federal or state, civil or military, civil
disturbances, explosions, sabotage, breakage or accident to
equipment, machinery or lines of pipe, freezing of machinery,
equipment or lines of pipe, electric power shortages,
inability of any party to obtain necessary permits and/or
permissions due to existing or future rules, orders, laws or
governmental authorities (federal, state and local), shutdowns
of the Venice Complex or any operating units thereof due to
explosion or other extraordinary incident, or any other
causes, whether of the kind herein enumerated or otherwise,
which were not reasonably foreseeable, and which are not
within the control of the party claiming suspension and which
such party is unable to overcome by the exercise of due
diligence. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of
the party having the difficulty, and that the above
requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing
parties when such course is inadvisable in the sole discretion
of the party having difficulty. The term "force majeure" shall
also include any event of force majeure occurring with respect
to the facilities or services of Contractor's third party
supplier's or customers delivery or receiving any product,
fuel, feedstock, or other substance necessary to the
performance of such party's obligations, and shall also
include curtailment or interruption of deliveries or service
by such third party suppliers or customers as a result of an
event of force majeure.
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10. DISPUTE RESOLUTION
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not
limited to, any disputes concerning the interpretation of the terms and
provisions hereof, shall be resolved through the use the following
procedures:
10.1. The parties will initially attempt in good faith to resolve
any disputes, controversy or claim arising out of or relating
to this Agreement.
10.2. Should the parties directly involved in any dispute,
controversy or claim be unable to resolve same within a
reasonable period of time, such dispute, controversy or claim
shall be submitted to a senior executive of each party (the
"Senior Executives") with such explanation or documentation as
the parties deem appropriate to aid the Senior Executives in
their consideration of the issues presented. The date the
matter is first submitted to the Senior Executives shall be
referred to as the "Submission Date". The Senior Executives
representatives shall attempt in good faith, through the
process of discussion and negotiation, to resolve any dispute,
controversy, or claim presented to them within 45 days after
the Submission Date.
10.3. If the Senior Executives cannot so resolve any dispute,
controversy, or claim submitted to it within 45 days after the
Submission Date, the parties shall attempt in good faith to
settle the matter by submitting the dispute, controversy or
claim to mediation within 60 days after the Submission Date
using any mediator upon which they mutually agree. If the
parties are unable to mutually agree upon a mediator within 75
days after the Submission Date, the case shall be referred for
mediation to the office of Judicial Arbitration and Mediation
Services, Inc. ("JAMS") in Houston, Texas. The cost of the
mediator will be split equally between the parties unless they
agree otherwise in writing.
10.4. If the matter has not been resolved pursuant to the aforesaid
mediation procedure within 30 days of the initiation of such
procedure, or if either party will not participate in such
mediation, either party may request that the matter be
resolved through arbitration by submitting a written notice
(the "Arbitration Notice") to the other. Any arbitration that
is conducted hereunder shall be governed by the Federal
Arbitration Act, 9 U.S.A. ss.1 ET SEQ., and will not be
governed by the arbitration acts, statutes or rules of any
other jurisdiction.
10.5. The Arbitration Notice shall name the noticing party's
arbitrator and shall contain a statement of the issue(s)
presented for arbitration. Within 15 days of receipt of an
Arbitration Notice, the other party shall name its arbitrator
by written notice to the other and may designate any
additional issue(s) for arbitration. The two named arbitrators
shall select the third arbi
-20-
trator within 15 days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree
on the selection of the third arbitrator, either party shall
be entitled to request the Senior judge of the United States
District Court for the Southern District of Texas to select
the third arbitrator. All arbitrators shall be qualified by
education or experience within the natural gas industry to
decide the issues presented for arbitration. No arbitrator
shall be: a current or former director, officer or employee of
either party, or its affiliates; an attorney (or member of a
law firm) who has rendered legal services to either party, or
its affiliates, within the preceding three years; or an owner
of any of the common stock of either party, its affiliates.
10.6. The three arbitrators shall commence the arbitration
proceedings within 25 days following the appointment of the
third arbitrator. The arbitration proceedings shall be held at
a mutually acceptable site and if the parties are unable to
agree on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each party
shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of
pre-hearing statements of position and legal authority, but no
post-hearing briefs shall be submitted. After the presentation
of the evidence has concluded, each party shall submit to the
arbitration panel a final offer of its proposed resolution of
the dispute. A majority of the arbitrators shall approve the
final offer of one party without modification, and reject the
offer of the other party. The arbitration panel shall not have
the authority to award punitive, exemplary, incidental or
consequential damages. The arbitrators' decision must be
rendered within 30 days following the conclusion of the
hearing or submission of evidence, but no later than 90 days
after appointment of the third arbitrator.
10.7. The decision of the arbitrators, or of a majority of them,
shall be in writing and shall be final and binding upon the
parties as to the issue(s) submitted. The cost of the hearing
shall be shared equally by the parties, and each party shall
be responsible for its own expenses and those of its counsel
or other representatives. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection
it may have to the arbitrability of any such disputes,
controversies or claims and further agrees that a final
determination in any such arbitration proceeding shall be
conclusive and binding upon each party. Judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The prevailing party shall be entitled
to recover reasonable attorneys' fees and court costs in any
court proceeding relating to the enforcement or collection of
any award or judgment rendered by the arbitration panel under
this Agreement.
10.8. All deadlines specified herein may be extended by mutual
agreement of the parties. The procedures specified herein
shall be the sole and exclu
-21-
sive procedures for the resolution of disputes between the
parties arising out of or relating to this Agreement;
provided, however, that a party may seek a preliminary
injunction or other preliminary judicial relief if in its
judgment such action is necessary to avoid irreparable damage.
Despite such action, the parties will continue to participate
in good faith in the procedures specified herein. All
applicable statutes of limitation shall be tolled while the
procedures specified in this Section 10 are pending. The
parties will take all actions, if any, necessary to effectuate
the tolling of any applicable statutes of limitation.
11. BOND
Chevron may require that Contractor obtain a bond or similar instrument
in an amount sufficient in Chevron's opinion to insure Contractor's
performance hereunder. Expense of such bond or instrument shall be
borne by Chevron.
12. LIENS
Contractor shall operate the Venice Complex in such a manner that no
liens of any kind may be filed or attached to the Venice Complex
(except liens of nominal value resulting from minor disputes arising in
the normal course of business), and Contractor herewith agrees to
discharge or dispute any such liens as soon as practicable after
receiving notice of the filing of such lien. Contractor further agrees,
for itself and for its subcontractors, heirs, successors and assigns,
to hold Chevron harmless and to indemnify Chevron against liability for
all liens or claims filed by any third party and arising in connection
with Contractor's obligations hereunder.
13. NOTICES
Notices and statements provided to be given hereunder shall be deemed
sufficiently given and served upon being delivered by hand, or sent by
facsimile transmission, or delivered by recognized express courier, or
upon the passage of 5 days after being deposited in the United States
mail with postage prepaid, and addressed to the respective parties or
their designees at the address stated below, or to such other address
as they hereafter designate in writing
If to Chevron: Chevron U.S.A. Inc.
(Mail) P. O. Box 2100
Houston, Texas 77252
(Courier) 1301 McKinney Street
Houston, Texas 77010
Attention Larry D. Robison
Facsimile (713) 754-2536
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If to Contractor: Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention Vice-President, Asset Management
(East Processing)
Facsimile (713) 507-3770
with a copy to:
Vice-President and General Counsel
Warren Petroleum Company
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Facsimile (713) 507- 6834
14. ASSIGNMENT
14.1. THIS AGREEMENT
Except to the extent this Agreement is affected by operation
of Section 14.2, neither party may assign this Agreement in
whole or in part without the prior written consent of the
other party, which consent shall not be unreasonably withheld
or delayed; provided, however, that either party may assign
this Agreement without the other party's consent to an
Affiliate.
14.2. THE VENICE COMPLEX
Subject to Sections 2.2 and 2.3, Chevron reserves the right to
assign, in whole or in part, the Venice Complex or any portion
thereof to any third party acceptable to Chevron in its sole
discretion. Any party receiving an interest in the Venice
Complex or any portion thereof shall take such interest
subject to the terms and conditions of this Agreement in the
following manner: (1) for purposes of approvals required of
Chevron hereunder, approval shall be deemed given if the
required majority so approves the operation or project in
accordance with any agreement or agreements among Chevron
and/or its assignees; and (2) for all other purposes
hereunder, each party shall have the same rights and
obligations as outlined for Chevron in this Agreement, but
only to the extent of its interest in the various facilities
of the Venice Complex. The parties understand and agree that
this Agreement is between Contractor and Chevron or each of
its assignees individually, and that the respective rights and
liabilities of Chevron and its assignees shall be several, not
joint.
15. EARLY TERMINATION OF AGREEMENT
15.1. REMOVAL
In addition to the rights of termination under Section 2,
either party may terminate this Agreement upon 15 days'
advance written notice under any one of the following
conditions:
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15.1.1. Any assignment or any general arrangement by the
other party for the benefit of creditors;
15.1.2. The filing by the other party of a bankruptcy action
or similar action for the protection of creditors, or
the involuntary filing of such an action by a third
party against the other party which remains
undismissed for a period of 180 days or which is not
dismissed or suspended pursuant to Section 305 of the
Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy
law);
15.1.3. The other party's becoming unable to pay its debts as
they fall due;
15.1.4. The failure of the other party to remedy a material
breach of this Agreement within 30 days after receipt
of written notice of such breach, or if the breach is
one which by its nature cannot be remedied within
such 30-day period, the failure of the other party to
begin to remedy the breach within such 30-day period,
or the subsequent failure of the other party to
prosecute its remedial efforts diligently; or
15.1.5. The failure or refusal of the other party to carry
out its duties hereunder.
15.2. RIGHTS UPON EARLY TERMINATION
Neither party shall be relieved of its liabilities or
obligations to the other party incurred prior to early
termination as outlined in this Section 15.
16. TRANSITION UPON TERMINATION
Upon termination of this Agreement, Chevron and Contractor shall
cooperate in good faith to make the transition to the new operator as
expeditiously as possible. At a reasonable time prior to such
termination, Contractor shall provide to the successor operator such
operating manuals or other operating information as Contractor shall
have available. To the extent that provision of such information causes
Contractor to incur additional costs, such costs shall be at Chevron's
expense. In addition, Contractor shall provide copies of all accounting
records pertaining to the Venice Complex.
17. CONFIDENTIALITY
17.1. DUTY OF CONFIDENTIALITY
Contractor agrees to hold in confidence, and not to disclose
to third parties or use for any purpose other than performance
of its duties hereunder, all or any part of the information
(including the location and type of services performed), maps,
data, plans, reports, manuscripts, procedures,
-24-
schedules, drawings,specifications, results, models, computer
programs or any work product which is (1) received or
ascertained by Contractor, directly or indirectly, from
Chevron, its licensors or other contractors, or any member or
members of the project for which the work is performed; or (2)
originated or otherwise acquired by Contractor, its employees,
representatives, or subcontractors, in connection with, as a
result of, or incident to performance of its duties hereunder.
Nothing herein contained shall preclude Contractor or Chevron
from disclosing or providing information to (a) any federal,
state or local agency or agencies or stock exchange to the
extent Contractor or Chevron is required to do so by
applicable laws, rules, regulations or orders of any federal,
state or local agency or agencies or the applicable
regulations of a securities or commodities exchange or (b)
which is or becomes public information through no action or
omission of Contractor or Chevron (as applicable).
17.2. USE OF OTHER PARTY'S NAME
Neither party shall use the other party's name or the name of
any affiliate of the other party in any promotional material
or make any publicity release regarding this Agreement without
first obtaining the written permission of the other party.
18. MISCELLANEOUS
18.1. CHOICE OF LAW
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas, without
recourse to any conflict-of-laws doctrine or rule that would
require the application of the law of any other state or
jurisdiction.
18.2. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, and each other
provision of this Agreement shall be severable and enforceable
to the extent permitted by law. Furthermore, in lieu of such
invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and as may be legal, valid, and
enforceable. If a provision of this Agreement is or becomes
illegal, invalid, or unenforceable in any jurisdiction, the
foregoing event shall not affect the validity or
enforceability in that jurisdiction or any other provision of
this Agreement nor the validity or enforceability in other
jurisdictions of that or any other provision of this
Agreement.
18.3. NO WAIVERS
Failure or delay by either party in exercising any right or
power under this Agreement shall not operate as a waiver of
that right or power.
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18.4. ENTIRE AGREEMENT
This Agreement is the entire Agreement between the parties as
to its subject matter, and there are no other contracts oral
or written, as to that subject matter, expressed or implied.
This Agreement may be modified only by a written instrument
signed by both parties.
18.5. EXHIBITS
The following exhibits are attached hereto and made a part of
this Agreement:
18.5.1. Exhibit "A" - Equal Opportunity Certificate
18.5.2. Exhibit "B" - Drug, Alcohol and Firearms Policy
18.5.3 Exhibit "C" - Safety, Health and Environmental Policy
18.5.4. Exhibit "D" - Duties and Responsibilities of
Contractor
18.5.5. Exhibit "E" - Venice Complex Plat and List of Major
Equipment
18.6. ACKNOWLEDGMENT
EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES AND
AGREES (1) THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THAT
IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS HEREOF,
AND (2) THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY
INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT. EACH PARTY HERETO
FURTHER AGREES THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY SUCH PROVISIONS OF THIS AGREEMENT ON THE
BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISIONS OR THAT SUCH PROVISIONS ARE NOT "CONSPICUOUS".
18.7. REMEDIES
FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS
REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY SHALL BE LIMITED
AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS
EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE
LIMITED TO DIRECT ACTUAL DAMAGES ONLY, EXCLUDING LOST PROFITS,
AND SHALL DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES
ARE WAIVED. IN NO EVENT SHALL EI
-26-
THER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF
THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY
PROVISION HEREOF) FOR PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR
CONTRACT. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF THIS
AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES.
THE PRECEDING SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE
OBLIGATION OF EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER
PARTY AGAINST CLAIMS ASSERTED BY THIRD PARTIES, INCLUDING, BUT
NOT LIMITED TO, THIRD PARTY CLAIMS FOR CONSEQUENTIAL,
INCIDENTAL, OR INDIRECT DAMAGES. TO THE EXTENT ANY PAYMENT
REQUIRED TO BE MADE PURSUANT TO ANY PROVISION OF THIS
AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE LIQUIDATED
DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE
DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT
CONSTITUTES A REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH
DAMAGES.
18.8. NO THIRD PARTY BENEFICIARIES
This Agreement is for the sole benefit of the parties and
their respective successor sand permitted assigns, and shall
not inure to the benefit of any other person whomsoever, it
being the intention of the parties that no third person shall
be deemed a third party beneficiary of this Agreement.
18.9. FURTHER ASSURANCES
Each party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to
each of them, in order to effectuate the purposes of this
Agreement.
18.10. RESERVATION OF RIGHTS
Except as otherwise provided herein, each party reserves to
itself all rights, set-offs, counterclaims, and other remedies
and/or defenses which such party is or may be entitled to
arising from or out of this Agreement or as otherwise provided
by law.
18.11. CONSTRUCTION OF AGREEMENT
In construing this Agreement, the following principles shall
be followed:
18.11.1. No consideration shall be given to the fact or
presumption that one party had a greater or lesser
hand in drafting this Agreement.
18.11.2. Examples shall not be construed to limit, expressly
or by implication, the matter they illustrate.
18.11.3. The word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding
syntactical variant expressions.
18.11.4. The plural shall be deemed to include the singular
and VICE VERSA, as applicable.
18.12. CONFLICTS OF INTEREST
No director, employee, or agent of either party shall give or
receive any commission, fee, rebate, gift, or entertainment of
significant cost or value in connection with this Agreement.
Each party shall have the right to audit the records of the
other party to verify compliance with this paragraph;
provided, however, that neither party shall audit for these
purposes more than once per calendar year.
IN WITNESS WHEREOF, the parties hereto have subscribed their names
effective as of the day and year first above written.
[Signatures on Next Page]
SIGNATURE PAGE TO VENICE COMPLEX
OPERATING AGREEMENT
between
CHEVRON U.S.A. INC. and
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
CHEVRON U.S.A. INC. WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By Warren Petroleum G.P., Inc.,
its General Partner
By By
Title Title
<PAGE>
EXHIBIT "A"
EQUAL OPPORTUNITY CERTIFICATE
Attached to and made a part of that certain Venice Complex Operating
Agreement effective as of ______________ 1, 1996, by and between
Chevron U.S.A. Inc. ("Chevron") and Warren Petroleum Company
("Contractor").
1. EQUAL OPPORTUNITY CLAUSE (Applicable to contracts in excess of $10,000)
Contractor will comply with all provisions of Executive Order 11246 of
September 24, 1965, as amended, and the rules, regulations and relevant
orders promulgated thereunder to the extent that they are applicable.
In particular:
a. Contractor will not discriminate against any employee or
applicant for employment because of race, color, religion,
sex, age, or national origin. Contractor will take affirmative
action to ensure that applicants are employed and that
employees are treated without regard to their race, color,
religion, sex, or national origin as to all terms and
conditions of employment.
b. Contractor agrees to post, in conspicuous places available to
employees and applicants for employment, notices to be
provided by the federal contracting officer setting forth the
non-discrimination requirements of federal contractors.
c. Contractor will, in all solicitations or advertisements for
employees placed by or on behalf of the Contractor, state that
all qualified applicants will receive consideration for
employment without regard to race, color, religion, sex, age
or national origin.
d. Contractor will send to each labor union or representative of
workers with which it has a collective bargaining agreement or
other contract or understanding, a notice, to be provided by
the federal agency contracting officer, advising the labor
union or workers' representative of the Contractor's
non-discrimination commitments under Section 202 of Executive
Order 11246, and shall post copies of the notice in
conspicuous places available to employees and applicants. e.
Contractor will furnish all information and reports required
by Executive Order 11246, and by the rules, regulations and
orders promulgated thereunder, and will permit access to its
records by the federal contracting agency and the Secretary of
Labor for purposes of investigation to ascertain compliance.
f. In the event of Contractor's failure to comply with the
non-discrimination provisions of this contract or with any
applicable rules, regulations, or orders, this contract may be
canceled, terminated or suspended in whole or in part and the
Contractor may be sanctioned, penalized or declared ineligible
for further Government contracts in accordance with procedures
authorized in Executive Order 11246, the regulations and rules
promulgated thereunder, and other applicable law.
g. Contractor will incorporate the requirements of Section 202 of
Executive Order 11246, which are summarized in this Equal
Opportunity Clause, into every subcontract or purchase order
unless exempted by rules, regulations, or orders of the
Secretary of Labor issued pursuant to Section 204 of Executive
Order 11246. Contractor will take such action with respect to
any subcontract or purchase order as the federal contracting
agency may direct as a means of enforcing such provisions,
including sanctions for noncompliance; provided, however, that
in the event Contractor becomes involved in, or is threatened
with, litigation with a subcontractor or vendor as a result of
such direction by the federal contracting agency, the
Contractor may request the United States to enter into such
litigation to protect the interests of the United States.
2. CERTIFICATION OF NON-SEGREGATED FACILITIES
The certification of non-segregated facilities set forth in part 60-1,
Title 41 of the Code of Federal Regulations is incorporated into this
Certification. In particular, Contractor certifies that it does not and
will not maintain or provide for its employees any facilities that are
segregated on the basis of race, religion , color or national origin,
and that it does not and will not permit its employees to work at any
location where segregated facilities are maintained. Contractor further
agrees that it will obtain or has obtained the same certification from
any proposed subcontractor prior to the award of a subcontract
exceeding $10,000 which is not exempt from this requirement, and it
will retain such certifications in its files.
3. EMPLOYER INFORMATION REPORT (EEO-1, STANDARD FORM 100)
If Contractor has 50 or more employees and a federal contract or
subcontract of $50,000 or more and is required under Part 60 of title
41 of the Code of Federal Regulations to file Employer Information
Report EEO-1 (Standard Form 100), Contractor hereby certifies that it
has done so or, if not, agrees that it will file such Report in
accordance with the applicable instructions and will continue to file
such Report unless or until such filing is no longer required by law,
executive order or regulation.
4. AFFIRMATIVE ACTION COMPLIANCE PROGRAM
Contractor may be required under Part 60 of the Code of Federal
Regulations to develop a written affirmative action compliance program
if it has 50 or more employees and a federal contract or subcontract of
$50,000 or more. If Contractor is so required, it agrees to do so no
later than 120 days after the effectiveness of the contract and to
maintain such program until such time as it is no longer required by
law, executive order or regulation.
5. EMPLOYMENT OF THE DISABLED
the affirmative action clause and regulations regarding the employment
and advancement of qualified disabled individuals, which implement
Section 503 of the Rehabilitation Act of 1973 and which are found in
Part 60 of Title 41 of the Code of Federal Regulations, are
incorporated into this Certificate by reference. Contractor agrees to
comply with such affirmative action clause and regulations to the
extent applicable.
6. DISABLED VETERANS AND VETERANS OF THE VIETNAM ERA (Applicable to
contracts for $10,000 or more)
The affirmative action clause and regulations regarding the employment
and advancement of qualified disabled veterans and veterans of the
Vietnam era, which implement Section 2012 of the Vietnam Era
Readjustment Act of 1974, and which are found in Part 60 of Title 41 of
the Code of Federal Regulations, are incorporated into this Certificate
by reference. Contractor agrees to comply with such affirmative action
clause and regulations to the extent applicable. Such compliance shall
include, if applicable, the filing of Federal Contractor Veterans'
Employment Report (VETS-100).
7. USE OF SMALL BUSINESS CONCERNS, INCLUDING THOSE OWNED AND CONTROLLED BY
ECONOMICALLY DISADVANTAGED INDIVIDUALS, AND WOMEN-OWNED BUSINESS
CONCERNS
a. (Applicable to contracts in excess of $5,000, except contracts
for services which are personal in nature)
It is the policy of the Government that small business
concerns, including those owned and controlled by economically
disadvantaged individuals, and women-owned business concerns
shall have the maximum practicable opportunity to participate
in the performance of Government contracts. Contractor agrees
to use its best efforts to carry out this policy in the award
of its subcontracts to the fullest extent consistent with the
efficient performance of this contract. (The term
"economically disadvantaged individuals" is defined in part 19
of Title 48 of the Code of Federal Regulations.)
b. (Applicable to contracts in excess of $500,000) If required by
applicable law, executive order or regulation,
Contractor agrees to conduct and document a program which will
enable small business concerns, including those owned and
controlled by economically disadvantaged individuals, to be
considered fairly as subcontractors and suppliers under this
contract. The program requirements are specified in Section
211 of Public Law 95-507, and Part 19 of Title 48 of the Code
of Federal Regulations.
<PAGE>
EXHIBIT "B"
DRUG, ALCOHOL AND FIREARMS POLICY
All Contractor personnel assigned to Chevron work shall be mentally and
physically capable of performing their assigned duties competently and safely.
Therefore, Contractor and its subcontractors shall have procedures which allow
screening of all employees for controlled substances and alcohol while on
Chevron's premises, in Chevron equipment or while engaged in Chevron business.
Chevron's "Illegal Drugs, Alcohol and Firearms Policy for Contractors"
("Policy") is stated, and "Controlled Substances", "Screen", and "Chevron
premises" are defined in the attached Notice to Contractor Employees.
Chevron has occasionally suffered the loss of equipment and confidential data
from its work locations. Such losses will not be tolerated. Therefore, Chevron
may conduct searches to ensure compliance with its Policy as outlined on the
attached Notice to Contractor Employees.
To facilitate compliance with Chevron's Policy, Contractor should take the
following steps:
1. Advise all employees and/or subcontractors of Chevron's Policy of
searches without prior notice and that any person found in violation of
the Policy shall be denied access to Chevron premises.
2. Give to each employee and/or subcontractor, the enclosed Notice to
Contractor Employees for his or her review.
3. Screen employees and subcontractors before assigning them to Chevron
premises, bearing Chevron's Policy in mind.
Contractor shall immediately remove from Chevron premises any of its or its
subcontractors' personnel found to be in violation of the Policy. Such personnel
may be denied future access to Chevron premises. Any illegal or unauthorized
drugs, intoxicating beverages, firearms, weapons or Chevron property discovered
as a result of Chevron searches may be confiscated and may be turned over to law
enforcement agencies.
If Contractor or Contractor's employees or subcontractors fail to comply with
Chevron's Policy, it may become necessary to take remedial action, including
termination of this contract.
Attachment: Notice to Contractor Employees
<PAGE>
NOTICE TO CONTRACTOR EMPLOYEES
ILLEGAL DRUGS, ALCOHOL AND FIREARMS POLICY FOR CONTRACTORS
POLICY
The Policy of Chevron regarding illegal drugs and controlled substances,
alcoholic beverages, and firearms is:
1. The use, possession, distribution, purchase or sale of any illegal
drugs or other controlled substances by any person while on Chevron
premises, engaged in Chevron business or while operating Chevron
equipment is prohibited.
2. The use of any illegal drug or other controlled substances or alcohol
which causes or contributes to unacceptable job performance or unusual
job behavior is prohibited.
3. The use, possession, transportation, or sale of explosives,
unauthorized flammable materials, firearms, or other weapons by
Contractor, its subcontractors or their employees while on Chevron
premises, engaged in Chevron business or while operating Chevron
equipment is prohibited.
4. The unauthorized use, possession, transportation, or sale of alcoholic
beverages by Contractor, it subcontractor or their employees while on
Chevron premises or while operating Chevron equipment is prohibited.
Contractor's and subcontractors' employees shall abide by this Policy. Any
person violating this Policy shall be removed from Chevron premises and may be
denied future access to Chevron premises. In addition, Chevron may suspend work
or, in repeated or serious situation, terminate a contract as a result of
violation of this Policy. In appropriate cases, local law enforcement agencies
may be advised of violations.
In support of this Policy, Chevron may conduct or require searches and require
screens as set forth in the following:
SEARCH
Without prior announcement, and at any time, Chevron may carry out reasonable
searches of individuals and their personal effects when entering Chevron
premises, while on Chevron premises, and when leaving Chevron premises. Unless
prohibited by applicable law, Chevron may require Contractor to search its
employees or subcontractors' employees before entering Chevron premises,
engaging in Chevron business or operating Chevron equipment. Entry onto Chevron
premises constitutes consent to a search of the person and his/her personal
effects, including, without limitation, packages, briefcases, purses, lunch
boxes and vehicle, or any office, locker, closet or desk. Refusal to cooperate
shall be cause for not allowing that individual on Chevron premises.
SCREEN
Unless prohibited by applicable law, Chevron may require Contractor to conduct a
controlled substance and/or alcohol screen on any of its employees or
subcontractors' employees while on Chevron premises, engaged in Chevron
business, or operating Chevron equipment. In addition, Chevron may require
Contractor to conduct a controlled substance and/or alcohol screen on any of its
employees or subcontractors' employees before entering Chevron premises,
engaging in Chevron business, or operating Chevron equipment. Prior written
consent shall be obtained from any person who is to be screened. A positive
screen on a Contractor or subcontractor employee or failure to give written
consent for a screen shall be cause for removal from Chevron premises and shall
result in the Contractor or subcontractor employee being restricted or
disqualified from performing services for Chevron.
NOTIFICATION OF SEARCH AND/OR SCREEN BY CONTRACTOR
Prior to conducting a search and/or screen of its or subcontractors' employees
on Chevron premises, Contractor shall notify the local Chevron facility manager.
DEFINITIONS
As used herein, "controlled substance" specifically includes opiates, including
heroin; hallucinogens, including marijuana, mescaline, and peyote; cocaine; PCP;
and prescription drugs, including amphetamines and barbiturates, which are not
obtained and used under a prescription lawfully issued to the person possessing
them or which are not authorized by the Chevron Medical Staff; and any other
substance included in the Federal Controlled Substances Act or its regulations
or unlawful under applicable law.
As used herein, controlled substance or alcohol "screen" means any test using
blood, urine, breath or other samples to determine the presence of controlled
substances or alcohol in the body.
As used herein, "Chevron premises" is used in the broadest sense, and includes,
but is not limited to, all land, property, buildings, structures, installations,
Chevron operated service stations (but not Chevron owned stations operated by
independent dealers), vehicles, equipment, aircraft, and water craft owned,
leased, or in any other manner being used by Chevron for any purpose.
<PAGE>
EXHIBIT "C"
SAFETY, HEALTH AND ENVIRONMENTAL POLICY
Contractor shall provide continuous adequate protection of Chevron's property
and adjacent property, and take all necessary precautions to keep and maintain
the workplace free from recognized hazards which are likely to cause death,
illness or injury to persons or damage to property. Contractor shall comply and
cause Contractor's employees, agents and subcontractors entering upon Chevron's
premises in the performance of this Agreement or in connection therewith to
comply with all applicable provisions of federal, state or local safety, health,
and environmental laws, rules, regulations or orders. This provision will not
require Chevron to police Contractor's compliance with any safety, health, and
environmental rules, laws, regulations or orders, and shall not impose any
obligation on the part of Chevron under such rules, laws, regulations or orders.
Nevertheless, Chevron shall have the right, from time to time, to inspect or
examine Contractor's practices and policies to ensure Contractor's compliance
with such requirements. Nothing contained in this paragraph shall be interpreted
as enlarging the legal duty of Chevron to Contractor or Contractor's agents,
employees, and others under Contractor's control or altering the status of
Contractor as set forth in this Agreement.
If applicable to the services to be performed under this Agreement, Contractor
shall ensure that its employees, agents and subcontractors have received all
applicable training in the rules and procedures regarding hazardous materials,
including the identification, handling, labeling, packaging, loading,
transporting, unloading, storing, disposal, and responding to spills or releases
of such materials and substances, as required by U.S. Department of
Transportation Hazardous Materials regulations, 49 CFR Parts 171-177, and the
Occupational Safety and Health Administration regulations, 29 CFR 1910.120.
Contractor shall maintain all required documentation to verify such training,
and shall make such documents available to Chevron upon request.
<PAGE>
EXHIBIT "D"
DUTIES AND RESPONSIBILITIES OF CONTRACTOR
1. Contractor shall perform the duties of operator on behalf of Chevron as
provided herein. Certain subparagraphs of this paragraph 1 contain
bulleted duties that are intended as illustrative examples (not
complete listings) of the duty or duties generally described above
them. Contractor is expected to perform fully the duties described in
this paragraph 1, regardless of whether illustrative examples are given
along with any such duty. These duties include, but are not limited to,
the following:
a. Except as provided in Section 5.2, preparing and implementing
the Annual Budget.
b. Preparing AFEs to Chevron for any work (capital or expense)
exceeding $75,000, and implementing such AFEs.
c. Providing to Chevron reports and information reasonably
requested by Chevron concerning the Venice Complex. Example:
Provide Monthly Production/Operations Summary to
Chevron by the last day of the Month following the
Month of production
d. Directing, controlling and performing statistical and
accounting services, including but not limited to allocation
of plant products to the liquids owners (or designees of such
owners) delivering raw liquids to the Venice plant, including
but not limited to such allocations for shippers on the Venice
Gathering Company system, and also including invoicing
shippers on behalf of Chevron for gathering services provided
by the Venice Gathering Company, and for services provided
under gas processing, fractionation, storage, terminaling or
other agreements.
e. Control of the flow of natural gas and associated products
through the Venice Complex and to the proper recipients, in
accordance with the instructions of the owners of such gas and
products or their designees, and maintenance of appropriate
records and documentation in connection with this function.
f. Performing gas control functions similar to those described in
paragraph e. above for Venice Gathering Company.
g. Establishing liaison with area producers, gas pipeline
companies, residue gas purchasers, and all other parties
providing gas to the Venice Complex for processing or
receiving products or services.
h. Subject to the capabilities of the Venice plant, manufacture
product in accordance with specifications and instructions as
provided by Chevron from time to time.
i. Engineering required for day-to-day operation of the Venice
Complex, but not including engineering work associated with
expansion or significant reconfiguration of the Venice
Complex, or associated with special operational or other
studies of the performance of the Venice Complex or a portion
thereof.
j. Acquiring, installing, operating and maintaining facilities,
vehicles and ancillary equipment used or useful in connection
with the operation of the Venice Complex.
k. Securing and maintaining required operating licenses and
permits.
l. Preparing all regulatory, administrative and governmental
reports as may be required by the Department of Interior, the
Minerals Management Service, and all other applicable
governmental agencies and authorities having jurisdiction.
Examples:
Maintain pipeline safety systems for connected
gathering pipelines in accordance with applicable
regulations
Perform compliance checks on pipeline safety systems
for connected gathering pipelines as required by
regulations
Maintain records on file of all information and
reports transmitted to Chevron in accordance with
regulatory requirements
Maintain pipeline manuals for connected gathering
pipelines as required by Department of Transportation
regulations
Perform applicable compliance checks for connected
gathering pipelines as required by Department of
Transportation regulations, including:
Valve inspections and maintenance
Erosion/corrosion surveys of risers and
piping situated at the Venice Complex
Pig trap inspections and maintenance
situated at the Venice Complex
Handle all federal, state and parish reporting
requirements applicable to operation of the Venice
Complex
m. Preparing proposals and supervising work on capital projects,
including plant modifications and improvements, as approved by
Chevron.
n. Providing requested information in conjunction with, and
paying, all applicable taxes other than income or AD VALOREM
taxes, including, but not limited to, federal or state taxes,
payroll taxes, real or personal property taxes, and other
taxes associated with the Venice Complex.
o. Paying and discharging promptly all Expenditures incurred in
connection with the operation, modification and expansion of
the Venice Complex, taking advantage of trade discounts where
available.
p. Performing the duties incumbent upon Chevron in the operating
agreements identified in Section 1.10. To the extent that
duties and responsibilities in such agreements conflict with
or are inconsistent with the duties and responsibilities
required of Contractor under this Agreement, Contractor shall
notify Chevron and shall consult with Chevron on the proper
resolution of such conflicts or inconsistencies. Chevron will
protect and indemnify Contractor from and against any
resulting liabilities or claims, unless Contractor fails to
follow Chevron's written directions concerning such
resolutions.
q. Administration of division orders, in a manner consistent with
industry standards and with Contractor's policy of not
assuming royalty payment liabilities, for producers having
executed gas processing or gathering agreements with Chevron
involving the Venice Complex.
r. Adequately train Contractor's personnel to perform the duties
of operator as provided herein, to ensure safe operating
practices, and to comply with all applicable federal, state
and local laws, rules, regulations, ordinances and orders.
Chevron shall have the right, no more often than once during
each year during the term hereof and during normal business
hours, to ensure Contractor's compliance with the foregoing.
s. Generally carrying out administrative, maintenance, technical
and supervisory services necessary for the operation of the
Venice Complex. Examples:
Update new plant owners and Venice Gathering Company
shippers into accounting systems used by Contractor
in performing its duties hereunder
Set up and send plant statements and other
information via electronic mail, to the extent
available or mutually agreed
Accommodate audit requests by Chevron, other joint
owners if any, connected pipelines, and parties to
processing, gathering, fractionation, storage,
terminaling or other agreements and gathering
agreements on the Venice Complex
Provide reasonably safe storage of critical audit
information
Provide safe back-up of electronic data (operations
and accounting records)
Make necessary accounting adjustments as a result of
mutually agreed-upon audit exceptions for Chevron
(pursuant to Section 6.5) and for third parties as
needed
Prepare quarterly aging report on accounts receivable
Rerun any applicable accounting allocation in which
parties would be materially impacted versus handling
the change in subsequent accounting periods
Modify accounting allocation to add or delete new
business
Perform monthly allocations for connected inlet
pipelines
Comply with any active or future gas processing, gas
gathering, fractionation, storage, terminaling or
other agreements associated with the Venice Complex
as directed by Chevron
Verify all contractors working at the Complex for
Contractor have the necessary insurance
Generate and issue monthly invoices for gathering
services rendered by Venice Gathering Company
Provide monthly allocation by the last day of the
Month following the Month of production
Coordinate with pipelines and producers for GPM tests
Sample at least semiannually, and determine more
frequent sampling times as necessary to meet the
requirements of various pipeline and processing
agreements affecting products from the Venice Complex
Provide notice of meter tests to Chevron and other
associated parties
Read and interpret in a reasonable manner, consistent
with then-current industry practices and procedures,
production charts and meters; determine rates;
determine condensate and oil gravity
Set and monitor chemical injection rates; maintain
chemical inventories and equipment for corrosion
inhibition program as prescribed by third-party
chemical company
Operate and perform minor maintenance on all gas,
condensate and water measurement equipment
Operate and periodically test SCADA equipment, if and
when installed
Interpret in a reasonable manner, consistent with
then-current industry practices and procedures, gas
meter charts; calculate gas volumes and liquid
volumes
Maintain cathodic protection systems or other
corrosion protection systems
Receive pipeline pigs through connected gathering
pipelines
Assist Chevron in coordinating the disposal and
handling of any naturally occurring radioactive
material ("NORM") recovered by pigging operations
through connected gathering pipelines
Develop and implement a NORM operating and emergency
procedure manual, and ensure compliance by all
affected Contractor or third-party personnel
Arrange third-party meter calibrations and
maintenance on gas meters and liquid meters
Report immediately to Chevron any significant well,
equipment, production, regulatory or logistical
problem detected by Contractor
Maintain the currently existing hurricane evacuation
plan
Establish contact and maintain the currently existing
emergency response evacuation plan including area
residents
Operate and perform minor maintenance on safety and
safety alarm equipment
Maintain up-to-date flow schematics for connected
gathering pipelines and associated piping
Chevron reserves the right at any time and from time to time to assume
itself any or all of the foregoing duties upon written notice to
Contractor; provided, however, that except as provided in Section 2.2,
such assumption shall not affect the Operating Fee payable to
Contractor hereunder, and that such assumption shall not materially and
adversely affect Contractor's ability to perform the duties retained by
it hereunder.
2. It is specifically understood by the parties hereto that this Agreement
does not authorize or otherwise require Contractor, as operator of the
Venice Complex, to conduct the following:
a. Payment or distribution of royalties on liquid hydrocarbon
products recovered at the Venice Complex.
b. Payment of periodic rentals affecting surface leases or
rights-of-way comprising part of the Venice Complex.
c. Administration of division orders for parties other than those
specified in paragraph 1.q.
d. Allocation of any product to the individual wells of any
producer, owner or purchaser thereof delivering such to a tank
battery in the Venice Complex.
e. Site remediation of the Delta Gathering Station and Venice
Stabilizer Plant earthen water disposal pits.
f. Design or construction of any facilities, or application for
any regulatory approval, that would allow Contractor to divert
natural gas from one interstate pipeline to another at the
Venice Complex.
g. Solicitation of potential investors or participants in
ownership of the Venice Complex.
h. Entering into any contractual relationships with potential
customers for processing, gathering, fractionation,
terminaling, storage or other services to be provided at the
Venice Complex or any portion thereof.
i. Action of any kind before or in any docket the Federal Energy
Regulatory Commission in any matter affecting the Venice
Complex, whether on behalf of Chevron, in support of Chevron's
position therein, or contrary to Chevron's position therein.
<PAGE>
EXHIBIT "E"
VENICE COMPLEX PLAT AND LIST OF MAJOR EQUIPMENT
STEAM SYSTEM
Five nominal 120,000 lb/hr boilers and a 45,000 lb/hr heat recovery steam
generator provide 600 psig 750(degrees) F. steam to the steam system. High
pressure steam is used in the following steam turbines:
Two nominal 10,000 hp condensing turbines driving gas plant
refrigeration compressors. One turbine runs at the current gas
throughput.
One nominal 4,500 hp condensing turbine driving fractionation plant
refrigeration compressor. This unit is used in warm weather at the
current gas throughput.
Three 3,000 kw condensing turbines driving generators. One unit runs at
the current gas throughput.
Five 750 hp turbines driving cooling water pumps. These turbines
exhaust into the 250 psig steam header. Two units currently operate.
Three 310 hp turbines driving boiler feed water pumps. These turbines
exhaust into the 50 psig steam header.
Three 110 hp turbines driving boiler forced draft fans. These turbines
exhaust in to the 50 psig steam header.
Medium pressure steam (250 psig, 450(degrees) F.) is used to drive smaller
turbines and provide heat to several high temperature reboilers and heaters. Low
pressure steam (50 psig, 350(degrees) F.) is used to provide heat to the
Fractionation plant, amine unit and several low temperature utility users.
COOLING WATER SYSTEM
Once through cooling water is taken from and returned to Pass Tante Phine.
Capacity of each cooling water pump is 22,500 gpm.
ELECTRICAL SYSTEM
As mentioned earlier, there are three 3000 kw steam turbine driven generators.
In addition, there is one Centaur H driven generator with a nominal capacity of
3,700 kw. At current gas throughput, this generator shares the load with one
steam turbine driven generator.
REFRIGERATION SYSTEMS
Two propane refrigeration systems serve the plant. The Gas plant is served by
two nominal 10,000 hp compressors. These compressors provide -50(Degree) F
propane to two inlet gas chillers and two lean oil presaturator chillers.Cooling
water is used in propane condensers.
A second propane refrigeration system, served by a nominal 4,500 hp compressor,
provides 40(degrees) F propane to the deethanizer reflux condenser and the EP
product condenser. Cooling water is used in propane condensers.
GAS PLANT
The gas plant consists of two nominal 400 MMscfd gas chilling and absorption
trains and a nominal 2,350 gpm lean oil plant. Each gas train consists of a gas
to gas exchanger, a gas chiller (served with -50(degrees) F propane), a
hydrocarbon ethylene glycol separator and an absorber. The lean oil plant
consists of a rich oil demethanizer (ROD), a rich oil prefractionator (ROPF), a
rich oil fractionator (ROF) and a number of heat exchangers, pumps and vessels.
Three 47 MMBtu/hr direct fired heaters provide heat to the ROF. A nominal 500 hp
steam turbine driven compressor, or a 500 hp electric motor driven compressor,
compresses vapor raw product before condensation. The steam turbine is driven by
250 psig steam and exhausts into the 50 psig header.
ETHYLENE GLYCOL SYSTEM
A 24 gpm ethylene glycol system provides EG to the inlet gas to gas exchangers
and chillers to inhibit formation of gas hydrates. The EG reboiler is heated
with 250 psig steam.
PRODUCT FRACTIONATION PLANT
The fractionation plant consists of a deethanizer, a depropanizer, a
debutanizer, a butanes splitter, and a number of heat exchangers, pumps and
vessels. Plant capacity is about 27,000 bpd while making a purity ethane
product, and 30,000 bpd for making an 80/20 EP product. The plant is served with
50 psig steam, once through cooling water, and 40 F propane refrigerant.
AMINE SYSTEM
A conventional 200 gpm MEA unit provides amine for removal of CO2 from the EP
vapor product. Amine still reboiler is heated with 50 psig steam.
DELTA GATHERING STATION
Delta Gathering Station is primarily a gas dehydration and compression facility
for five inlet gas/condensate pipelines and one gas/oil pipeline. The gas is
transported via a 26-inch line to the Venice stabilizer plant, and ultimately to
the gas plant. The condensate and oil is treated and sold into a Chevron Pipe
Line Company line that terminates in Empire. The following is a summary of the
major pieces of equipment to accomplish this goal.
Inlet Compression:
3 - recip compressors totaling 4300 hp on a 100 psig system
2 - 1100 hp saturns on a 600 psig system
3 - 3700 hp centaurs and 4 - 1100 hp saturns on an 800 psig system
Inlet Separation:
3 - 2 phase separators on each of the above mentioned systems
8 - tanks ranging from 5000 bbls to 20000 bbls each for water,
condensate and oil
1 - VRU for tank vapors
Inlet Dehydration:
5 - dehydration towers totaling 525 MMscfd capacity
4 - glycol reboilers and VRU
Oil Treating:
2 - 10,000 bbl chem electric heater treaters
4 - LACT units
VENICE STABILIZER PLANT
Venice Stabilizer Plant was originally a condensate stabilizer facility, but it
is currently used for inlet and residue gas metering and some recompression for
Delta Gathering Station and the Venice gas plant. It also has three inlet
gas/condensate lines that flow in at plant pressure, with associated treating
facilities. Shell Pipeline is currently building a meter area that will have 10
12-inch meters. The following is a summary of the major pieces of equipment to
accomplish this goal.
Metering:
8 - inlet meters ranging from 6 inches to 16 inches
9 - residue meters ranging from 8 inches to 16 inches
3 - 10-inch turbine meters
1 - Sonic Nozzle prover system
TETCO, Columbia Gulf and Sonat Check meter facilities
Recompression:
3 - 1200 hp saturns
1 - 700 hp recip
Inlet Separation:
2 - 3 phase separators
3 - condensate and water storage tanks
1 - LACT
Exhibit 10.63
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
PRODUCT STORAGE LEASE AND
TERMINAL ACCESS AGREEMENT
THIS AGREEMENT, entered into as of _____________ 1, 1996, is by and
between CHEVRON U.S.A. INC., hereinafter called "Lessor", and WARREN PETROLEUM
COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership hereinafter called
"Lessee".
WITNESSETH:
WHEREAS, Lessor is the owner of a certain liquids Storage Facility (the
"Storage Facility") and barge terminal (the "Barge Terminal") which is adjacent
to a certain processing and fractionation complex owned in whole or in part by
Chevron U.S.A. Inc. ("Chevron") near Venice, Louisiana; and
WHEREAS, Lessee desires to obtain liquids storage capacity from Lessor,
as well as access to the Barge Terminal;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements of the parties contained herein, Lessor and Lessee
agree as follows:
1. NGL STORAGE LEASE AND BARGE TERMINAL ACCESS
Lessor hereby grants to Lessee the right to use Lessor's Venice Storage
Facility for storage of natural gas liquids ("NGLs") owned by Lessee,
in accordance with Lessor's normal operating conditions (including but
not limited to rates of delivery, delivery pressures, and scheduling),
up to the maximum quantity indicated on Exhibit "A". Product Primary
Capacity elections may be changed, subject to availability, annually on
the anniversary of the effective date hereof, as evidenced by
substitution of a new Exhibit "A". The quantities designated as Product
Primary Capacity Elections will be available to Lessee on a firm basis.
If (a) capacity is available, and (b) the total quantity of all
products stored does not exceed the Base Capacity subscribed to on the
applicable Exhibit "A", Lessee may store, on an interruptible basis,
quantities in excess of the individually designated Product Primary
Capacity Elections, up to the Base Capacity, at no additional capacity
charge. If additional capacity is available, Lessee may elect to store
quantities exceeding the Base Capacity at the rate indicated (Monthly
or Quarterly Excess Capacity) on the applicable Exhibit "A".
Furthermore, Lessor grants Lessee the right to use (1) the Venice Barge
Terminal for loading and unloading of NGLs, subject to appropriate
scheduling, and (2) the pipeline delivery facilities that are used in
connection with the Storage Facility and Barge Terminal.
2. NGL SPECIFICATIONS
NGLs delivered by Lessee shall meet the specifications set forth in
Exhibit "B" attached hereto.
3. LIMIT ON WITHDRAWALS
Owing to normal operating losses occurring in injecting, storing and
withdrawing liquid products, a certain percentage of the NGLs are lost.
Consequently, as long as Lessee is operating the Storage Facility and
Barge Terminal, Lessee will bear its proportionate share of the actual
losses that are incurred in connection with the loading, unloading and
storage of Lessee's NGLs. If Lessee ceases to operate such facilities,
Lessee's losses shall be one-quarter of one percent (0.25%) of the
volumes of NGLs that are received from the Venice Fractionator and
injected into storage and one-half of one percent (0.50%) of the
volumes of NGLs that are received from barges and injected into
storage.
4. RESPONSIBILITY FOR COSTS
As between the parties under this Agreement, Lessee shall be directly
responsible for all costs associated with delivery of NGLs to the
Venice Storage Facility, and Lessor shall have neither responsibility
nor liability therefor. However, nothing in this Section 4 shall limit
or negate any right to recover such costs or any portion thereof under
any other agreements with Lessor.
5. MEASUREMENT
Lessor shall measure NGLs injected into and withdrawn from the Venice
Storage Facility and the NGLs loaded and unloaded from and into barges
in accordance with its standard measurement procedures at the Storage
Facility and Barge Terminal, which shall conform to good industry
practices as same may be updated from time to time. All quantities
shall be corrected to standard conditions of 60(0) Fahrenheit and
equilibrium vapor pressure in accordance with the API Manual of
Petroleum Measurement Standards, Chapter 14, Section B. The quantity
and quality of NGLs covered by this Agreement shall be measured
according to the current versions of the applicable standards of API
and the American Society for Testing Materials, if available. Each
party shall be entitled to have its representatives present during all
loadings, unloadings, tests and measurements involving NGLs delivered
hereunder. Either party may request a special measurement or quality
test to be performed at any reasonable time by an agreed-to third
party. The party making such a request shall bear the cost of the test
if the tests indicate the measuring equipment and quality tests to be
within the limits acceptable under industry standards referenced above.
If the performance is not within acceptable limits, the cost of the
tests shall be borne by Lessor. The results of the special testing
shall be used in the manner prescribed herein for results of regularly
scheduled measurement and quality testing.
6. TITLE AND RISK OF LOSS
6.1. TITLE
Title to NGLs injected by Lessee into the Venice Storage
Facility shall be, and shall remain, in Lessee. Said NGLs will
be commingled with those belonging to other parties using the
Storage Facility, which are required to meet the same Product
Specifications as those provided herein. Consequently, the
NGLs withdrawn from storage by Lessee will not be the
identical product injected, but shall be fungible goods
meeting the Product Specifications provided herein.
6.2. LOSSES OF NGLS
If there are losses (other than normal operating losses
described in Section 3 above) of NGLs from the Venice Storage
Facility which are not attributable to the fault or negligence
of Lessor or of its designated operator, then Lessee shall
bear its proportionate share of such losses, based on its
proportionate share of NGL inventory then held in the Venice
Storage Facility. However, if there are losses (other than
normal operating losses described in Section 3 above) of NGLs
from the Venice storage facility which are attributable to the
fault or negligence of Lessor (or of its designated operator,
if the operator is not Lessee), then as between Lessor and
Lessee, Lessor shall bear such losses, but only to the extent
of either replacing the lost volumes of NGLs with like product
or payment of the fair market value, calculated at the time of
the loss, of such lost NGLs.
6.3. OTHER LIABILITIES
Except as specifically set forth in Section 6.2, each party
shall indemnify the other party for any and all costs,
expenses, losses, liabilities, claims or causes of action
(including reasonable attorneys' fees and costs of court)
actually incurred by the other party as a result of such
party's negligence or fault in performing its duties under
this Agreement.
6.4. LIMITATION OF LIABILITY
FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS
REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY SHALL BE LIMITED
AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS
EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE
LIMITED TO DIRECT ACTUAL DAMAGES ONLY, EXCLUDING LOST PROFITS,
AND SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY UNDER ANY PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES IN TORT,
CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. TO THE
EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO ANY
PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO
CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT
THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT
SUCH PAYMENT CONSTITUTES A REASONABLE APPROXIMATION OF THE
AMOUNT OF SUCH DAMAGES.
ALL DISPUTES ARISING UNDER THIS AGREEMENT THAT ARE NOT
OTHERWISE RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO
THE ALTERNATIVE DISPUTE RESOLUTION PROCEDURES AS SET FORTH IN
SECTION 14 HEREOF. TO THE EXTENT THAT ANY SUCH UNRESOLVED
DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN 25 MONTHS AFTER THE EVENT CAUSING
THE DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN
DISCOVERED, THE PARTY ASSERTING THE CLAIM IN DISPUTE SHALL BE
DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND ALL RIGHTS HEREUNDER
WITH RESPECT THERETO.
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
7. THIRD -PARTY CONTRACTS
Lessee may solicit third parties to enter into agreements with Lessor
for storage of NGLs at the Venice Complex. In soliciting such
contracts, Lessee shall work within guidelines agreed upon in advance
by Lessor and Lessee. For any such contracts solicited by Lessee and
executed by Lessor and the third party, Lessor shall pay to Lessee a
fee equal to ten percent of the gross revenue received by Lessor under
the terms of such contract.
8. FEES
8.1. PAYMENT OF FEES
As compensation to Lessor for Lessee's right (1) to store NGLs
in the Venice Storage Facility, (2) to deliver NGLs into NGL
pipelines leaving the Venice complex, and (3) to load and
unload such NGLs at Lessor's Barge Terminal, Lessee shall pay
Lessor the fees specified in Exhibit "A".
8.2. RENEGOTIATION OF FEES
* Every [REDACTED] after the effective date of this Agreement,
either party shall have the option to open this Agreement
solely for the purpose of renegotiating the fees to be paid
hereunder. To exercise such option, a party shall provide to
the other party written notification (the "Renegotiation
Notice") of its desire to renegotiate fees for any or all
services rendered hereunder at least 90 days before the
expiration of such 5-year period. In any such renegotiations,
the parties shall continue to recognize that the fees to be
paid for services rendered hereunder must return to Lessor the
greater of the fair market value of the services or that
proportion of Lessor's costs incurred in providing the
services. If, after negotiating in good faith for a period of
90 days following the date of the Renegotiation Notice, the
parties are unable to agree upon a mutually satisfactory fee
for the services in question, the matter shall be submitted to
the dispute resolution procedures as provided in Section 14
hereof. During the period while such negotiations or dispute
resolution procedures are ongoing until new fees are agreed to
or otherwise established as provided herein, the fee for the
services in question shall be determined in accordance with
the fee arrangement that was applicable immediately prior to
the date of the Renegotiation Notice. If a new fee is agreed
to or otherwise established under this Section 8.2, such new
fee shall be effective as of, and shall, if necessary, be made
retroactive to, the first day of the applicable 5-year period
immediately following the Renegotiation Notice.
8.3. ECONOMIC OR OPERATIONAL HARDSHIP
If conditions change such that this Agreement causes, or could
reasonably be expected to cause a material long-term economic
or operational hardship to either party, upon the written
request of either party, Lessor and Lessee shall meet to
renegotiate in good faith such burdensome terms and provisions
so as to make them fair and equitable. Such renegotiations
shall occur within 30 days of the date of the non-requesting
party's receipt of such written request for such
renegotiations. If the parties are unable to agree on new
provisions to replace such burdensome terms and provisions
within 90 days of the non-requesting party's receipt of such
written request, the matter shall be submitted to the dispute
resolution procedures set forth in Section 14 hereof. In
making any decision regarding fees payable hereunder, the
decision-maker(s) shall be guided by the requirement that the
fees to be paid for services rendered hereunder must return to
Lessor the greater of the fair market value of the services or
that proportion of Lessor's costs incurred in providing the
services. If new provisions are agreed upon or otherwise
established under this Section 8.3, such new provisions shall
be as of the date of such resolution, if such provisions are
operational in nature, or as of the date on which the notice
commencing renegotiations was given, if such provisions are
economic in nature.
9. BILLING AND PAYMENT
9.1. PREPARATION OF INVOICE AND PAYMENT
On or before the twentieth (20th) day of each month, Lessor or
its designated operator shall prepare a monthly statement of
the fees due from Lessee for the previous month under this
Agreement. Lessee shall pay Lessor the amount due, by wire
transfer with immediately available funds, no later than the
tenth day after Lessee's receipt of the such statement. If the
day on which any payment is due is not a day on which Federal
Reserve member banks in New York City are open for business (a
"Business Day"), then the relevant payment shall be due upon
the immediately preceding Business Day, except if such payment
due date is a Sunday or Monday, then the relevant payment
shall be due upon the immediately succeeding Business Day. For
purposes of billing, determination of inventory volumes
hereunder shall be made at the end of each calendar month.
9.2. INTEREST
If either party fails to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this
Agreement, including, without limitation, adjustments as the
result of the conclusion of any audits, as a result of the
resolution of a billing dispute, or as a result of any
renegotiations under Sections 8.2 or 8.3 above, interest on
the unpaid portion shall accrue from the date upon which such
payment should have been made hereunder or upon the effective
date of such adjustment until paid in full at the lower of (1)
two percent (2%) above the prime rate established from time to
time by Wells Fargo Bank, San Francisco, California, or (2)
the maximum legal rate of interest. All such accrued interest
shall be added to the amount reflected as being owed hereunder
on the next invoice or by separate invoice.
9.3. GOOD FAITH DISPUTE
If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either
party elects to withhold any payment otherwise due as a
consequence of such good faith dispute, the withholding party
shall provide the other party with written notice of its
reasons for withholding payment, and shall simultaneously
place the disputed amount into an escrow account at a mutually
acceptable commercial bank, pending resolution of the dispute.
Any such dispute shall be resolved in accordance with the
alternative dispute resolution procedures of Section 14. The
performance of both parties under this Agreement shall
continue pending the outcome of such procedures. If it is
subsequently determined, whether by mutual agreement of the
parties or otherwise, that the withholding party is required
to pay all or any portion of the disputed amounts to the other
party, the withholding party, in addition to paying over such
amounts, shall also pay interest accrued on such amounts from
the original due date until paid, at the lower of (1) two
percent (2%) above the prime rate established from time to
time by Wells Fargo Bank, San Francisco, California, or (2)
the maximum legal rate of interest.
9.4. TIME LIMIT FOR ADJUSTMENTS
No retroactive adjustments may be made for any overcharge or
undercharge after a period ending 24 months from the end of
the month in which the invoice or statement forming the basis
of the overcharge or undercharge was delivered or not
delivered, as the case may be, unless a claim for such
adjustment shall have been presented prior to the end of such
period. Any payment with respect to a retroactive adjustment
shall include an amount equal to interest on all amounts past
due from the date of initial payment at the lower of (1) two
percent (2%) above the prime rate established from time to
time by Wells Fargo Bank, San Francisco, California, or (2)
the maximum legal rate of interest, except in instances where
neither party knew or could have known that the overcharge or
undercharge occurred, in which case interest shall rum from
the date of demand for payment.
9.5. RIGHT TO AUDIT
Either party, upon notice in writing to the other, shall have
the right at reasonable hours to audit the accounts and
records relating to the accounting or billing under the
provisions of any section hereof; provided, however, that the
auditing party must take written exception to and make claim
upon the other party for all discrepancies disclosed by said
audit within 24 months of the rendition of any statement or
invoice forming the basis of such claim. Such audit shall be
conducted by the auditing party's representative or auditor at
the auditing party's expense.
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
ALL DISPUTES ARISING UNDER THIS SECTION 9.5 THAT ARE NOT
OTHERWISE RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO
THE DISPUTE RESOLUTION PROCEDURES AS SET FORTH IN SECTION 14
HEREOF. TO THE EXTENT THAT ANY SUCH UNRESOLVED DISPUTE HAS NOT
BEEN SUBMITTED TO SUCH DISPUTE RESOLUTION PROCEDURES WITHIN 25
MONTHS AFTER THE EVENT CAUSING THE DISPUTE IS DISCOVERED OR
REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY ASSERTING
THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH
CLAIM AND ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
10. TAXES
Lessee shall be responsible for the payment of any and all AD VALOREM
or other taxes assessed on and attributable to the storage, inventory,
deliveries and redeliveries, or offloading of NGLs pursuant to this
Agreement. If Lessor is required to any pay such taxes on Lessee's
behalf, Lessee shall reimburse Lessor for such taxes in accordance with
the invoicing and payment procedures set forth in Section 9.1. It is
understood and agreed that the foregoing shall not be construed as
requiring Lessee to pay any portion of any AD VALOREM taxes assessed
against or on the equipment owned or leased by Lessor that is used to
store, load and unload NGLs on behalf of Lessee.
11. FORCE MAJEURE
Except for the duty to pay amounts of money due hereunder, neither
party shall be liable to the other party for failure to perform its
duties and obligations under this Agreement to the extent that such
failure results from a condition of FORCE MAJEURE. As used herein,
"FORCE MAJEURE" means any cause beyond the reasonable control of the
party affected which renders such party unable to perform its
obligations under this Agreement, including but not limited to acts of
God, federal, state or local orders, laws, rules or regulations,
strikes or labor disputes, wars, accidents, or failure of facilities.
The party affected by the FORCE MAJEURE condition shall use due
diligence to remedy the adverse impacts of the condition; however,
under no circumstances shall Lessor be required to reconstruct or
replace its Venice Storage Facility or its Barge Terminal if for any
reason either or both of them is destroyed, substantially destroyed or
otherwise rendered unusable.
12. TERM
* This Agreement shall remain in effect for a period of [REDACTED]from
the effective date hereof, and from year to year thereafter, until
terminated by one party's written notice to the other party at least 90
days in advance of the next succeeding anniversary of the effective
date.
13. FINAL WITHDRAWAL
Unless otherwise arranged with Lessor in advance, Lessee shall withdraw
all of its stored NGLs from the Venice Storage Facility prior to the
termination date of this Agreement. If Lessee fails to remove the NGLs
within thirty (30) days after such termination, Lessor has the right to
sell the NGLs and remit to Lessee the proceeds of the sale, less a
marketing fee of $0.01 per gallon of product sold and less any
transportation, sales, or handling fees incurred by Lessor in making
the sale. Lessor shall also have the right to collect at the prices set
forth herein, any amounts accruing for storage services after
termination, until Lessee's NGLs are removed or sold.
14. RESOLUTION OF DISPUTES
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not
limited to, any disputes concerning the interpretation of the terms and
provisions hereof, shall be resolved through the use the following
procedures:
14.1. The parties will initially attempt in good faith to resolve
any disputes, controversy or claim arising out of or relating
to this Agreement.
14.2. Should the parties directly involved in any dispute,
controversy or claim be unable to resolve same within a
reasonable period of time, such dispute, controversy or claim
shall be submitted to the senior executives of each party (the
"Senior Executives") with such explanation or documentation as
the parties deem appropriate to aid the Senior Executives in
their consideration of the issues presented. The date the
matter is first submitted to the Senior Executives shall be
referred to as the "Submission Date". The Senior Executives
shall attempt in good faith, through the process of discussion
and negotiation, to resolve any dispute, controversy, or claim
presented to them within 45 days after the Submission Date.
14.3. If the Senior Executives cannot so resolve any dispute,
controversy, or claim submitted to it within 45 days after the
Submission Date, the parties shall attempt in good faith to
settle the matter by submitting the dispute, controversy or
claim to mediation within 60 days after the Submission Date
using any mediator upon which they mutually agree. If the
parties are unable to mutually agree upon a mediator within 75
days after the Submission Date, the case shall be referred for
mediation to the office of Judicial Arbitration and Mediation
Services, Inc. ("JAMS") in Houston, Texas. The cost of the
mediator will be split equally between the parties unless they
agree otherwise in writing.
14.4. If the matter has not been resolved pursuant to the aforesaid
mediation procedure within 30 days of the initiation of such
procedure, or if either party will not participate in such
mediation, either party may request that the matter be
resolved through arbitration by submitting a written notice
(the "Arbitration Notice") to the other. Any arbitration that
is conducted hereunder shall be governed by the Federal
Arbitration Act, 9 U.S.A. ss.1 ET SEQ., and will not be
governed by the arbitration acts, statutes or rules of any
other jurisdiction.
14.5. The Arbitration Notice shall name the noticing party's
arbitrator and shall contain a statement of the issue(s)
presented for arbitration. Within 15 days of receipt of an
Arbitration Notice, the other party shall name its arbitrator
by written notice to the other and may designate any
additional issue(s) for arbitration. The two named arbitrators
shall select the third arbitrator within 15 days after the
date on which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either party shall be entitled to request the
Senior judge of the United States District Court for the
Southern District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience
within the natural gas industry to decide the issues presented
for arbitration. No arbitrator shall be: a current or former
director, officer or employee of either party, or its
affiliates; an attorney (or member of a law firm) who has
rendered legal services to either party, or its affiliates,
within the preceding three years; or an owner of any of the
common stock of either party, its affiliates or direct
competitors.
14.6. The three arbitrators shall commence the arbitration
proceedings within 25 days following the appointment of the
third arbitrator. The arbitration proceedings shall be held at
a mutually acceptable site and if the parties are unable to
agree on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each party
shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of
pre-hearing statements of position and legal authority, but no
post-hearing briefs shall be submitted. After the presentation
of the evidence has concluded, each party shall submit to the
arbitration panel a final offer of its proposed resolution of
the dispute. A majority of the arbitrators shall approve the
final offer of one party without modification, and reject the
offer of the other party. The arbitration panel shall not have
the authority to award punitive, exemplary or consequential
damages. The arbitrators' decision must be rendered within 30
days following the conclusion of the hearing or submission of
evidence, but no later than 90 days after appointment of the
third arbitrator.
14.7. The decision of the arbitrators, or of a majority of them,
shall be in writing and shall be final and binding upon the
parties as to the issue(s) submitted. The cost of the hearing
shall be shared equally by the parties, and each party shall
be responsible for its own expenses and those of its counsel
or other representatives. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection
it may have to the arbitrability of any such disputes,
controversies or claims and further agrees that a final
determination in any such arbitration proceeding shall be
conclusive and binding upon each party. Judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The prevailing party shall be entitled
to recover reasonable attorneys' fees and court costs in any
court proceeding relating to the enforcement or collection of
any award or judgment rendered by the arbitration panel under
this Agreement.
14.8. All deadlines specified herein may be extended by mutual
agreement of the parties. The procedures specified herein
shall be the sole and exclusive procedures for the resolution
of disputes between the parties arising out of or relating to
this Agreement; provided, however, that a party may seek a
preliminary injunction or other preliminary judicial relief if
in its judgment such action is necessary to avoid irreparable
damage. Despite such action, the parties will continue to
participate in good faith in the procedures specified herein.
All applicable statutes of limitation shall be tolled while
the procedures specified in this Section 14 are pending. The
parties will take all actions, if any, necessary to effectuate
the tolling of any applicable statutes of limitation.
15. NOTICES
Any notice, request, demand, or statement, provided for in this
Agreement, except as otherwise herein provided, may be given in
writing, delivered in person, by facsimile transmission, by express
courier, or by United States Mail, to the parties hereto at the
addresses shown below or at such other addresses as may hereafter be
furnished to the other party in writing:
Lessor: NOTICES AND CORRESPONDENCE:
Chevron U.S.A. Inc.
P. O. Box 2100
Houston, Texas 77252
1301 McKinney Street
Houston, Texas 77010
Attention L. D. Robison
Facsimile (713) 754-2536
Phone (713) 754-4518
PAYMENTS:
___________________
___________________
___________________
___________________
Lessee: NOTICES AND CORRESPONDENCE:
[Warren Petroleum Company, Limited Partnership]
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention Vice-President and General Manager -
NGL Marketing
Telephone (713) 507-6408
Facsimile (713) 507-3715
with a copy to:
Vice-President and General Counsel
[WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP]
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Telephone (713) 507-3725
16. CHOICE OF LAWS
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Texas, without recourse to any
conflict-of-laws rules or doctrines that would require the application
of laws from another state or jurisdiction.
17. CONFLICT OF INTEREST
No director, employee, or agent of either party shall give or receive
any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement. Any mutually agreeable
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining
whether there has been compliance with this paragraph.
18. MISCELLANEOUS
18.1. LAWS AND REGULATIONS
This Agreement and the operations hereunder shall be subject
to the valid and applicable federal and state laws and the
valid and applicable orders, laws. local ordinances. rules,
and regulations of any local. state or federal authority
having jurisdiction. but nothing contained herein shall be
construed as a waiver of any right to question or contest any
such order, laws, rules, or regulations in any forum having
jurisdiction in the premises. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable
under the present or future laws effective during the term of
this Agreement: (1) such provision will be fully severable,
(2) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and (3) the remaining
provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as
a part of this Agreement a provision similar in terms to such
illegal, invalid, or unenforceable provision as may be
possible and as may be legal, valid, and enforceable. If a
provision of this Agreement is or becomes illegal, invalid, or
unenforceable in any jurisdiction, the foregoing event shall
not affect the validity or enforceability in that jurisdiction
of any other provision of this Agreement nor the validity or
enforceability in other jurisdictions of that or any other
provision of this Agreement.
18.2. ENTIRE AGREEMENT; AMENDMENTS; WAIVERS
This Agreement, including, without limitation, all exhibits
hereto, integrates the entire understanding between the
parties with respect to the subject matter covered and
supersedes all prior understandings, drafts, discussions, or
statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not
be amended or modified in any manner except by a written
document signed by both Parties that expressly amends this
Agreement. No waiver by either party of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver unless
expressly provided. No waiver shall be effective unless made
in writing and signed by the Party to be charged with such
waiver.
18.3. LIMITATION OF DAMAGES
FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS
REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY SHALL BE LIMITED
AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS
EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE
LIMITED TO DIRECT ACTUAL DAMAGES ONLY, EXCLUDING LOST PROFITS,
AND SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE
WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY UNDER ANY PROVISION OF THIS AGREEMENT (INCLUDING,
WITHOUT LIMITATION, ANY INDEMNITY PROVISION HEREOF) FOR
PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT FOR
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES. THE PRECEDING
SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE OBLIGATION OF
EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST
CLAIMS ASSERTED BY THIRD PARTIES, INCLUDING, BUT NOT LIMITED
TO, THIRD PARTY CLAIMS FOR CONSEQUENTIAL, INCIDENTAL, OR
INDIRECT DAMAGES. TO THE EXTENT ANY PAYMENT REQUIRED TO BE
MADE PURSUANT TO ANY PROVISION OF THIS AGREEMENT IS AGREED BY
THE PARTIES TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE
APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
18.4. NO THIRD-PARTY BENEFICIARIES
This Agreement is for the sole benefit of the parties and
their respective successors and permitted assigns, and shall
not inure to the benefit of any other person whomsoever, it
being the intention of the parties that no third person shall
be deemed a third party beneficiary of this Agreement.
18.5. FURTHER ASSURANCES
Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to
each of them, in order to effectuate the purposes of this
Agreement.
18.6. SET-OFFS AND COUNTERCLAIMS
Except as otherwise provided herein each party reserves to
itself all rights, set-offs, counterclaims, and other remedies
and/or defenses which such party is or may be entitled to
arising from or out of this Agreement or as otherwise provided
by law.
18.7. NO PARTNERSHIP OR JOINT VENTURE
Nothing contained in this Agreement shall be construed to
create an association, trust, partnership, or joint venture or
impose a trust or partnership duty, obligation, or liability
on or with regard to either Party.
18.8. CONSTRUCTION OF AGREEMENT
In construing this Agreement, the following principles shall
be followed:
18.8.1. No consideration shall be given to the fact or
presumption that one party had a greater or lesser
hand in drafting this Agreement;
18.8.2. Examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
18.8.3. The word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding
syntactical variant expressions; and
18.8.4. The plural shall be deemed to include the singular
and vice versa, as applicable.
IN WITNESS WHEREOF, this Agreement is executed by the parties as of the
date first above written.
CHEVRON U.S.A. INC. WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: Warren Petroleum G.P., Inc.,
its General Partner
By __________________________ By __________________________
Title __________________________ Title __________________________
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT "A"
VOLUMES AND FEES
This Exhibit "A" sets forth the maximum storage capacity available to Lessee
under this Agreement, and the fees to be paid by Lessee for such storage. These
capacities and fees may be revised from time to time by substitution of a new
Exhibit "A". Under the terms and conditions of that certain Product Storage
Lease and Terminal Access Agreement between Chevron U.S.A. Inc. and Warren
Petroleum Company, Limited Partnership, dated effective August 1, 1996, Lessor
and Lessee agree to the following:
Product: Purity Ethane, Ethane-Propane Mix, Propane, Butanes, and Natural
Gasoline
Period for which capacity and fees are effective:
* Capacity [REDACTED]
* Fees [REDACTED]
Base Capacity: 1,360,000 barrels
Fees:
* Base Capacity [REDACTED]
* Monthly Excess Capacity [REDACTED]
* Quarterly Excess Capacity [REDACTED]
* Barge Loading/Unloading [REDACTED]
Barge unloading for NGL receipts
* from Pascagoula Refinery [REDACTED]
* Pipeline Delivery [REDACTED]
Product Primary Capacity Elections:
* Purity Ethane or Ethane-Propane Mix [REDACTED]
* Propane [REDACTED]
* Butanes [REDACTED]
* Natural Gasoline [REDACTED]
CHEVRON U.S.A. INC. WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: Warren Petroleum G.P., Inc.,
its General Partner
By __________________________ By __________________________
Title __________________________ Title __________________________
Date __________________________ Date __________________________
<PAGE>
EXHIBIT "B"
PRODUCT SPECIFICATIONS
The attached pages of this Exhibit "B" indicate the minimum specifications for
each product that Lessee is authorized to store in Lessor's facilities.
<PAGE>
EXHIBIT "B-1"
Product:
Specifications:
<PAGE>
DEMETHANIZED RAW PRODUCT
WARREN PETROLEUM COMPANY
SPECIFICATION
VENICE PLANT
S-102
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for any
demethanized raw material of natural gas liquids received by Warren Petroleum at
the Venice Plant.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION GPA 2177
Percent by Liquid Volume Predominantly Ethane, Propane,
Butanes & Natural Gasoline
Methane 2.0 of Ethane
Propylene 5.0 of Propane ASTM D-2163
Butylene 1.0 of Butane
2. CORROSION
Copper Strip @ 100(Degree)F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246
4. CARBON DIOXIDE
PPM by Weight in Liquid 200 GPA 2177
5. DRYNESS
PPM by Weight 12 Panametric Moisture
(-10(Degree)F Dewpoint) Analyzer or Equal.
6. PENTANES & HEAVIER No Color Visual using
White Cup Method
Perform the Saybolt color test after weathering sample to 70(Degree)F if
white cup indicates possible color.
COLOR
Saybolt No. Plus 25 ASTM D 156
DISTILLATION
End Point, (Degree)F 375 ASTM D 216
10. DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
COS 1
Ammonia 1
Fluorides 1
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane shall be considered ethane, propylene shall be
considered propane, and butylenes shall be considered normal butane within the
above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
METHANOL
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
PURITY ETHANE
WARREN PETROLEUM COMPANY
SPECIFICATION
S-202
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for purity ethane
mixtures received or delivered by Warren Petroleum Company.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Methane 3.0 GPA-2177
Ethane 95.0 100.0
Ethylene 1.0
Heavier than Ethane 3.5 ASTM D-2163
Propylene 1.0
2. CORROSION
Copper Strip @ 100(Degree)F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 30 ASTM D-3246
4. DRYNESS No Free Water Visual
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
ETHANE-PROPANE MIXTURE
WARREN PETROLEUM COMPANY
SPECIFICATION
VENICE PLANT
S-203
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for an
ethane-propane mixture produced by the Venice Gas Plant.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION GPA 2177
Percent by Liquid Volume
Methane 5.0
Ethane and Propane 95.0 100
Propane 30.0
Butanes and Heavier 0.25
Ethane-Propane Ratio
Shall Average 4.0
2. CORROSION
Copper Strip @ 100(Degree)F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 50 ASTM D-3246
4. MOISTURE
PPM by Weight 76 Panametric Moisture
Analyzer or Equal
5. CARBON DIOXIDE
PPM by Weight in Liquid 250 GPA 2177
</TABLE>
PRODUCT ACCOUNTING
For accounting purposes, methane shall be considered ethane and butanes shall be
considered propane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
TARIFF SPECIFICATIONS
Products delivered to Warren shall also meet any individual requirements of
Chevron Pipeline Company's published tariff product specifications in effect at
time of delivery if the individual tariff specification is more stringent than
that of Warren.
<PAGE>
HD-5 PROPANE FUEL
WARREN PETROLEUM COMPANY
SPECIFICATION
S-300
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for HD-5 propane
fuel received or delivered by Warren Petroleum Company. This product meets the
requirement of the GPA HD-5 propane specification.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Ethane As limited by other
components & vapor
pressure.
Propane 90.0 100
Propylene 5.0 ASTM D-2163
Butanes & Heavier 2.5
2. VAPOR PRESSURE
Psig @ 100(Degree)F 208 ASTM D-1267
3. CORROSION
Copper Strip @ 100(Degree)F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.) Corrosion
Additive or Inhibitor, PPM by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
5. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of Stain Tube
(Lab test required if field test is positive.) Lab Chromatography with
Flame Photometric Detector
6. CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field-Length of
(Field test invalid if C4+ exceeds Stain Tube
1.0 LV%) (Lab test required if Lab-UOP 212 or UOP 791
field test is positive.) Lab-Gas Chromatography with
Flame Photometric Detector
7. NON-VOLATILE RESIDUE
a) Milliliters @ 100(Degree)F 0.05 ASTM D-2158
b) Oil Stain Pass
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING UPON THE PRODUCT SOURCE:
8. DRYNESS
Freeze Valve, Seconds 60 (Note 2) ASTM D-2713
9. VOLATILE RESIDUE
95% Evaporated-Temperature, (Degree)F -37 ASTM D-1837
10. AMMONIA
PPM by Weight in Liquid 1 Field-Length of
Stain Tube
Lab - UOP 430
11. FLUORIDES
PPM by Weight in Liquid as 5 Field-Length of Stain Tube
Monatomic Fluorine
Lab-UOP-619-83
12. OTHER DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
Includes but not limited to 1 Gas chromatography with flame
(Isoprene, Butadiene, Vinyl ionization or electron
Chloride, glycol, amine, caustic) capture detection or other
industry accepted methods
</TABLE>
NOTES: (1) The test methods for items 2 and 7 are not necessary if a
compositional analysis is available which indicates compliance with
these requirements.
(2) The addition of methanol in the distribution system should be on a
spot basis and must not exceed a rate of 5 gallons per 10,000 gallons
of product.
<PAGE>
NORMAL BUTANE
WARREN PETROLEUM COMPANY
SPECIFICATION
S-400
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for normal butane
received or delivered by Warren Petroleulm Company.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Isobutane and Lighter 5.0 ASTM D-2163
Butylene (Percent of N.Butane) 1.0
N. Butane & Butylene 95.0 100 GPA 2165
Pentanes & Heavier 2.0
2. VAPOR PRESSURE
Psig @ 10O(Degree)F 50 ASTM D-1267
3. CORROSION
Copper Strip @100(Degree)F 1-b ASTM D-1838
(Invalid if additive
or inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated-Temperature, (Degree)F +36 ASTM D-1837
6. DRYNESS No Free Water Visual
</TABLE>
NOTE: The test methods for Items 2 and 5 are not necessary if a compositional
analysis indicates compliance with these requirements.
<PAGE>
ISOBUTANE
WARREN PETROLEUM COMPANY
SPECIFICATION
S-401
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for isobutane
received or delivered by Warren Petroleum Company.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Propane, Propylene and Lighter 3.0 ASTM D-2163
Isobutane 96.0 100
Butylene, Normal Butane
& Heavier 4.0
2. VAPOR PRESSURE
Psig @ 100(Degree)F 62 ASTM D-1267
3. CORROSION
Copper Strip @ 100(Degree)F 1-b ASTM D-1838
Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated-Temperature (Degree)F +16 ASTM D-1837
6. DRYNESS No Free Water Visual
</TABLE>
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
compositional analysis is available which indicates compliance with
these requirements.
<PAGE>
COMMERCIAL BUTANE
WARREN PETROLEUM COMPANY
SPECIFICATION
S-402
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for commercial
butane received or delivered by Warren Petroleum Company.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION Predominately Isobutane ASTM E-260
Percent by Liquid Volume & Normal Butane
Propane 3.0 of Isobutane ASTM D-2163
Butylene 1.0 of Isobutane
Pentanes & Heavier 2.0 of Butanes
2. VAPOR PRESSURE
Psig @ 100(Degree)F 70 ASTM D-1267
3. CORROSION
Copper Strip @ 100(Degree)F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM 1 Applicable Industry
Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated, Temperature, (Degree)F +36 ASTM D-1837
6. DRYNESS No Free Water Visual
7. BUTADIENE
Percent by Liquid Volume 0.5 Gas Chromatography
</TABLE>
PRODUCT ACCOUNTING
For Accounting purposes, propane shall be considered isobutane, butylenes shall
be considered normal butane, and pentanes and heavier shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
compositional analysis is available which indicates compliance with these
requirements.
<PAGE>
NATURAL GASOLINE
WARREN PETROLEUM COMPANY
SPECIFICATION
S-600
Effective Date: 8/2/94
Product characteristics with test methods are herein specified for natural
gasoline received or delivered by Warren Petroleum Company.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
----------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Butanes & Lighter 3.0 GPA 2165
Pentanes & Heavier 97 100
2. VAPOR PRESSURE
Psi @ 100(Degree)F, Reid 14 ASTM D-323
3. CORROSION
Copper Strip @ 104(Degree)F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. DOCTOR TEST Negative GPA 1138
5. DRYNESS No Free Water Visual
6. COLOR plus 25 No Color Field White Cup Method
Lab-ASTM D-156
7. DISTILLATION
End Point, (Degree)F 375 ASTM D-216
</TABLE>
NOTE: The test methods for Items 2 and 7 are not necessary if an adequate
compositional analysis is available which indicates compliance with
these requirements.
Exhibit 10.64
May 21, 1996
TERM SHEET
The following form Confirmation sets forth the terms and conditions of a
commodity swap transaction that will be entered into between Chevron U.S.A. Inc.
and Natural Gas Clearinghouse in connection with that certain Contribution and
Assumption Agreement dated May , 1996, and pursuant to that certain Master
Agreement dated as of February 1, 1993 executed by Chevron U.S.A. Inc and
Natural Gas Clearinghouse:
CONFIRMATION
COMMODITY SWAP
CASH SETTLED
DATE:
TO: CHEVRON U.S.A. INC. ("CHEVRON")
ATTN:
FROM: NATURAL GAS CLEARINGHOUSE ("NGC")
The purpose of this document is to confirm the terms and conditions of the
Transaction entered into by NGC and Chevron on the trade date specified below.
This document constitutes a "Confirmation" as defined in the Master Agreement
specified below. This Confirmation supplements, forms a part of and is subject
to the Master Agreement dated as of February 1, 1993 executed by NGC and
Chevron. The terms and conditions of the Master Agreement govern this
Confirmation except as specifically provided below.
The terms and conditions of the Transaction relating to this Confirmation are as
follows:
COMMODITY: NATURAL GAS
NOTIONAL QUANTITY PER MONTHLY QUANTITY OF NATURAL GAS DELIVERED BY
CALCULATION PERIOD: CHEVRON TO LONE STAR GAS COMPANY ("LONE
STAR") FOR CHEVRON'S ACCOUNT PURSUANT TO
THAT CERTAIN GAS PURCHASE AGREEMENT DATED
JULY 27, 1955, AS AMENDED, BETWEEN CHEVRON'S
PREDECESSOR, STANDARD OIL COMPANY OF TEXAS,
AS SELLER, AND LONE STAR, AS BUYER (THE
"LONE STAR CONTRACT"). THE NOTIONAL QUANTITY
SHALL INCLUDE NATURAL GAS DELIVERED BY
CHEVRON PURSUANT TO THE LONE STAR CONTRACT
FROM CHEVRON'S OWN PRODUCTION AND NATURAL
GAS PURCHASED BY CHEVRON FROM THIRD PARTIES
AND DELIVERED TO LONE STAR PURSUANT TO THE
LONE STAR CONTRACT, BUT SHALL NOT INCLUDE
ANY QUANTITIES OF NATURAL GAS DELIVERED TO
LONE STAR UNDER THE LONE STAR CONTRACT FOR
WHICH CHEVRON DOES NOT RECEIVE PAYMENT,
INCLUDING, BUT NOT LIMITED TO, QUANTITIES
DELIVERED UNDER THE LONE STAR CONTRACT BY
PARTIES WHICH, PRIOR TO MAY 17, 1996,
ACQUIRED FROM CHEVRON PROPERTIES OR
INTERESTS IN PROPERTIES SUBJECT TO THE LONE
STAR CONTRACT.
TRADE DATE: (EFFECTIVE DATE OF COMBINATION)
EFFECTIVE DATE: (EFFECTIVE DATE OF COMBINATION)
TERMINATION DATE: FIRST DAY OF THE MONTH FOLLOWING TERMINATION
OF LONE STAR CONTRACT
CALCULATION PERIOD(S): EACH CALENDAR MONTH DURING THE TERM OF THE
LONE STAR CONTRACT
PAYMENT DATE: ON OR BEFORE THE LAST DAY OF THE MONTH
FOLLOWING PHYSICAL DELIVERY OF NATURAL GAS
UNDER THE LONE STAR CONTRACT
FIXED AMOUNT DETAILS:
FIXED PRICE PAYER: CHEVRON
FIXED AMOUNT: THE PRICE PAID BY LONE STAR TO CHEVRON
DURING THE CALCULATION PERIOD FOR NATURAL
GAS DELIVERED PURSUANT TO THE LONE STAR
CONTRACT. A COPY OF THE PRICING PROVISION OF
THE LONE STAR CONTRACT IS ATTACHED HERETO AS
EXHIBIT "A".
FLOATING AMOUNT DETAILS:
FLOATING PRICE PAYER: NGC
FLOATING AMOUNT: THE INDEX PRICE REPORTED IN THE FIRST ISSUE
OF INSIDE F.E.R.C.'S GAS MARKET REPORT
PUBLISHED DURING THE CALCULATION PERIOD IN
THE TABLE TITLED "DELIVERED SPOT-GAS PRICES"
UNDER THE HEADING "HOUSTON SHIP
CHANNEL/BEAUMONT, TEXAS INDEX (LARGE
PACKAGES ONLY) MINUS $0.15 PER MMBTU.
OTHER CONDITIONS: 1. IF DURING ANY CALCULATION PERIOD CHEVRON
DELIVERS NATURAL GAS TO LONE STAR PURSUANT
TO THE LONE STAR CONTRACT, BUT LONE STAR
FAILS TO PAY CHEVRON FOR ALL OF SUCH NATURAL
GAS, THE NOTIONAL QUANTITY APPLICABLE TO
THAT CALCULATION PERIOD SHALL BE REDUCED BY
A QUANTITY EQUAL TO THE QUANTITY DELIVERED
BY CHEVRON TO LONE STAR BUT NOT PAID FOR BY
LONE STAR. IF LONE STAR SUBSEQUENTLY PAYS
FOR SUCH NATURAL GAS, THE NOTIONAL QUANTITY
APPLICABLE TO THE CALCULATION PERIOD DURING
WHICH THE NATURAL GAS WAS DELIVERED BY
CHEVRON TO LONE STAR SHALL BE RETROACTIVELY
INCREASED TO REFLECT THE QUANTITIES PAID
FOR, AND APPROPRIATE ADJUSTMENTS IN PAYMENTS
DUE UNDER THIS TRANSACTION SHALL BE MADE
WITHIN TEN DAYS. CHEVRON AGREES TO
DILIGENTLY PURSUE PAYMENT IN SUCH INSTANCES.
2. IF DURING ANY CALCULATION PERIOD CHEVRON
DELIVERS NATURAL GAS TO LONE STAR PURSUANT
TO THE LONE STAR CONTRACT AND LONE STAR PAYS
CHEVRON FOR SUCH NATURAL GAS AT A PRICE
LOWER THAN THAT PROVIDED FOR IN THE LONE
STAR CONTRACT, THE FIXED AMOUNT APPLICABLE
TO THAT CALCULATION PERIOD SHALL BE THE
AMOUNT ACTUALLY PAID BY LONE STAR. IF LONE
STAR SUBSEQUENTLY PAYS THE ADDITIONAL AMOUNT
DUE FOR SUCH NATURAL GAS, THE FIXED AMOUNT
APPLICABLE TO THE CALCULATION PERIOD DURING
WHICH THE NATURAL GAS WAS DELIVERED BY
CHEVRON TO LONE STAR SHALL BE RETROACTIVELY
INCREASED TO REFLECT THE FULL PRICE PAID BY
LONE STAR, AND APPROPRIATE ADJUSTMENTS IN
PAYMENTS UNDER THIS TRANSACTION SHALL BE
MADE WITHIN TEN DAYS. CHEVRON AGREES TO
DILIGENTLY PURSUE FULL PAYMENT FROM LONE
STAR IN SUCH INSTANCES.
3. CHEVRON AGREES THAT IT WILL NOT, WITHOUT
NGC'S PRIOR WRITTEN CONSENT, AMEND OR MODIFY
THE LONE STAR CONTRACT AFTER MAY 17, 1996,
IN ANY MANNER WHICH WOULD AFFECT THE AMOUNTS
PAYABLE BY EITHER CHEVRON OR NGC UNDER THIS
TRANSACTION. IN ADDITION, CHEVRON AGREES
THAT IT WILL NOT, AFTER MAY 17, 1996, SELL,
FARMOUT, OR OTHERWISE DISPOSE OF ANY
PROPERTY OR INTEREST IN PROPERTY SUBJECT TO
THE LONE STAR CONTRACT WITHOUT RESERVING AND
EXERCISING A CALL ON NATURAL GAS PRODUCTION
WHICH WILL ALLOW CHEVRON TO CONTINUE TO SELL
NATURAL GAS FROM SUCH PROPERTY OR INTEREST
TO LONE STAR UNDER THE LONE STAR CONTRACT.
NOTHING HEREIN SHALL PREVENT CHEVRON, ACTING
AS A PRUDENT OPERATOR, FROM RELEASING,
CEASING TO OPERATE, OR ABANDONING ANY LEASE
OR PROPERTY SUBJECT TO THE LONE STAR
CONTRACT IF, IN CHEVRON'S SOLE DISCRETION,
CONTINUING TO OPERATE SUCH LEASE OR PROPERTY
WOULD BE UNECONOMICAL FOR CHEVRON.
If this Confirmation correctly sets forth the terms of the Transaction
specified above, please so indicate by signing below and sending this
Confirmation (or a copy) to us.
If this Confirmation contains any error, please notify NGC immediately.
Failure to Notify NGC of an error in this Confirmation or failure to accept this
Confirmation as provided in Master Agreement-Schedule Part 4(e) after receipt by
Chevron shall result in this Confirmation being deemed binding as sent as set
forth in the Master Agreement.
Sincerely,
Natural Gas Clearinghouse
By:
Name:
Title:
AGREED TO AND ACCEPTED
By: Chevron U.S.A. Inc.
Name:
Title:
Date:
<PAGE>
EXHIBIT "A"
LONE STAR CONTRACT PRICE
ARTICLE XI
PRICE:
Effective February 1, 1993, through January 31, 1994, the price per
MMBtu to be paid by Lone Star for gas received hereunder shall be $3.35. Said
price shall be adjusted up or down beginning on February 1, 1994, and annually
thereafter during the term hereof based on the following formula:
PNEW=POLD+[HSCX+LSX+VALX - HSCX-1+LSX-1+VALX-1]
------------- -------------------
3 3
Where:
Pnew = The new price per MMBtu for gas received by Buyer hereunder;
Pold = The price pr MMBtu applicable for the previous annual period
(I.E., February 1 through January 31), determined pursuant to
this formula, except that for the 1993 - 1994 annual period,
"Pold" shall equal $3.35;
HSCx = The average of the twelve prices published during the period
from February through January immediately preceding the each
February 1 price recalculation, in the first-of-the-month
editions of INSIDE F.E.R.C.'S GAS MARKET REPORT, for
"Delivered Spot-Gas Prices (per MMBtu), Houston Ship
Channel/Beaumont, Texas," under the heading "index (large
packages only);"
LSx = The average of the twelve monthly Contract Indices published
during the period from February through January through
January immediately preceding each February 1 price
recalculation, in the first-of-the-month editions of NATURAL
GAS INTELLIGENCE GAS PRICE INDEX, for "Spot-Gas Prices,
Delivered to Pipelines, 30-Day Supply Transactions" for Lone
Star in the West Texas/Permian Basin Region;
VALx = The average of the twelve monthly Contract Indices published
during the period from February through January immediately
preceding each February 1 price recalculation, in the
first-of-the-month editions of NATURAL GAS INTELLIGENCE GAS
PRICE INDEX, for "Spot-Gas Prices, Delivered to Pipelines,
30-Day Supply Transactions" for Valero in the West
Texas/Permian Basin Region;
HSCx-1 = The average of twelve prices published during the period
from February through January beginning two (2) years prior to
each February 1 price recalculation, the first-of-the-month
editions of INSIDE F.E.R.C.'S GAS MARKET REPORT, for
"Delivered Spot-Gas Prices (per MMBtu), Houston Ship
Channel/Beaumont, Texas," under the heading "index (large
packages only);"
<PAGE>
LSx-1 = The average of the twelve monthly Contract Indices published
during the period from February through January beginning two
(2) years prior to each February 1 price recalculation, in the
first-of-the-month editions of NATURAL GAS INTELLIGENCE GAS
PRICE INDEX, for "Spot-Gas Prices, Delivered to Pipelines,
30-Day Supply Transactions" for Valero in the West
Texas/Permian Basin Region;
VALx-1 = The average of the twelve monthly Contract Indices published
during the period from February through January beginning two
(2) years prior to each February 1 price recalculation, in the
first-of-the-month editions of NATURAL GAS INTELLIGENCE GAS
PRICE INDEX, for "Spot-Gas Prices, Delivered to Pipelines,
30-Day Supply Transactions" for Valero in the West
Texas/Permian Basin Region;
Exhibit "C," attached hereto and made a part hereof, contains a
hypothetical calculation using the above formula for illustrative purposes only.
If one of the indices required for redetermination is not published in
the applicable publication temporarily (I.E., not published for no more than two
consecutive months), then the applicable annual average of such index shall be
determined using only the months during which such index was published, and
dividing by the number of months such index was published.
If one of the indices used in the foregoing formula is materially
changed in formulation, or is discontinued (I.E., is not published for a period
longer than two consecutive months), during any annual period for which
recalculation of price is required hereunder, then the parties shall negotiate
in good faith to find a comparable index to use as a substitute for the
discontinued or altered index. If the parties cannot agree on an appropriate
substitute index within sixty (60) days following commencement of good faith
negotiations, then either party hereto may submit the matter to binding
arbitration in the same manner provided in Article XVI.
Exhibit 10.65
PAGES WHERE CONFIDENTIAL TREATMENT
HAS BEEN GRANTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THE APPROPRIATE SECTION HAS BEEN
MARKED AT THE APPROPRIATE PLACE AND IN
THE MARGIN WITH A STAR (*)."
WEST TEXAS LPG PIPELINE
PARTNERSHIP AGREEMENT
May 20, 1996
<PAGE>
WEST TEXAS LPG PIPELINE
PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
1. DEFINITIONS
2. CREATION OF PARTNERSHIP; NAME
3. PRINCIPAL OFFICE
4. DURATION OF THE PARTNERSHIP
5. PURPOSES
6. PARTNERSHIP PROPERTY
6.1 CONTRIBUTION OF EXISTING PROPERTY
6.2 TITLE TO PROPERTY
ASSUMPTION OF RIGHTS AND OBLIGATIONS APPLICABLE TO SYSTEM
7. WARRANTIES OF PARTNERS
8. MANAGEMENT
8.1 PARTNERSHIP COMMITTEE
8.2 OFFICIALS OF THE PARTNERSHIP COMMITTEE AND TERMS OF SERVICE
THEREON
8.3 GENERAL PROVISIONS REGARDING THE PARTNERSHIP COMMITTEE
8.4 MEETINGS OF THE PARTNERSHIP COMMITTEE
8.5 AUTHORITY OF THE PARTNERSHIP COMMITTEE
8.6 VOTING
8.7 NO MANAGEMENT BY INDIVIDUAL PARTNERS
9. BOOK CAPITAL ACCOUNTS AND CAPITAL CONTRIBUTIONS
9.1 BOOK CAPITAL ACCOUNTS OF THE PARTNERS
9.2 CAPITAL CONTRIBUTIONS
10. DISTRIBUTIONS
ALLOCATION
DISTRIBUTIONS
12. AUDIT
13. PARTNER'S COVENANT AGAINST ENCUMBRANCES AND ATTACHMENTS
<PAGE>
14. LIMITATION ON PARTNER'S LIABILITIES REGARDING PARTNERSHIP
CONTRACTS
15. CROSS INDEMNIFICATION
15.1 INDEMNITY
15.2 REIMBURSEMENT
15.3 SHARING OF UNCOVERED LOSSES
16. TAX PROVISIONS
16.1 STATUS OF PARTNERSHIP
16.2 TAX RETURNS, PROCEEDINGS AND ELECTIONS
16.3 TAX DEFINITIONS
16.4 TAX ALLOCATIONS
17. TRANSFER OF OWNERSHIP INTERESTS
17.1 LIMITATION ON ASSIGNMENTS
17.2 PERMITTED TRANSFERS
17.3 TRANSFERS TO AFFILIATES
17.4 LIMITATION ON DISPOSITIONS TO AVOID TERMINATION
17.5 RELATIVE LIABILITIES OF OLD AND NEW PARTNERS
18. EXTENSIONS TO AND EXPANSION OF THE SYSTEM
19. DEFAULT BY PARTNERS
19.1 FAILURE TO MAKE CONTRIBUTIONS
19.2 EXPULSION OF PARTNERS
19.3 TREATMENT OF BOOK CAPITAL ACCOUNT OF EXPELLED PARTNER
19.4 OTHER OBLIGATIONS OF EXPELLED PARTNER
20. DISSOLUTION AND WINDING UP OF THE PARTNERSHIP
20.1 DISSOLUTION
20.2 CONTINUANCE OF BUSINESS AFTER DISSOLUTION
20.3 LIQUIDATION OF THE PARTNERSHIP
20.4 WINDING UP OF THE PARTNERSHIP
21. FURTHER ASSURANCE
22. WAIVER
23. INDEPENDENT CONDUCT
24. APPLICABLE LAW
25. SUBJECT TO APPLICABLE LAW
<PAGE>
26. SEVERABILITY
27. HEADINGS
28. BINDING EFFECT
29. BENEFITS OF AGREEMENT RESTRICTED TO PARTIES
30. COUNTERPARTS
31. ENTIRE AGREEMENT
32. AMENDMENT
33. NOTICES
EXHIBIT A - Ownership Percentages
EXHIBIT B - Map of the System
EXHIBIT C - Financial Responsibility Requirements
EXHIBIT D - Enabling Agreement
EXHIBIT E - Tax Matters
<PAGE>
WEST TEXAS LPG PIPELINE
PARTNERSHIP AGREEMENT
THIS IS AN AGREEMENT dated as of ______________ 1, 1996, between WTLPS,
Inc., a Delaware corporation ("WTLPS") and Chevron Pipe Line Company-Subsidiary,
a Delaware corporation ("CPL-Sub").
WHEREAS, the Partners desire to create a Partnership to own a common
carrier pipeline system for the transportation of LPG from various points in New
Mexico and Texas to various points in Texas.
THEREFORE, the Partners hereby agree as follows:
1. DEFINITIONS
As used in this Agreement the following words and terms shall
have the meanings set forth below.
1.1 "Act" means the Texas Revised Partnership Act, as set forth
in R.C.S., Art.6132b-1.01 , as amended from time to time.
1.2 "Affiliate" means, with respect to any Person, (i) any other
Person which beneficially owns, directly or indirectly, 50% or more of such
Person's stock or 50% or more of the ownership interest entitled to vote in such
Person, or (ii) any other Personas to which 50% or more of the voting stock or
50% or more of the ownership interest entitled to vote therein, is beneficially
owned, directly or indirectly, either by such Person or by an Affiliate of such
Person as defined in the preceding clause (i).
1.3 "Agreement" means this West Texas LPG Pipeline System
Partnership Agreement.
1.4 "Book Capital Account" means the account described in Section
9.1.
<PAGE>
1.5 "Business Day" means a day on which the Federal Reserve Bank
in New York City is open for business.
1.6 "Calendar Year" means a year beginning on the first day of
January and ending on the thirty-first day of December, except that for the
first year of operation, the Calendar Year shall begin on the date on which the
Partnership is established and end on December 31, 1996.
1.7 "CPL-Sub" means Chevron Pipe Line Company-Subsidiary.
1.8 "Credit Worthy Affiliate" means an Affiliate of a potential
new Partner, which meets the Financial Responsibility Requirements set forth in
Exhibit C and which has executed an Enabling Agreement as set forth in Exhibit
D.
1.9 "Current Liabilities" means the current liabilities described
in Section 18.3.
1.10 "Dissolving Partner" or "Dissolving Partners" means the
Partner or Partners who cause a dissolution of the Partnership as described in
Article 19.
1.11 "Distributable Cash" means the gross cash proceeds from
Partnership operations (including sales and dispositions of property in the
ordinary course of business) less the portion thereof used to pay or establish
reasonable reserves approved by the Partnership Committee for all Partnership
expenses, Guaranteed Payments, debt payments, capital improvements, replacements
and contingencies, all as determined by the Partnership Committee. Distributable
Cash shall not be reduced by depreciation, amortization, cost recovery
deductions or similar allowances, but shall be increased by any reductions of
cash reserves previously established.
1.12 "Effective Date" means the effective date of this Agreement
as stated above.
1.13 "Enabling Agreement" means the agreement attached hereto as
Exhibit D.
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1.14 "Fiscal Year" means the fiscal year of the Partnership as
designated in Article 11, except that for the first year of operation, the
Fiscal Year shall begin on the date on which the Partnership is established and
end on December 31, 1996.
1.15 "GAAP" means generally accepted accounting principles.
1.16 "Indemnifying Partner" means each Partner undertaking the
indemnity obligations described in Sections 15.1 and 15.2.
1.17 "LPG" means liquefied petroleum gas or Petroleum Products.
1.18 "Member" means a Partner's designated representative on the
Partnership Committee.
1.19 "WTLPS" means WTLPS, Inc..
1.20 "Non-Current Liabilities" means the non-current liabilities
described in Section 19.3.
1.21 "Operating Agreement" means the agreement for the operation
of the System.
1.22 "Operator" means the Person designated as the operator of
the System in the Operating Agreement.
1.23 "Ownership Interest" means the respective ownership
percentage of a Partner in the Partnership as set forth in Exhibit A hereto, as
amended from time to time.
1.24 "Partner" means any party to this Agreement, including any
Person who may hereafter become a party to this Agreement.
1.25 "Partnership" means the West Texas LPG Pipeline System
Partnership.
1.26 "Partnership Committee" means the committee designated to
manage the affairs of the Partnership in Section 8.1(a) of this Agreement.
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1.27 "Person" means any individual, partnership, association,
trust, corporation or other entity.
1.28 "Partnership Property" means all property acquired by the
Partnership by contribution, purchase or otherwise.
1.29 "Petroleum Products" means natural gasoline, ethane,
propane, isobutane, normal butane, and pentane or mixtures thereof, recovered
from gasoline recovery plants and gas recycling plants as defined from time to
time by the Gas Processors Association.
1.30 "Proposed Transferee" means a Person to whom a Transferring
Partner intends to transfer all or a portion of its Ownership Interest in the
Partnership.
1.31 "Purchase Agreement" means an agreement between a
Transferring Partner and a Proposed Transferee as described in Section 17.2(a).
1.32 "Related Company" means an Affiliate of a Partner which
acquires all or a portion of a Partner's Ownership Interest in the Partnership.
1.33 "Remaining Partners" means all Partners other than a
Transferring Partner.
1.34 "System" means the pipeline system described in Article 5
and depicted on Exhibit B attached hereto, and any additions or modifications
made thereto after this Agreement becomes effective.
1.35 "Transfer Document" means the document or instrument
evidencing the transfer of an interest in the Partnership Property to the
Partnership;
1.36 "Transferring Partner" means a Partner who transfers all or
a portion of its Ownership Interest in the Partnership pursuant to Article 17.
2. CREATION OF PARTNERSHIP; NAME
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The Partners hereby create a general partnership under the
provisions of the Act, with CPL-Sub and WTLPS being the sole initial Partners
and with each Partner initially owning that percentage of the total Ownership
Interests in the Partnership set forth in Exhibit A attached hereto. Said
Ownership Interests shall be amended from time to time to reflect assignments
and transfers of a Partner's Ownership Interest in the Partnership as provided
for herein. At all times, the sum of all Partners' Ownership Interests shall
total 100 percent. The name of the Partnership shall be West Texas LPG Pipeline
Partnership.
3. PRINCIPAL OFFICE
The principal office of the Partnership shall be maintained at
1400 Woodloch Forest Drive, The Woodlands, Texas 77380 or at such other address
as agreed by the Partnership Committee.
4. DURATION OF THE PARTNERSHIP
The Partnership shall commence as of the Effective Date and shall
terminate, unless sooner terminated pursuant to this Agreement or extended by
agreement of the Partners, on December 31, 2046. This Agreement shall terminate
when the Partnership has been wound up and liquidated, all assets of the
Partnership have been distributed or disposed of, and all liabilities and
obligations of the Partnership (and of each Partner as they relate to the
Partnership) have been fully discharged, satisfied or provided for as provided
in Article 20.
5. PURPOSES
The Partnership is created for the purposes of: (a) owning the
System for the
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CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
common carrier transportation of LPG from various points in New Mexico and Texas
to various points in Texas as depicted on the attached Exhibit B, as it may be
amended from time to time; (b) causing the System to be operated, maintained,
repaired and, if appropriate in the judgment of and directed by the Partnership
Committee, expanded, extended, changed in direction or use, replaced, removed or
abandoned in place; (c) causing any facilities, property or property rights,
equipment, or services related to or required in connection with any of the
above described activities to be procured, constructed, operated, maintained,
repaired, replaced, sold, disposed of, removed, or abandoned in place; (d) any
other purposes related to and necessary or appropriate in the judgment of the
Partnership Committee to implement any of the foregoing; and (e) any other legal
purpose unanimously approved by the Partners.
6. PARTNERSHIP PROPERTY
6.1 CONTRIBUTION OF EXISTING PROPERTY The initial contributions
of each Partner to the Partnership shall be their respective shares of undivided
interests in and to the property described elsewhere in this Agreement as the
Partnership Property; and CPL-Sub shall pay to the Partnership both CPL-Sub's
and WTLPS's shares of the initial working capital needed to operate the System
in the amount of * [REDACTED]; provided, however, in the event WTLPS withdraws
from the Partnership, other than as a result of an assignment to an Affiliate as
provided herein, at such time of withdrawal, WTLPS shall reimburse CPL-Sub for
its share of such initial contribution of working capital. Should WTLPS dispose
of a portion if its Ownership Interest in the Partnership, at such time of
disposition, WTLPS shall reimburse CPL-
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Sub for the proportionate share of its initial contribution of working capital
equal to the percentage of Ownership Interest disposed.
6.2 TITLE TO PROPERTY The title to all Partnership Property shall
be held in the name of the Partnership unless otherwise approved by the
Partnership Committee; provided, however, licenses, permits, easements and
rights-of-way necessary for the operation of the System may be held in the name
of the Operator who will act as agent on behalf of the Partnership.
6.3 ASSUMPTION OF RIGHTS AND OBLIGATIONS APPLICABLE TO SYSTEM.
The Partnership shall be bound by the terms of that certain Rate Case Settlement
Agreement approved by the Federal Energy Regulatory Commission on April 30,
1996, Docket No. ________________ relating to the System and applicable to
CPL-Sub subsequent to the Effective Date of the Partnership Agreement but shall
not assume any reimbursement obligations arising out of the Rate Case Settlement
Agreement covering time periods prior to the Effective Date. The Partnership
shall adopt the tariffs for the System in effect on the Effective Date of this
Agreement.
7. WARRANTIES OF PARTNERS
7.1 ORGANIZATION
(a) Each Partner, upon becoming a party to this Agreement,
represents, warrants and agrees that:
(b) It is a corporation duly incorporated, validly existing, and
in good standing under the laws of its jurisdiction of incorporation;
(c) It will not voluntarily cause a dissolution or termination of
the Partnership
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by failure to maintain its corporate existence or by any other act or omission
to act;
(d) The execution, delivery and performance of this Agreement
have been duly authorized, and this Agreement, when executed and delivered, will
be valid and binding on it; and
(e) The execution and delivery of this Agreement does not
contravene any provision of, or constitute a default under, any relevant
material indenture, mortgage or other agreement binding on such Partner or any
valid order of any court, commission or governmental agency to which such
Partner is subject.
8. MANAGEMENT
8.1 PARTNERSHIP COMMITTEE
8.1(a) COMPOSITION OF THE COMMITTEE. The Partnership shall
be managed by a Partnership Committee composed of one Member representing each
Partner. Each Partner shall designate its Member of the Partnership Committee,
whose vote shall be based on that Partner's Ownership Interest. The Members of
the Partnership Committee shall be designated by the Partners by notice to each
other immediately after the Effective Date, and the Members shall serve until
their successors' designations shall become effective.
8.1(b) REPLACEMENT OF COMMITTEE MEMBERS. If any Member of
the Partnership Committee dies, resigns, or becomes incapacitated, the Partner
which designated such Member shall designate his or her successor, the term of
such successor to commence immediately, and any Partner may withdraw the
designation of the Member of the Partnership Committee which it designated and
designate a replacement (whose term shall commence immediately) at any time,
with or without cause, by giving notice of the withdrawal and replacement to the
other Members of the Partnership Committee.
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8.1(c) CHANGES IN THE VOTING INTEREST OF COMMITTEE MEMBERS
DUE TO CHANGES IN OWNERSHIP. In the event of any changes in the relative
Ownership Interests of the Partners in the Partnership effective during the
course of a Calendar Year, the vote of each Member of the Partnership Committee
shall reflect such change effective upon the receipt of notice by the
Partnership that a change in the Ownership Interests of the Partners has
occurred.
8.1(d) SPECIAL LEGAL AND REGULATORY OBLIGATIONS OF MEMBER.
All Members of the Partnership Committee are under a special legal obligation to
protect confidential information, including but not limited to shipper
information, against disclosure or against use by the Partner or any other party
for any purpose other than the direct business of the Partnership. Each Partner
shall be obligated to take such steps as are necessary to ensure that such
confidential information is not disclosed or used otherwise than as allowed by
law. No Member shall be allowed to participate in any business of the
Partnership in the event that such participation would compromise the
Partnership's obligation to safeguard such information.
8.2 OFFICIALS OF THE PARTNERSHIP COMMITTEE AND TERMS OF SERVICE
THEREON
8.2(a) ELECTION OF-PARTNERSHIP OFFICIALS. The Partnership
Committee shall elect a Chairman and one or more Vice-Chairmen from among its
Members and a Secretary and a Treasurer, who need not be Members, immediately
after being created and thereafter at its first meeting during each Calendar
Year. Each Chairman, Vice-Chairman, Secretary and Treasurer shall serve until
his or her successor is elected and qualified or until his or her earlier
resignation, removal by vote of the Partnership Committee, or, in the case of
the Chairman or Vice-Chairmen, his or her earlier departure from membership in
the Partnership Committee.
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An individual may hold more than one office.
8.2(b) DUTIES OF THE CHAIRMAN. The Chairman shall preside
over all meetings of the Partnership Committee, shall call regular meetings of
the Partnership Committee, may call special meetings of the Partnership
Committee and shall have other duties as specified elsewhere in this Agreement.
8.2(c) DUTIES OF THE VICE-CHAIRMAN. The Vice-Chairman
present with the longest continuous service as such shall preside over meetings
of the Partnership Committee in the absence of the Chairman, and in the event
the Chairmanship becomes vacant, the Vice Chairman with the longest continuous
service as such shall serve as Chairman until a new Chairman is elected.
8.2(d) DUTIES OF THE SECRETARY. The Secretary shall record
minutes of the Partnership Committee meetings, shall give notice of regular and
special meetings of the Partnership Committee when directed to do so pursuant to
Section 8.4 hereof, and shall accept and notify all Partnership Committee
Members of any resignations of Partnership Committee Members or Partnership
officials (other than his own resignation which shall be accepted by the
Chairman). The Secretary shall also cause the Partnership to comply with
requirements under the Assumed Business or Professional Name Act of the Business
and Commerce Code of the State of Texas.
8.2(e) DUTIES OF THE TREASURER. The Treasurer shall have
general supervision of the funds, securities, notes, drafts, acceptances, and
other commercial paper and evidences of indebtedness of the Partnership and
shall insure that funds belonging to the Partnership are kept on deposit in such
banking institutions or invested in securities as the Partnership Committee may
from time to time direct. The Treasurer shall insure that accurate
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accounting records are kept, and shall render statements of income and of
financial position of the Partnership to the Partnership Committee and each
Partner at any time upon reasonable request. The Treasurer shall perform other
duties commonly incident to such office.
8.3 GENERAL PROVISIONS REGARDING THE PARTNERSHIP COMMITTEE.
8.3(a) ADDITIONAL AUTHORITY. The Chairman, Vice-Chairmen,
Secretary or Treasurer and the incumbents of any other similar positions which
the Partnership Committee may elect to create, may be given other duties either
of a general or specific nature by the Partnership Committee, but, in the
absence of any such grant of authority, shall not be deemed to have any inherent
authority to act for the Partnership except as specifically set forth above or
elsewhere in this Agreement.
8.3(b) COMPENSATION. The officials of the Partnership
shall receive no compensation from the Partnership. All costs of each Member of
the Partnership Committee arising out of his attendance at Partnership Committee
meetings or conduct of Partnership business shall be borne by the Partner he
represents. The Partnership shall indemnify and save harmless the Members of the
Partnership Committee and the officials of the Partnership against all actions,
claims, demands, costs and liabilities arising out of the acts (or failure to
act) of any such Members and officials in good faith within the scope of their
authority in the course of the Partnership's business, and such Persons shall
not be liable for any obligations, liabilities or commitments incurred by or on
behalf of the Partnership as a result of any such acts or failure to act.
8.3(c) INSURANCE. To the extent that such insurance is
commercially available, the Partnership Committee may authorize the Operator to
purchase and maintain
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insurance on behalf of any Person who is or was a Member of the Partnership
Committee, or an official of the Partnership, or who is or was serving at the
request of the Partnership as agent of the Partnership, against any liability
asserted against or incurred by him in any such capacity, or arising out of his
status as such, whether or not the Partnership would have the power to indemnify
him against such liability under the provisions of the preceding Section 8.3(b).
8.4 MEETINGS OF THE PARTNERSHIP COMMITTEE. The Partnership
Committee may hold meetings either within or without the State of Texas. Regular
meetings of the Partnership Committee shall be held not less frequently than
once each calendar quarter at such times and places as the Partnership Committee
determines. Special meetings of the Partnership Committee may be called by the
Chairman of the Partnership Committee on ten (10) Business Days notice to each
Member of the Partnership Committee and shall be called by the Chairman or
Secretary of the Partnership Committee on like notice upon request of any Member
of the Partnership Committee representing at least forty nine percent (49%) of
the Ownership Interests. Meetings of the Partnership Committee may be held by
conference telephone call on two (2) Business Days notice. Each notice of a
meeting or conference call shall state the time and place of the meeting or the
conference call and the purpose or purposes thereof.. Unless otherwise waived in
writing by all Members of the Partnership Committee, only matters included in
the notice of the meeting or conference call can be considered for a vote by the
Partnership Committee. Any requirements of notice will be deemed waived by any
Member of the Partnership Committee who attends a Partnership Committee meeting
or participates in a conference call unless such Member attends or participates
solely to protest the lack of proper notice. Any requirement of notice may be
waived by any Member in writing, which waiver or waivers shall be attached by
the Secretary of the Partnership Committee to the minutes of the meeting of the
Partnership
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Committee for which such waiver is effective. Provided that proper notice is
either given or duly waived by all Members of the Partnership Committee, the
presence of at least two (2) Members of the Partnership Committee representing
at least fifty-one percent (51%) of the Ownership Interests shall be sufficient
to constitute a quorum for the transaction of business. The Partnership
Committee may act by the unanimous written consent of all Members of the
Partnership Committee (which may be signed in counterpart) in lieu of holding a
meeting; such unanimous written consent shall be effective when filed with the
Secretary of the Partnership Committee. Notice to Members of the Partnership
Committee shall be as provided in Article 32 hereof.
8.5 VOTING OF THE PARTNERSHIP COMMITTEE - SIMPLE MAJORITY. The
operation and maintenance of the System shall be performed by the Operator
pursuant to the Operating Agreement to be approved by the Partnership Committee.
The Partnership Committee shall have authority to oversee the operations of
operator as provided in the Operating Agreement and, except as such authority
may be limited under the terms of this Agreement, the Partnership Committee
shall have full power and authority to manage the entire business and affairs of
the System. Without limiting the generality of the foregoing, on a simple
majority vote of the Member(s) representing fifty one percent (51%) of the
Ownership Interest, the Partnership Committee is authorized to:
(a) Oversee the activities of the Operator,
(b) Designate, in writing, agents authorized to act on
behalf of the Partnership, whose designations may be either specific or
general; provided, that the Partnership Committee may not authorize any
agent to act with greater authority on behalf of the Partnership than
the Partnership Committee itself has,
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(c) Undertake contractual commitments in the ordinary
course of business,
(d) Acquire, sell, lease or otherwise dispose of real and
personal property in the ordinary course of business,
(e) Elect Partnership Committee officials,
(f) Establish, amend and cause the filing of tariffs,
(g) Give notice of default to a defaulting Partner,
(h) Expel a defaulting Partner as provided in Section
19.2, or
(i) Perform or authorize any other act on behalf of the
Partnership not specifically delegated to the Operator.
8.6 VOTING OF THE PARTNERSHIP - SUPERMAJORITY. Without limiting
the generality of the foregoing section, on a vote of Members representing a
minimum of sixty-seven percent (67%), the Partnership Committee is authorized
to:
(a) Acquire, encumber, sell, lease, or otherwise dispose
of all or substantially all of the real and personal property assets of
the Partnership;
(b) Terminate the business or dissolve the Partnership or
appoint a liquidating trustee other than the Operator;
(c) Expand the capacity of the System or extend the System
as provided in Article 18,
(d) Authorize the use of the System for transportation of
substances other than LPG,
(e) Authorize cash distributions in a manner other than as
set forth in Section 10 or amend the provisions of Section 10,
(f) Consider, revise, approve and reject operating and
capital budgets and
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AFEs recommended by the Operator as provided in the Operating Agreement,
(g) Authorize the creation of an Audit and other
subcommittees to advise the Partnership Committee,
(h) Appoint or change the Operator,
(i) Authorize, or refuse to authorize, the Operator to
settle claims brought against the Partnership recommended by the
Operator in amounts greater than $50,000 or the filing of lawsuits the
Operator proposes the Partnership bring against third parties, other
than routine debt collection actions,
(j) Change the provisions of Section 16 and Exhibit E,
(k) Borrow money or obtain any advance or credit in any
form (other than trade credit) or make a loan or advance or give credit,
other than normal trade credit,
(l) Give any guarantee or indemnity or security in respect
of any liabilities or obligations of any person other than the
Partnership,
(m) Amend the Partnership Agreement,
(n) Create or dispose of any subsidiary of the Partnership
or any interest therein,
(o) Enter into any partnership, joint venture or profit
sharing agreement or arrangement,
(p) Enter into any material contract or arrangement
outside of the ordinary course of business,
(q) Factor or assign any of the Partnership's accounts,
(r) Except as otherwise provided herein, do or permit or
suffer to be done any act or thing whereby the Partnership may be wound
up, liquidated or dissolved
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(whether voluntarily or compulsorily),
(s) Acquire or make any investment in another company,
partnership or business,
(t) Change the nature or scope of the Partnership's
business or commence any new business not being ancillary or incidental
to the Partnership's business,
(u) Make any claim, disclaimer, surrender, election or
consent of a material nature for tax purposes,
(v) Require the Partners to make any additional capital
contributions,
(w) Resolve audit disputes, or
(x) Appoint a liquidating trustee.
8.7 NO MANAGEMENT BY INDIVIDUAL PARTNERS. All acts of management
of the Partnership shall be taken by the Partnership Committee, acting pursuant
to this Agreement, by agents duly authorized in writing by the Partnership
Committee or by the Operator acting pursuant to the Operating Agreement. No
individual Partner or Member of the Partnership Committee shall act or purport
to act as an agent of or otherwise on behalf of the Partnership unless, and then
only to the extent, authorized in writing to do so by the Partnership Committee.
9. BOOK CAPITAL ACCOUNTS AND CAPITAL CONTRIBUTIONS
9.1 BOOK CAPITAL ACCOUNTS OF THE PARTNERS. The Partnership shall
maintain individual Book Capital Accounts for each Partner for financial
accounting purposes. Each Partner's Book Capital Account shall include its
initial capital contributions (a) increased by (i) any additional capital
contributions made by such Partner and (ii) its Ownership Interest in
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Partnership income, and (b) decreased by (i) its Ownership Interest in
Partnership losses, (ii) any distributions of Distributable Cash to such Partner
and (iii) the agreed value of any distributions of property made to such Partner
net of any liabilities assumed by such Partner or to which such property is
subject.
9.2 CAPITAL CONTRIBUTIONS. Each Partner agrees to contribute any
amount of additional capital specified by the Partnership Committee to fulfill
the purposes, as they may be amended, for which the Partnership is created.
When, subject to the foregoing, the Partnership Committee shall determine
additional capital funds are required from the Partners it shall specify the
amount to be contributed by each Partner, which amount shall be in proportion to
the Ownership Interest of that Partner in the Partnership, but which shall also
take into account relative amounts then in that Partner's Book Capital Account
to the end that the additional amount to be paid, plus the existing balance in
that Partner's Book Capital Account, shall result in a balance in exact
proportion to that Partner's Ownership Interest in the Partnership. Prior to any
call for capital contributions, the aggregate loss of any Partner's profits and
losses shall be deducted from that Partner's Book Capital Account and the
aggregate gain of any Partner's profits and losses shall be added to that
Partner's Book Capital Account before the calculation is made to determine the
amount of additional capital required from each Partner.
10. DISTRIBUTIONS OF DISTRIBUTABLE CASH
ALLOCATION. Any profits and/or losses of the Partnership
shall be shared among the Partners in accordance with their Ownership Interests
at the time such profits and losses are accrued.
DISTRIBUTIONS. Unless otherwise approved by a vote of
the Partners under
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Section 8.6 (e), the Operator shall distribute to the Partners Distributable
Cash as follows: within thirty days after the end of each calendar month there
shall be distributed in cash to the Partners allocated in accordance with their
Ownership Interest all cash available for distribution, taking into account the
cash account as of the end of the month and any cash activity from the end of
the month to the date of distribution less the reasonable working capital needs
to operate the System.
11. ACCOUNTING
The books and records of the Partnership shall be maintained by
the Operator and shall be open to inspection at all reasonable times to any
Partner. Such books shall be maintained in accordance with GAAP utilizing the
principles and practices generally employed in regulated oil pipeline accounting
unless any regulatory agency with jurisdiction over the System or the
Partnership shall rule otherwise. Unaudited financial statements for the
Partnership shall be prepared and distributed to each Partner and to the
Partnership Committee Members not less often than quarterly; however, income
statements shall be provided monthly. Complete financial statements shall be
prepared annually which shall be audited and certified by independent certified
public accountants selected by the Partnership Committee. The Fiscal Year for
the Partnership shall commence January 1 and end December 31 of each year,
except that for the first year of operation, the Fiscal Year shall begin on the
Effective Date and end on December 31, 1996.
12. AUDIT
Any Partner, at its sole expense, may audit the Partnership books
of account by giving ten (10) Business Days notice to the Partnership Committee,
the Operator and all other
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Partners, but the Partnership Committee may decline to permit more than one (1)
such audit to be conducted in any six-month period. Such audit shall be at the
reasonable convenience of the Partner, the Operator and the Partnership
Committee, shall be open for participation by all Partners and shall be
restricted to books of account for the preceding two (2) Fiscal Years. All audit
exceptions shall be resolved in a timely manner. Any audit exception not
resolved within ninety (90) days after the release of the audit report will
become an agenda item at the next Partnership Committee meeting and shall be
resolved at that time. Amounts owed as determined by an audit shall be paid with
interest at the base rate in effect from time to time published by the First
National Bank of Chicago plus two percent. Should the Partnership Committee fail
or be unable to resolve any such audit disputes, the matter shall be submitted
to the dispute resolution procedures set forth in Section 21 hereinafter.
13. PARTNER'S COVENANT AGAINST ENCUMBRANCES AND ATTACHMENTS
No Partner shall mortgage, lease, assign, pledge or otherwise
encumber or create a security interest in its Ownership Interest for the benefit
of any creditor of that Partner during the term hereof or permit its Ownership
Interest to be attached or levied upon as a result of any such separate debt of
that Partner unless the security interest documents effecting such rights are
approved by the Partners, which approval shall not be unreasonably withheld;
provided that a Partner may sell all or part of its Ownership Interest, subject
to Article 17 hereof. In the event that the holder of any mortgage, lease,
assignment, pledge or other encumbrance or other security interest in an
Ownership Interest of a Partner exercising its rights hereunder seeks to
exercise foreclosure under such security, the transaction shall be deemed a
transfer of ownership subject to the terms of Section 17 below and the Remaining
Partners may exercise rights of
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purchase as provided therein.
14. LIMITATION ON PARTNER'S LIABILITIES REGARDING PARTNERSHIP CONTRACTS
Unless approved by the Partnership Committee, the Partnership or
its authorized agents or representatives shall not enter into any contract,
lease, sublease, note, deed of trust or other obligation unless there is
contained therein an appropriate provision limiting the claims of all parties to
such instruments and other beneficiaries thereunder to the assets of the
Partnership and expressly waiving any rights of such parties and other
beneficiaries to proceed against the Partners individually.
15. CROSS INDEMNIFICATION
15.1 INDEMNITY. Each Partner (in each case the "Indemnifying
Partner") shall indemnify and hold all other Partners and, in the case of
Sections 15.1 and 15.2 hereof, the Partnership, harmless from:
(i) Any losses or claims resulting from any act or
omission of such Indemnifying Partner in breach of this
Agreement;
(ii) Any claim by any third party arising out of the
intentional, willful, or grossly negligent act of such
Indemnifying Partner related directly or indirectly to the
Partnership; and
(iii) Any judgment against any other Partner arising
solely because of the Indemnifying Partner's liability for
Partnership debts under the laws of the State of Texas (and not
because of any other act of the Partner seeking indemnity), to
the extent that the Partner claiming indemnity has borne greater
than its
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proportionate share of the judgment actually paid.
15.2 REIMBURSEMENT. Except as otherwise specifically provided in
this Agreement, all expense, loss, damage, liability or claims (together with
all costs incurred in connection therewith) shall be borne, shared and paid by
the Partners hereto on the basis of their respective Ownership Interests. In the
event any Partner is required for any reason, other than as specified in this
Agreement, to pay a disproportionate share of any obligations of the
Partnership, all other Partners who have not paid their proportionate share
agree to reimburse that Partner to the extent necessary to place the resulting
loss of each Partner into direct proportion to its Ownership Interest. The
provisions of this Article 15 shall survive termination of this Agreement and of
the Partnership.
15.3 SHARING OF UNCOVERED LOSSES. Should the Partnership incur
losses which are either greater than the amount of, or not covered by any
insurance coverage carried by the Partnership, and which are the obligation of
the Partnership and not that of individual Partners, the Partners agree to share
such losses in proportion to their Ownership Interests.
16. TAX PROVISIONS [* UNDER REVIEW BY TAX COUNSEL *]
16.1 STATUS OF PARTNERSHIP. The Partners intend that, pursuant to
the provisions of Subchapter K of Chapter 1 of Subtitle A of the Code, the
Partnership will be treated as a Partnership for federal, state, and local
income tax purposes, and each Partner agrees not to elect to be excluded from
the application of all or any part of Subchapter K of the Code or any
corresponding provisions of state or local law.
16.2 TAX RETURNS, PROCEEDINGS AND ELECTIONS. Tax returns,
proceedings and
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elections shall be governed by the provisions of Exhibit E attached. The
provisions of Exhibit E may be amended from time to time by vote of the
Partnership Committee as provided in Section 8.6 (j).
16.3 TAX DEFINITIONS.
16.3(a) "Adjusted Federal Income Tax Capital Account
Deficit" (Adjusted FIT Capital Account Deficit) means, with respect to any
Partner, the deficit balance in such Partner's FIT Capital Account as of the end
of the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such FIT Capital Account any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or pursuant to Regulations Sections 1.704-1(b)(2)(ii)(c) or is deemed
to be obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) or 1.704-2(i)(5); and
(ii) Debit to such FIT Capital Account the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704l(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of
Adjusted FIT Capital Account Deficit is intended to comply with the provisions
of Regulations Section 1.704l(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
16.3(b) "Code" means the Internal Revenue Code of 1986, as
amended.
16.3(c) "Depreciation" means, for each Fiscal Year or
other period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes, as described in Treasury
Regulations Section 1.704-1(b)(2)(iv)(g), at the beginning of such year or other
period,
- 22 -
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or other
cost recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Partners.
16.3(d) "Federal Income Tax Capital Account" (FIT Capital
Account) means, with respect to any and each Partner, the FIT Capital Account
maintained for such Person in accordance with Regulation Section
1.704l(b)(2)(iv) and the following provisions:
(i) To each Partner's FIT Capital Account there
shall be credited such Partner's FIT Capital Contributions, such Partner's
distributive share of Profits and any items in the nature of income or gain
which are specially allocated pursuant to Section 16.4(b) or Section 16.4(c)
hereof, and the amount of any Partnership liabilities assumed by such Partner or
which are secured by any Partnership Property distributed to such Partner; and
(ii) To each Partner's FIT Capital Account there
shall be debited the amount of cash and the Gross Asset Value of any Partnership
Property distributed to such Partner pursuant to any provision of this
Agreement, such Partner's distributive share of Losses and any items in the
nature of expenses or losses that are specially allocated pursuant to Section
16.4(b) or Section 16.4(c) hereof, and the amount of any liabilities of such
Partner assumed by the Partnership or which are secured by any property
contributed by such Person to the Partnership.
(iii) In determining the amount of any liability
for purposes of subparagraphs (i) and (ii) hereof, there shall be taken into
account Code Section 752(c) and any
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other applicable provisions of the Code and Regulations.
16.3(e) "Federal Income Tax Capital Contribution" (FIT
Capital Contribution) means, with respect to any Partner, the amount of money
and the initial Gross Asset Value of any property (other than money) contributed
as capital and not as a project loan to the Partnership by such Partner pursuant
to this Agreement. The principal amount of a promissory note which is not
readily traded on an established securities market and which is contributed to
the Partnership by the maker of the note shall not be included in the FIT
Capital Account of any Partner until the Partnership makes a taxable
distribution of the note or until (and to the extent) principal payments are
made on the note, all in accordance with Regulations Section
1.704-1(b)(2)(iv)(d)(2).
16.3(f) "Gross Asset Value" means, with respect to any
asset, the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership (or deemed contributed to the
Partnership following a Code Section 708(b)(1)(B) termination) shall be the
gross fair market value of such asset as determined by the contributing Partner
and the Partnership Committee;
(ii) The Gross Asset Value of all Partnership
assets shall be adjusted to equal their respective gross fair market values, as
determined by the Partnership Committee, as of the following times: (a) the
acquisition of an additional Ownership Interest by any new or existing Partner
in exchange for more than a de minimas FIT Capital Contribution (if the
Partnership Committee reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interest of the Partners in the
Partnership); (b) the distribution by the Partnership to a Partner of more than
a de minimas amount of Partnership
- 24 -
Property as consideration for an Ownership Interest (if the Partnership
Committee reasonably determines that such adjustment is necessary or appropriate
to reflect the relative economic interest of the Partners in the Partnership);
and (c) the liquidation of the Partnership within the meaning of Regulations
Section (1.704-1(b)(2)(ii)(g);
(iii) The Gross Asset Value of any Partnership
asset distributed to any Partner shall be the gross fair market value of such
asset on the date of distribution; and
(iv) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but
only to the extent that such adjustments are taken into account in determining
FIT Capital Accounts pursuant to Regulations Section 1.704- l(b)(2)(iv)(m) and
16.4(b)(viii) hereof; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subparagraph (iv) to the extent the Partnership
Committee determines that an adjustment to subparagraph (ii) hereof is necessary
or appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv). If the Gross Asset Value of an
asset has been determined or adjusted pursuant to subparagraph (i), (ii) or (iv)
hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing Profits
and Losses.
16.3(g) "Guaranteed Payment" means a payment by the
Partnership to a Partner as provided under Regulations Section 1.707-1(c). Such
payment is to be determined without regard to the income of the Partnership and
is considered as made to a Partner who is not acting in its capacity as a
Partner.
16.3(h) "Nonrecourse Deductions" has the meaning set forth
in Regulations Section 1.704-2(b). The amount of Nonrecourse Deductions for a
Partnership Fiscal
- 25 -
Year is determined in accordance with Regulations Section 1.704-2(c) and equals
the net increase in Partnership Minimum Gain during the year, reduced (but not
below zero) by the aggregate distributions made during the year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Partnership Minimum
Gain; provided that increases in Partnership Minimum Gain resulting from
conversions, refinancing, or other changes to a debt instrument described in
Regulations Section 1.704-2(g)(3) shall not generate Nonrecourse Deductions.
16.3(i) "Nonrecourse Liabilities" has the meaning set
forth in Regulations Section 1.752-1(a)(2) or 1.704-2(b)(3).
16.3(j) "Partner Nonrecourse Debt" or "Partner Nonrecourse
Liability" as set forth in Regulations Section 1.704-2(b)(4), means any
Partnership liability to the extent that the liability is nonrecourse for
purposes of Regulations Section 1.1001-2, and a Partner (or related person
within the meaning of Regulations Section 1.752-4(b)) bears the economic risk of
loss within the meaning of Regulations Section 1.754-2.
16.3(k) "Partner Nonrecourse Debt Minimum Gain" means an
amount, with respect to each Partner Nonrecourse Debt, determined in accordance
with Regulations Sections 1.704-2(i)(2) and 1.704-2(i)(3).
16.3(l) "Partner Nonrecourse Deductions", as set forth in
Regulations Section 1.704-2(i)(2) and 1.704-2(i)(3), means for any Partnership
taxable year, the net increase during the year in Partner Nonrecourse Debt
Minimum Gain, reduced (but not below zero) by proceeds of the liability
distributed during the year to the Partner bearing the economic risk of loss for
the liability that is both attributable to the liability and allocable to an
increase in the Partner Nonrecourse Debt Minimum Gain.
16.3(m) "Partnership Minimum Gain" has the meaning set
forth in
- 26 -
Regulations Section 1.704-2(b)(2) and 1.704-2(d).
16.3(n) "Profits and Losses" means, for each Fiscal Year
or other period, an amount equal to the Partnership's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(i) Any income described in Code Section
705(a)(1)(B) of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profits and Losses pursuant to this
definition shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described
in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses pursuant to this
definition, shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any
Partnership Property is adjusted pursuant to subparagraph (ii) or subparagraph
(iii) of the definition of Gross Asset Value, the amount of such adjustments
shall be taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits and Losses;
(iv) Gain or loss resulting from any disposition of
Partnership Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax basis
of such property may differ from its Gross Asset Value.
(v) In lieu of the depreciation, amortization, and
other cost
- 27 -
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or other
period, computed in accordance with the definition of Depreciation; and
(vi) Notwithstanding any other provisions of this
definition, any items which are specially allocated pursuant to Section 16.4(b)
or Section 16.4(c) shall not be taken into account in computing Profits or
Losses.
16.3(o) "Regulations" means the Income Tax Regulations
promulgated under the Code as amended from time to time, including the
corresponding provisions of any succeeding regulations.
16.3(p) "Tax Matters Partner" means the Partner so
designated pursuant to Exhibit E hereof.
16.4 TAX ALLOCATIONS.
16.4(a) ALLOCATION OF PROFITS AND LOSSES.
(i) Allocation of Profits. After first giving
effect to the Regulatory Allocations set forth in Section 16.4(b), and the
Special Allocations in Section 16.4(c), Profits for each Fiscal Year of the
Partnership shall be allocated to the Partners in proportion to their respective
Ownership Interests as reflected in Exhibit A.
(ii) Allocation of Losses. After first giving
effect to the Regulatory Allocations set forth in Section 16.4(b), and the
Special Allocations in Section 16.4(c), Losses for each Fiscal Year of the
Partnership shall be allocated to the Partners in proportion to their respective
Ownership Interests as reflected in Exhibit A.
16.4(b) REGULATORY ALLOCATIONS. The following special
allocations shall be made for the purpose of complying with Code Section 704(b)
and the Regulations thereunder
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in the following order:
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(f), and notwithstanding any other
provision of this Article 16, if there is a net decrease in Partnership Minimum
Gain during any Partnership Fiscal Year, each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if necessary
subsequent years) equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g); provided that a Partner shall not be subject to this Section
16.4(b)(i) to the extent that an exception is provided by Regulations Sections
1.704-2(f)(2), (3) and (4), and any Revenue Rulings issued pursuant to those
Regulations. Any Partnership Minimum Gain allocated pursuant to this Section
16.4(b)(i) shall consist of first, gains recognized from the disposition of
Partnership Property subject to one or more Partnership Nonrecourse Liabilities,
and second, if necessary, a pro rata portion of the Partnership's other items of
income or gain for that year. This Section 16.4(b)(i) is intended to comply with
the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and
shall be interpreted consistently therewith. The FIT Capital Accounts of the
Partners will be restated pursuant to Regulation Section 1.704-1(b)(2)(iv)(f) in
connection with a termination of the Partnership under Code Section
708(b)(1)(B).
(ii) PARTNER NONRECOURSE DEBT MINIMUM GAIN
CHARGEBACK. Except as otherwise provided in Regulations Section 1.7042(i)(4),
and notwithstanding any other provision of this Article 16 except Section
16.4(b)(i), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership Fiscal Year,
each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt (determined in accordance with
- 29 -
Regulations Section 1.704-2(i)(5)) as of the beginning of the year shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) equal to such Partner's share of the net decrease
in Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt determined in accordance with Regulations Section 1.704-2(i). A
Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain
shall be determined in accordance with Regulations Section 1.704-2(i)(5);
provided that a Partner shall not be subject to this Section 16.4(b)(ii) to the
extent that an exception is provided by Regulations Section 1.704-2(i)(4) and
any Revenue Rulings issued thereunder. Any Partner Nonrecourse Debt Minimum Gain
allocated pursuant to this Section 16.4(b)(ii) shall consist of first,' gains
recognized from the disposition of Partnership Property subject to the Partner
Nonrecourse Debt, and second, if necessary, a pro rata portion of the
Partnership's other items of income or gain for that year. This Section
16.4(b)(ii) is intended to comply with the minimum gain chargeback requirement
in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(iii) CODE SECTION 704(C). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
shall, solely for tax purposes, be allocated amount the Partners so as to take
into account any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with the definition of Gross Asset Value) including, but
not limited to, special allocations to a contributing Partner that are required
under Code Section 704(c) to be made upon distribution of such property to any
of the non-contributing Partners. In the event of a
- 30 -
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partners will be deemed to receive an undivided interest in each item of the
Partnership Property and thereafter, will be deemed to contribute an undivided
interest in each such item; and items of Partnership income, gain, loss and
deduction attributable to each deemed contributed undivided interest as to which
the Partners have different tax basis for the same undivided interest, shall be
allocated to each Partner in proportion to its tax basis in such undivided
interest until such variation amount is eliminated, and if such allocations are
not in accordance with Code Section 704(c), curative allocations shall be made
to achieve this result as quickly as possible. In the event the Gross Asset
Value of any Partnership Property is adjusted pursuant to subparagraph (ii) of
the definition of Gross Asset Value, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations thereunder. Any elections or other decisions relating
to such allocations shall be made by the Partnership Committee in any manner
that reasonably reflects the purpose and intention of the Agreement. Allocations
pursuant to this Section 16.4(b)(iii) are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing any Partner's Book Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
(iv) QUALIFIED INCOME OFFSET. In the event any
Partner unexpectedly receives any adjustments, allocations, or distributions
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704l(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted FIT
- 31 -
Capital Account Deficit of such Partner created by such adjustments, allocations
or distributions as quickly as possible, provided that an allocation pursuant to
this Section 16.4(b)(iv) shall be made if and only to the extent that such
Partner would have an Adjusted FIT Capital Account Deficit after all other
allocations provided for in this Article 16 have been tentatively made as if
this Section 16.4(b)(iv) were not in the Agreement.
(v) GROSS INCOME ALLOCATION. In the event any
Partner has a deficit FIT Capital Account at the end of any Partnership Fiscal
Year that is in excess of the sum of (A) the amount such Partner is obligated to
restore pursuant to the terms of this Agreement or otherwise, and (B) the amount
such Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Partner shall be specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 16.4(b)(iv) shall be made if, and only to the extent
that, such Partner would have a deficit FIT Capital Account in excess of such
sum after all other allocations provided for in this Article 16 have been
tentatively made as if Section 16.4(b)(iii) and this Section 16.4(b)(v) were not
in the Agreement.
(vi) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions
for any Fiscal Year or other period shall be allocated to the Partners in
proportion to their respective Ownership Interests.
(vii) PARTNER NONRECOURSE DEDUCTIONS. Any Partner
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-2(h).
- 32 -
(viii) SECTION 754 ADJUSTMENT. To the extent an
adjustment to the adjusted tax basis of any Partnership Property pursuant to
Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining FIT
Capital Accounts, the amount of such adjustment to the FIT Capital Accounts
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Partners in a manner consistent with
the manner in which their FIT Capital Accounts are required to be adjusted
pursuant to such section of the Regulations.
16.4(c) SPECIAL ALLOCATIONS.
(i) ALLOCATION OF INHERENT GAIN. If during the term
of the Partnership, the FIT Capital Accounts of the Partners are not restated
pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), then except as required by
the Regulatory Allocations, gain on disposition of the Partnership's assets as
of the date of this Agreement and their adjusted tax basis as of such date shall
be allocated to the Partners in proportion to their Ownership Interests. The FIT
Capital Accounts of the Partners will be restated pursuant to Regulations
Section 1.704-1(b)(2)(f) in connection with a termination of the Partnership
under code Section 708(b)(1)(B).
(ii) CURATIVE ALLOCATIONS. The allocations set
forth in Section 16.4(b) (the "Regulatory Allocations") are intended to comply
with certain requirements of Regulations Section 1.704-1(b). Notwithstanding any
other provision of this Article 16 (other than the Regulatory Allocations), the
Regulatory Allocations shall be taken into account in allocating other Profits,
Losses and items of income, gains, loss deduction among the Partners so that, to
the extent possible, the net amount of such allocations of other Profits,
Losses, and
- 33 -
other items and the Regulatory Allocations to the Partners shall be equal to the
net amount that would have been allocated to them if the Regulatory Allocations
had not occurred. Allocations made pursuant to this Section 16.4(c)(ii) are
hereby authorized by the Partnership Committee and shall be for the purpose of
minimizing the economic distortions that might otherwise result from the
application of the Regulatory Allocations.
(iii) DEDUCTION OR LOSS ATTRIBUTABLE TO FIT CAPITAL
CONTRIBUTIONS. Except as required by the Regulatory Allocations, all items of
deduction or loss attributable to a Partner's FIT Capital Contribution to the
Partnership shall be allocated to the contributing Partner in accordance with
the Partner's Ownership Interest.
16.4(d) OTHER ALLOCATION RULES.
(i) Upon liquidation of the Partnership (or any
Partner's Ownership Interest) liquidating distributions shall be made in all
cases in accordance with the positive FIT Capital Account balances of the
Partners, as determined after taking into account all capital account
adjustments for the Partnership taxable year during which the liquidation
occurs, consistent with the rules set forth in Regulations Section 1.704l(b)(2).
(ii) The provisions of this Article 16 are intended
to comply with Code Section 704 and the Regulations thereunder.
(iii) For purposes of determining the profits,
losses, or any other items allocable to any period, profits, losses, and any
such other items shall be determined on a daily, monthly, or other basis, as
determined by the Partnership Committee using any permissible methods under Code
Section 706 and the Regulations thereunder.
(iv) Except as otherwise provided in this
Agreement, all items of
- 34 -
Partnership income, gain, loss, deduction, and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share profits or losses, as the case may be, for the year.
(v) If any Ownership Interest is sold, assigned or
transferred during any accounting period, Profits, Losses, each item thereof and
all other items attributable to the transferred Ownership Interest for such
period shall be divided and allocated between the transferor and the transferee
by taking into account their varying interests during the period in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Partnership Committee. All distributions on or before the date of such
transfer shall be made to the transferor and all distributions thereafter shall
be made to the transferee.
(vi) For purposes of Regulations Section
1.7523(1)(3), the Partners agree that nonrecourse liabilities of the Partnership
in excess of the sum of (A) the amount of Partnership Minimum Gain, and (B) the
total amount of built-in gain (as described in Regulations Section
1.7523(a)(2)), shall be allocated among the Partners in accordance with their
respective ownership Interests.
17. TRANSFER OF OWNERSHIP INTERESTS
17.1 LIMITATION ON ASSIGNMENTS. No Partner shall assign its
Ownership Interest or its rights to share in the profits of the Partnership if
the fact of such assignment or any of the provisions in such assignment would
materially diminish the creditworthiness of the Partnership.
17.2 PERMITTED TRANSFERS. No Partner shall sell, assign,
transfer, encumber, or otherwise dispose of all or any portion of its Ownership
Interest in the Partnership unless it shall have obtained the written consent of
all other Partners or shall have complied with the provisions
- 35 -
of this Article 17. Subject to the foregoing, a Partner (herein the
"Transferring Partner") may dispose of all or any part of its Ownership Interest
in the Partnership provided that such proposed sale is not made as part of a
transaction involving the sale of any item other than such interest unless the
market value of such Ownership Interest can be separately identified and
demonstrated by complying with the following procedure:
(a) The Transferring Partner shall give written notice
(the "Disposition Notice") to each other Partner hereto (the "Remaining
Partners") not less than forty-five (45) days prior to the effective date of
such disposition, stating the interest to be sold and the price and terms of
sale and identifying the proposed transferee (herein the "Proposed Transferee").
Such notice, to be effective, shall be accompanied by an agreement executed by
the Transferring Partner and the Proposed Transferee (the "Purchase Agreement")
containing all the material terms and conditions of the proposed sale, which
agreement demonstrates that completion of the sale is contingent only upon (i)
the non-exercise of rights of first refusal under this Article 17, (ii) the
obtaining of any required government approvals and (iii) the satisfaction of a
standard due diligence review, including such items as title, environmental, and
certain other specifically itemized defects. The Remaining Partners shall then
have first options to purchase all such Ownership Interest on the same terms as
in the Purchase Agreement in the proportion which their Ownership Interest bears
to the Ownership Interests of all Remaining Partners, and those desiring to do
so shall exercise such options by giving written notice thereof to the
Transferring partner and all other Remaining Partners within thirty (30) days
after the notice described above is given. Any Ownership Interest as to which
such first options are not exercised shall be deemed re-offered to the Remaining
Partners who exercised their first options, and such Partners shall, for a
period of ten (10) days from the expiration of the thirty (30) day period, have
second
- 36 -
options to purchase the same (at the same price, on the same terms, and by
notice as stated above delivered within the ten (10) day period) in the
proportion that their Ownership Interest bears to the Ownership Interests of all
Partners exercising their first options or in such proportions as they may
mutually agree upon. Any Ownership Interest not elected to be purchased during
the ten (10) day period shall remain under option to those Remaining Partners
who have exercised both the first and second options, to be purchased
proportionately as stated above or in such other manner as such Remaining
Partners may mutually agree upon, but notice of election to purchase all of the
Ownership Interest originally offered must be given to the Transferring Partner
and the Remaining Partners within forty-five (45) days from the notice of offer
given by the Transferring Partner. If elections to purchase all of the offered
Ownership Interest have been made within the forty-five (45) day period, those
Partners electing to purchase shall be irrevocably obligated to promptly deposit
with the Secretary of the Partnership certified checks in favor of the
Transferring Partner for the purchase price of the Ownership Interest so
purchased who shall distribute the checks to the Transferring Partner upon
receipt of checks evidencing one hundred percent (100%) of the offered Ownership
Interest. If notices of elections to purchase less than all of the offered
Ownership Interest have been given at the expiration of the forty-five (45) day
period, the Transferring Partner may complete the sale of all of the offered
Ownership Interest to the Proposed Transferee, subject to the compliance with
Section 17.2(b), on the same terms as contained in the Purchase Agreement, at
any time within one hundred twenty (120) days thereafter. If the sale to the
Proposed Transferee is not completed within the one hundred twenty (120) day
period, all of the Ownership Interest originally offered shall again become
subject to the foregoing restrictions in this Section 17.2(a).
(b) At the time written notice is given to each Partner of
a proposed sale
- 37 -
in accordance with Section 17.2(a), the Transferring Partner shall include with
such notice information sufficient to demonstrate to the other Partners that the
Proposed Transferee has adequate financial capability to fulfill the obligations
of a Partner hereunder as set forth in Exhibit C, which such Proposed Transferee
will assume in the event of such transfer. The period of evaluation of the
Proposed Transferee shall run concurrently with the period of the first option
being offered pursuant to Section 17.2(a). Within thirty (30) days of the notice
of proposed sale, each of the other Partners shall deliver to all the other
Partners its reasonable and good faith opinion as to whether the adequate
financial capability of the Proposed Transferee has been demonstrated. If any
Partner fails to deliver such an opinion, it shall be deemed to have determined
that the adequate financial capability of the Proposed Transferee has been
demonstrated. During such thirty (30) day consideration period, any Partner may
request of the Transferring Partner, and the Transferring Partner shall provide,
such supplemental information concerning the Proposed Transferee as may be
reasonably necessary for the requesting Partner to make such evaluation.
(c) If the transfer of the offered Ownership Interest to
the Proposed Transferee is to be completed, after compliance with the conditions
set forth in Sections 17.2(a) and (b), the Transferring Partner shall have the
right to transfer to the Proposed Transferee the Ownership Interest in the
Partnership specified in the notice referred to above and upon such transfer
shall, subject to this Article 17, be relieved of all its obligations and
liabilities under this Agreement arising after (but not before) the effective
date of such transfer, but only to the extent that such obligations and
liabilities arise out of or are connected with the Ownership Interest so
transferred; provided that, if a Partner or Partners having an aggregate
ownership Interest in excess of forty percent (40%) give notice under the terms
of Section 17.2(b) that the Proposed
- 38 -
Transferee does not meet the requirements of Section 17.2(b), the Transferring
Partner shall be liable for all of the obligations and liabilities of its
Proposed Transferee under this Agreement, as hereafter amended (including any
liabilities for breach of this Agreement); provided, further, that, in such
event, the Transferring Partner shall be liable for the Proposed Transferee's
obligations and liabilities hereunder until such time as the Proposed Transferee
demonstrates to the Partnership Committee that it has adequate financial
capability to fulfill the obligations of a Partner and only to the extent that
such obligations and liabilities:
(1) arise out of, or are connected with, the
Ownership Interest transferred to such transferee by the Transferring Partner,
and
(2) arise under this Agreement as it exists on the
date of any such transfer and as it may thereafter be amended or supplemented,
but such amendments or supplements shall not in any material way increase or
adversely affect any of the obligations or liabilities hereunder of such
Transferring Partner as they exist on the date of such transfer or extend the
term of this Agreement past December 31, 2046. Any Transferring Partner who
retains liability hereunder shall be given copies of all notices (simultaneously
with its Proposed Transferee) concerning any obligations due and owing hereunder
from its Proposed Transferee. As a condition precedent to any person becoming a
Partner, such Proposed Transferee shall expressly assume the obligations of this
Agreement by executing and delivering one (or, at the request of the
Partnership, more) counterpart of this Agreement to each Partner and shall
execute such other documents as the other Partnership Committee may reasonably
request relating to assumption of the Transferring Partner's obligations and
liabilities concerning the Partnership.
(d) Notwithstanding any provision in this Section
17 to the contrary, in the event WTLPS elects to transfer all or any portion of
its Ownership Interest to a Proposed
- 39 -
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Transferee other than an Affiliate of WTLPS on or before August 15, 1997;
CPL-Sub shall have the right to purchase such interest from WTLPS at a price
equal to * [REDACTED] per percent of Ownership Interest in the Partnership. In
the event WTLPS elects to transfer all or any portion of its Ownership Interest
on or between August 16, 1997, and December 31, 1999; CPL- Sub shall have the
right but not the obligation to purchase such interest from WTLPS at a price
equal to the higher of (i) * [REDACTED] per percent of Ownership Interest in the
Partnership, plus WTLPS's share of Incremental Revenue Capital Contributions (as
hereinafter defined) proportionate to the percent of Ownership Interest being
tendered to CPL-Sub for any Incremental Revenue Capital Contributions made
subsequent to the date hereof, but only to the extent that the incremental cash
flow derived from said Incremental Revenue Capital Contributions has not
returned to WTLPS the full amount of such capital contribution, or (ii) the
dollar value of such Ownership Interests obtained by multiplying the number *
[REDACTED] the immediately preceding twelve (12) months EBITDA of the
Partnership commencing from the month immediately preceding the month in which
the Disposition Notice is made, less Actual Incremental Revenue Capital
Contribution EBITDA (as hereinafter defined) the result of which is multiplied
by the percentage Ownership Interest being tendered to CPL-Sub, and then adding
to this product WTLPS's share of Incremental Revenue Capital Contributions
proportionate to the percent of Ownership Interest being tendered to CPL-Sub
made within the twelve (12) months immediately preceding the month in which the
Disposition Notice is delivered. For the purpose of this Section 17.2(d), (i)
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization, and (ii) "Incremental Revenue Capital Contributions" shall mean
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capital contributions to the Partnership which are intended to ultimately fund
activities which add incremental earnings to the Partnership, but excluding any
contributions necessary to maintain the ongoing operations of the Partnership
Property. The determination as to whether a contribution is an Incremental
Revenue Capital Contribution shall be made by the Partnership Committee, the
determination of which will be included in the request for such contribution
that is sent to each Partner. Such request shall also include a projection of
incremental revenue to be derived from the activities funded by such capital
contribution, with a projected time schedule or other means to track actual
revenue derived from this contribution. "Actual Incremental Revenue Capital
Contribution EBITDA" shall mean actual EBITDA generated from Incremental Revenue
Capital Contributions made during the immediately preceding twelve (12) month
period. The rights granted in this Section 17.2 (d) must be exercised by CPL-Sub
by sending written notice (the "Election Notice") to WTLPS of its election to
purchase WTLPS's Ownership Interest within a period of thirty (30) days
following its receipt of the Disposition Notice from WTLPS. In the event CPL-Sub
fails to exercise its right to purchase WTLPS's interest by sending the Election
Notice within the required time period or fails to close on the acquisition of
such interest within ninety (90) days following WTLPS's receipt of the Election
Notice (if received by WTLPS within the required thirty (30) day period), WTLPS
shall have the right to transfer such interest at any price that it is able to
obtain as long as the transfer occurs within a period of eight (8) months
following the date of the Disposition Notice. In the event CPL-Sub elects to
exercise its rights to purchase as set forth in this Section 17.2(d), as
additional consideration for the purchase, CPL-Sub shall release WTLPS from its
obligation to reimburse CPL-Sub for the initial working capital as set forth in
Section 6.1, but only as to that portion of WTLPS's Ownership Interest that is
acquired by CPL-Sub. This provision shall bind
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any Transferee of WTLPS pursuant to Section 17.3, below, mutatis mutandis.
17.3 TRANSFERS TO AFFILIATES
17.3(a) GENERAL. Except as described in Section 17.3(b)
there shall be no restrictions on the disposition of all or any part of a
Partner's Ownership Interest in the Partnership to an Affiliate if such
Affiliate expressly assumes the obligations of this Agreement by executing and
delivering one (or at the request of the Partnership, more) counterpart of this
Agreement to each other Partner and shall execute such other documents as the
other Partners may reasonably request relating to the Transferring Partner's
obligations and liabilities concerning the Partnership.
17.3(b) RESTRICTIONS. Except as permitted by Section
17.3(c), no Partner or Related Company shall sell, assign, transfer, or
otherwise dispose of its controlling interest in its Related Company voluntarily
or by operation of law, except to a company wholly owned, directly or
indirectly, by such Partner or an Affiliate of the Partner, unless it shall have
obtained the written consent of all the other Partners or shall have complied
with the procedures set out below. Subject to the foregoing, any Partner
("Selling Partner") may sell its controlling interest in a Related Company
provided that such proposed sale is not made as a part of a transaction
involving the sale of any item other than such interest, unless the market value
of such controlling interest can be separately identified and demonstrated and
the Related Company has no assets other than its Ownership Interest in the
Partnership, by giving written notice to each other Partner ("Remaining
Partners") not less than forty-five (45) days prior to the effective date of
such disposition, stating the interest to be sold and the price and terms of
sale and identifying the proposed transferee (herein the "Proposed Transferee").
Such notice, to be effective, shall be accompanied by an agreement executed by
the Selling Partner and the Proposed Transferee
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(the "Purchase Agreement") containing all the terms and conditions of the
proposed sale, which agreement demonstrates that completion of the sale is
contingent only upon (i) the non-exercise of rights of first refusal under this
Section 17.3(b), (ii) the obtaining of any required government approvals and
(iii) the satisfaction of a standard due diligence review, including such items
as title, environmental, and certain other specifically itemized defects. The
Remaining Partners shall then have first options to purchase all such interests
on the same terms as in the Purchase Agreement in the proportion which their
then-existing Ownership Interest in the Partnership bears to the Ownership
Interest of all Remaining Partners and those desiring to do so shall exercise
such options by giving written notice thereof to the Selling Partner and all
other Remaining Partners within thirty (30) days after the notice described
above is given. Any interest as to which such first options are not exercised
shall be deemed re-offered to the Remaining Partners who exercised their first
options, and such Remaining Partners shall, for a period of ten (10) days from
the expiration of the thirty (30) day period, have second options to purchase
the same (at the same price, on the same terms, and by notice as stated above
delivered within the ten (10) day period) in the proportion which each Partner's
then-existing Ownership Interest in the Partnership bears to the ownership
Interests of all Partners exercising their first options or in such proportions
as they may mutually agree upon. Any interest not elected to be purchased during
the ten (10) day period shall remain under option to those Remaining Partners
who have exercised both the first and second options, to be purchased
proportionately as stated above or in such other manner as such Remaining
Partners may mutually agree upon, but notice of election to purchase all of the
interest originally offered must be given to the Selling Partner and the
Remaining Partners within forty-five (45) days from the notice of offer given by
the Selling Partner. If elections to purchase all of the offered interest have
been made within the
- 43 -
forty-five (45) day period, those Partners electing to purchase shall be
irrevocably obligated to execute agreements in the form of the Purchase
Agreement with the Selling Partner and promptly thereafter pay the purchase
price to the Selling Partner for their proportionate share of stock of the
Related Company. If notices of elections to purchase less than all of the
offered interest have been given at the expiration of the forty-five (45) day
period, the Selling Partner may complete the sale of all of the offered interest
to the Proposed Transferee on the same terms as contained in the Purchase
Agreement, at any time within one-hundred twenty (120) days thereafter. If the
sale to the Proposed Transferee is not completed within the one-hundred twenty
(120) day period, all of the interest originally offered shall again become
subject to the sale restrictions in this Section 17.3(b).
17.3(c) NON-APPLICATION OF SECTION 17.3(B) RESTRICTIONS.
The restrictions in Section 17.3(b), above, shall not apply to a transfer of an
interest in a Related Company if, at the time the transfer is consummated, any
one (or more) of the' following criteria is met:
(i) The proposed purchaser of the interest in the
Related Company is an Affiliate of the Selling Partner; or
(ii) The Related Company owns, in addition to its
ownership Interest in the Partnership, assets with a fair market value of at
least $50 million; or
(iii) The proposed purchaser of the interest in the
Related Company purchases from the Selling Partner or one or more Affiliates of
the Selling Partner, concurrently with its purchase of the Related Company,
other assets with a fair market value in excess of $50 million.
If a Selling Partner desires to make a transfer permitted
by this Section
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17.3(c), it shall send a notice of such transfer to each Remaining Partner at
least seven (7) days before the effective date of such transfer along with a
certificate signed by the President or Chief Financial Officer of the Selling
Partner certifying facts which affirmatively show that the transfer meets the
requirements of subparagraph "(i)", "(ii)" or "(iii)" above.
17.4 LIMITATION ON DISPOSITIONS TO AVOID TERMINATION.
Notwithstanding anything in this Agreement to the contrary, a Partner shall have
the right to effect a disposition of its Ownership Interest, with consent of the
other Partners, such consent not to be unreasonably withheld, to any Person or
entity that, so long as when aggregated with the total of all other dispositions
of ownership Interests within the preceding twelve (12) months, said disposition
does not result in the Partnership being considered to have terminated within
the meaning of Section 708(b)(1)(B) of the Code. Any Partner transferring all or
any portion of its Ownership Interest shall promptly notify the Tax Matters
Partner of such transfer.
17.5 RELATIVE LIABILITIES OF OLD AND NEW PARTNERS.
Partners shall be liable as to other Partners for
Partnership debts and obligations in proportion to their relative Ownership
Interests in the Partnership.
18. EXTENSIONS TO AND EXPANSION OF THE SYSTEM
18.1 EXTENSIONS TO THE SYSTEM. From time to time the Partnership
will consider extensions to the System for the purpose of connecting new sources
of LPG. The Partnership may fund such extensions if economically viable. Funding
for such projects will be approved by all Partners using the normal budgeting
processes as set forth in the Operating Agreement.
18.2 EXPANSIONS. From time to time the Partnership will consider
expansions
- 45 -
to the System for the purpose of increasing the capacity of the system or
portions thereof. The Partnership may fund such expansions if economically
viable. Funding for such projects will be approved by all Partners using the
normal budgeting processes as set forth in the Operating Agreement.
Any Partner may propose such expansions at any time with a
written request to the Partnership Committee. The expansion proposal shall
include a good faith presentation of the forecasted volumes which warrant the
expansion , an estimate of the construction costs and the estimated time to
complete the project. The Operator may be requested to provide assistance and
information needed for the preparation of the proposal. Additionally, the
Operator will be asked to coordinate the project once approved.
19. DEFAULT BY PARTNERS
19.1 FAILURE TO MAKE CONTRIBUTIONS. Capital contributions not
made when due shall bear interest at the lower of (i) two percent (2%) plus the
prime rate of interest charged by the Chase Manhattan Bank (N.A.) at the time
the contribution was due, or (ii) the maximum legal rate of interest. While any
Partner is in material default hereunder in any of its obligations to make
capital contributions, such Partner shall have:
(a) No right to vote as a Partner and its Member on the
Partnership Committee shall have no right to vote (and the requirements for
passage or approval of items and for quorums shall be modified as necessary),
(b) No right to receive any portion of any distributions
made by the Partnership, and
(c) A continuing duty to pay its share of all future
capital contributions
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called for by the Partnership pursuant to this Agreement.
19.2 EXPULSION OF PARTNERS. In the event any Partner commits a
material default of its obligations under this Agreement and fails to commence
reasonable steps to remedy the default within sixty (60) days after its receipt
of written notice specifying in reasonable detail the default and the reasonable
actions that must be taken to cure such default, which notice shall be prepared
and sent at the direction of the Partnership Committee, (which, for all
determinations under this Article 19, shall exclude the Ownership Interest of
the Partner in default) or becomes bankrupt or otherwise enters into a
proceeding for general relief from its creditors, the Partners not in default
may, in addition to any other remedy they may have by law or in equity, by vote
of the Partnership Committee as provided in Section 8.5(n), expel the defaulting
Partner effective as of any future date they specify.
19.3 TREATMENT OF BOOK CAPITAL ACCOUNT OF EXPELLED PARTNER. Any
Partner so expelled shall, within a reasonable period determined by the
Partnership which may include installment payments over five (5) years after the
date the expulsion becomes effective, be paid the positive balance, if any, in
its Book Capital Account after: (a) closing out its profits and losses (as
determined under GAAP) for Book Capital Account purposes; and (b) further
subtracting from its Book Capital Account the expelled Partner's or its
Affiliate's share of any then existing liabilities of the Partnership, whether
or not then due and owing, and any actual damages suffered by the Partnership
and other Partners by reason of the default. If the balance in the expelled
Partner's Book Capital Account is positive after the closing out of its profits
and losses and the subtraction of its (or its Affiliate's) share of then due and
owing liabilities of the Partnership, as well as the payment of any damages
(which subtracted items are herein referred to as "Current Liabilities"), but
such balance is less than the total of such former Partner's (or
- 47 -
its Affiliate's) share of any other potential existing Partnership liabilities
which are not then due and owing (herein "Non-Current Liabilities"), the
Partnership shall retain such part of the expelled Partner's Book Capital
Account as is equal to the amount of the expelled Partner's share of such
Non-Current Liabilities, until all such liabilities are paid in full. Such
retained moneys may be invested and reinvested as the Partnership deems
appropriate and shall constitute a security interest in the possession of the
Partnership to secure the payment of such Non- Current Liabilities of the
expelled Partner, and such expelled Partner agrees that such security interest
in its Book Capital Account shall pass to the Partnership and the Partnership
shall take possession thereof for the purpose of obtaining perfection of such
security interest on the earlier of the date of its expulsion or the date the
expelled Partner enters voluntary bankruptcy proceedings of any type or becomes
bankrupt. The Partnership shall apply all amounts retained from the expelled
Partner's Book Capital Account (including any interest earned thereon) to the
payment of such Non-Current Liabilities to the extent that such payments would
have constituted a proper charge against the Book Capital Account of such
expelled Partner had it not been expelled. At the time that all Non-Current
Liabilities of the Partner shall have been paid in full, the Partnership shall
refund to the expelled Partner any funds remaining on deposit with the
Partnership from such Partner's Book Capital Account.
19.4 OTHER OBLIGATIONS OF EXPELLED PARTNER. From the date of its
expulsion, the expelled Partner shall have no Ownership Interest in the
Partnership and shall not share in its profits and losses. Such expelled Partner
shall, however, be and remain directly liable for payment of (in addition to and
after application of any moneys retained by the Partnership from its Book
Capital Account) its Partnership share of any Current Liabilities and
Non-Current Liabilities that existed as of the date of such Partner's expulsion
until such liabilities are paid
- 48 -
in full, and shall remain fully responsible for any obligations it may have
incurred pursuant to Article 15.
20. DISSOLUTION AND WINDING UP OF THE PARTNERSHIP
20.1 DISSOLUTION. The dissolution of the Partnership shall be
caused only by the following events:
(a) The written consent of all Partners to dissolve the
Partnership.
(b) The withdrawal (other than pursuant to a sale or other
disposition by a Partner of its Ownership Interest as authorized
herein), expulsion, dissolution or bankruptcy of any Partner or
bankruptcy of the Partnership.
(c) The sale by the Partnership of all or substantially all of
its assets.
(d) By any event which makes it unlawful for the business of the
Partnership to be carried on or for the Partners to carry it on in
partnership.
(e) By expiration of the Partnership term as provided in Article
4.
(f) By court decree of dissolution as provided by the Act.
Each Partner covenants and agrees that it will not cause a dissolution
of the Partnership, directly or indirectly by (i) bankruptcy, (ii) being
expelled pursuant to Section 19.2 of this Agreement, (iii) withdrawal from the
Partnership, (iv) in the case of a partnership or a corporation, the taking of
any voluntary action or inaction to dissolve itself, or (v) breaching any other
material provision of this Agreement. It is understood that should any Partner
or Partners dissolve the Partnership in contravention of this provision, that
Partner or Partners shall be liable to the other Partners for damages for
wrongful dissolution. Such Partner also irrevocably waives any right it may have
under Texas law to be paid the value of its Ownership Interest.
- 49 -
<PAGE>
For the purposes of this Section 20.1, a bankruptcy occurs whenever (a)
an entity makes an assignment for the benefit of all or substantially all of its
creditors or applies for the appointment of a trustee, liquidator or receiver of
any substantial part of its assets, or commences any proceeding relating to
itself under any bankruptcy, reorganization or similar laws (including the
Federal Bankruptcy Code of 1978, Title 11 of the United States Code and any
state insolvency act), or any such application is filed or proceeding is
commenced against such entity and such entity indicates its consent thereto; or
(b) an order, judgment or decree is entered by any court of competent
jurisdiction, appointing a trustee, liquidator or receiver for an entity or for
all or a substantial part of such entity's assets and such order, judgment or
decree shall continue unstayed and in effect for any period of one hundred
eighty (180) consecutive days.
20.2 CONTINUANCE OF BUSINESS AFTER DISSOLUTION. In the event the
Partnership is ever dissolved as a result of the withdrawal, bankruptcy,
dissolution, legal incompetency, expulsion or a default or other act in
contravention of this Agreement by one or more (but less than all) of the
Partners (hereinafter referred to as the "Dissolving Partner" or "Dissolving
Partners"), then the remaining Partner or Partners agree to continue the
business of the Partnership and to form a new Partnership under the terms of
this Agreement for the purpose of continuing the business. The resulting new
Partnership will be owned by all Partners other than any Dissolving Partner in
the same relative proportion as their previous Ownership Interests. However,
such Partners other than any Dissolving Partner may, by unanimous agreement,
accept a new Partner or Partners to take the place of the Dissolving Partner or
Dissolving Partners.
20.3 LIQUIDATION OF THE PARTNERSHIP. Upon the dissolution of the
Partnership
- 50 -
under circumstances in which the business is not continued as provided in
Section 20.2, no further business shall be conducted by the Partnership, except
for the taking of such action as shall be necessary for the winding up of its
business and affairs, the liquidation of its assets and/or the distribution of
its assets to the Partners. Unless otherwise decided by the Partnership
Committee, the Operator shall be the liquidating trustee for the Partnership.
The winding up and liquidation of the Partnership shall consist of the sale of
the properties of the Partnership, at the conclusion of which the Partnership
shall terminate.
20.4 WINDING UP OF THE PARTNERSHIP. Upon the dissolution of the
Partnership, the proceeds from the liquidation of the assets of the Partnership
and collection of the receivables of the Partnership together with assets
distributed in kind, to the extent sufficient, shall be applied and distributed
in the following order of priority:
(a) To the payment and discharge of all of the
Partnership's debts and liabilities and the expenses of liquidation;
(b) To the creation of any reserves that the liquidating
trustee and Operator deem necessary for any contingent or unforeseen liabilities
or obligations of the Partnership;
(c) To the payment and discharge of all of the
Partnership's debts and liabilities owing to Partners, but if the amount
available for payment is insufficient, then pro rata in accordance with the
amounts of these debts and liabilities; and
(d) To the Partners with positive F.I.T. Capital Accounts
in accordance with the ratio of their F.I.T. Capital Accounts.
21. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES.
Any dispute, controversy or claim arising out of or relating to this
Partnership
- 51 -
Agreement, or the breach of performance hereof, including but not limited to,
any disputes concerning the interpretation of the terms and provisions hereof,
but excluding any matter which is within the exclusive jurisdiction of, and is
decided by, a regulatory agency having jurisdiction over the Partnership with
respect to such matter, shall be resolved through the use of the following
procedures or any other procedures mutually agreed to in writing by each of the
Partners:
(a) The parties will initially attempt in good faith to resolve any
disputes, controversy or claim arising out of or relating to this Agreement.
(b) Should the parties directly involved in any dispute, controversy or
claim be unable to resolve same within a reasonable period of time, such
dispute, controversy or claim shall be submitted to the Partnership Committee
with such explanation or documentation as the Parties deem appropriate to aid
the Partnership Committee in their consideration of the issues presented. The
date the matter is first submitted to the Partnership Committee shall be
referred to as the "Submission Date." The Partnership Committee representatives
shall attempt in good faith, through the process of discussion and negotiation,
to resolve any dispute, controversy, or claim presented to it within forty-five
(45) days after the Submission Date.
(c) If the Partnership Committee representatives cannot so resolve any
dispute, controversy, or claim submitted to it within forty-five (45) days after
the Submission Date, the Parties shall attempt in good faith to settle the
matter by submitting the dispute, controversy or claim to mediation within sixty
(60) days after the Submission Date using any mediator upon which they mutually
agree. If the Parties are unable to mutually agree upon a mediator within
seventy-five (75) days after the Submission Date, the case shall be referred for
mediation to the office of Judicial Arbitration and Mediation Services, Inc.
("JAMS") in Houston, Texas. The
- 52 -
cost of the mediator will be split equally between the Parties to the
controversy unless they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) days of the initiation of such procedure,
or if either Partner will not participate in such mediation, either Partner may
request that the matter be resolved through arbitration by submitting a written
notice (the "Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration Act, 9 U.S.C.
ss. 1 et seq., and will not be governed by the arbitration acts, statutes or
rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing Partner's arbitrator
and shall contain a statement of the issue(s) presented for arbitration. Within
fifteen (15) Days of receipt of an Arbitration Notice, the other Partner shall
name its arbitrator by written notice to the other and may designate any
additional issue(s) for arbitration. The two named arbitrators shall elect the
third arbitrator within fifteen (15) Days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree on the selection
of the third arbitrator, either Partner shall be entitled to request the Senior
Judge of the United States District Court for the Southern District of Texas to
select the third arbitrator. All arbitrators shall be qualified by education or
experience within the regulated oil or liquid petroleum gas pipeline industry to
decide the issues presented for arbitration. No arbitrator shall be a current or
former director, officer or employee of either Partner, or its affiliates; an
attorney (or member of a law firm) who has rendered legal services to any
Partner, or its affiliates, within the preceding three years; or an owner of any
of the common stock of either Partner or its Affiliates.
(f) The three arbitrators shall commence the arbitration proceedings
within twenty-five (25) Days following the appointment of the third arbitrator.
The arbitration proceedings shall
- 53 -
be held in Houston, Texas at a mutually acceptable site. The arbitrators shall
have the authority to establish rules and procedures governing the arbitration
proceedings. Each Partner shall have the opportunity to present its evidence at
the hearing. The arbitrators may call for the submission of pre-hearing
statements of position and legal authority, but no post-hearing briefs shall be
submitted. After the presentation of the evidence has concluded, each Partner
shall submit to the arbitration panel a final offer of its proposed resolution
of the dispute. If the issue under consideration is limited to a determination
of an amount of money owed by one Partner to the other, the arbitration panel
shall be charged to select from the two proposals the one which the panel finds
to be the most reasonable and consistent with the terms and conditions of this
Agreement, and the arbitration panel shall not average the Parties' proposals or
otherwise craft its own remedy. The arbitration panel shall not have the
authority to award punitive, exemplary or consequential damages. The
arbitrators' decision must be rendered within thirty (30) Days following the
conclusion of the hearing or submission of the evidence, but no later than 90
Days after appointment of the third arbitrator.
(g) The decision of the arbitrators, or a majority of them, shall be in
writing and shall be final and binding upon the Parties as to the issue(s)
submitted. The cost of the hearing shall be shared equally by the Parties, and
each Partner shall be responsible for its own expenses and those of its counsel
or other representatives. Each Partner hereby irrevocably waives, to the fullest
extent permitted by law, any objection it may have to the arbitrability of any
such disputes, controversies or claims and further agrees that a final
determination in any such arbitration proceeding shall be conclusive and binding
upon each Partner. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The prevailing Partner shall
be entitled to recover reasonable attorneys' fees and court costs in any
- 54 -
court proceeding relating to the enforcement or collection of any award or
judgment rendered by the arbitration panel under this Agreement.
(h) All deadlines specified herein may be extended by mutual agreement
of the Parties. The procedures specified herein shall be the sole and exclusive
procedures for the resolution of disputes between the Parties arising out of or
relating to this Agreement; provided, however, that a Partner may seek a
preliminary injunction or other preliminary judicial relief if in its judgment
such action is necessary to avoid irreparable damage. Despite such action, the
Parties will continue in good faith in the procedures specified herein. All
applicable statutes of limitation, including without limitation, contractual
limitation periods provided for in this Agreement, shall be tolled while the
procedures specified in this Section are pending. The Parties will take all
actions, if any, necessary to effectuate the tolling of any applicable statutes
of limitation.
22. FURTHER ASSURANCE
Each of the Partners agrees to execute and deliver all such other
additional instruments and documents and to do such other acts and things as may
be necessary more fully to effectuate this Agreement and the Partnership created
hereby and to carry on the business of the Partnership in accordance with this
Agreement.
23. WAIVER
No waiver by any Partner of the performance of any provision,
condition or requirement herein shall be deemed to be a waiver of, or in any
manner release the other Partners from, performance of any other provision,
condition or requirement herein; nor be deemed to be a waiver of, or in any
manner release the other Partners from future performance
- 55 -
of the same provision, condition, or requirement; nor shall any delay or
omission of any Partner to exercise any right hereunder in any manner impair the
exercise of any such right or any like right accruing to it thereafter.
24. INDEPENDENT CONDUCT
Each of the Partners and their respective Affiliates reserve and
retain the right to engage in all businesses and activities of any kind
whatsoever (regardless of whether the same may be in competition with the
business and activities of the Partnership), and to acquire and own all assets
however acquired and wherever situated, and to receive compensation or profit
therefrom, for their own respective accounts and without in any manner being
obligated to disclose such business and activities or assets or compensation or
profit to the other Partners or to the Partnership.
25. APPLICABLE LAW
THIS AGREEMENT, OTHER DOCUMENTS EXECUTED AND DELIVERED PURSUANT
HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES WITH RESPECT TO THIS
AGREEMENT, SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE
OF TEXAS WITHOUT REGARD TO RULES CONCERNING CONFLICTS OF LAW.
26. SUBJECT TO APPLICABLE LAW
This Agreement and the obligations of the Partners hereunder are
subject to all applicable laws, rules, court decisions, orders and regulations
of governmental authorities having
- 56 -
jurisdiction.
27. SEVERABILITY
Any provision of this Agreement prohibited by applicable law
shall be invalid to the extent of such prohibition unless it is determined by
the Partnership Committee, in accordance with Section 8.6(i), that such
prohibition invalidates the purposes or intent of this Agreement.
28. HEADINGS
The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
29. BINDING EFFECT
This Agreement and the covenants, obligations, undertakings,
rights and benefits shall be binding on and inure to the benefit of the
respective successors and assigns of the Partners, except to the extent of any
contrary provision in this Agreement.
30. BENEFITS OF AGREEMENT RESTRICTED TO PARTIES
Nothing in this Agreement, expressed or implied, shall give or be
construed to give any Person, other than the parties hereto and their successors
and assigns, any legal or equitable right, remedy or claim under or in respect
to this Agreement or under any covenant, conditions or provisions contained
herein; and all such covenants, conditions and provisions shall be for the sole
benefit of the parties hereto.
- 57 -
31. COUNTERPARTS
The Partners may execute the Agreement in two or more
counterparts, which shall, in the aggregate, be signed by all of the Partners;
each counterpart shall be deemed an original instrument as against any Partner
who has signed it.
32. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the
Partners concerning the subject matter hereof and the same supersedes any prior
understanding or written or oral agreements relative to said matter.
33. AMENDMENT
This Agreement may be amended only by agreement in writing of all
the Partners.
34. NOTICES
All notices required or permitted under this Agreement to be
given to any Partner or the Partnership shall be in writing and shall be deemed
given when personally delivered to the individual or individuals designated in
writing by that Partner or, for notices to the Partnership, to the Secretary of
the Partnership Committee; when sent by telex or facsimile; or five (5) days
after being mailed, postage prepaid, certified or registered, return receipt
requested and addressed as specified in writing by that Partner or, for notices
to the Partnership, to the Secretary of the Partnership Committee; provided,
that, in the case of notices which are mailed and which require the party or
parties being given notice to take action within a specified time period, the
party giving notice shall make a good faith effort to contact the party or
parties being
- 58 -
given notice by telephone during the five (5) day period following mailing to
advise them of the mailing of the notice. The persons initially designated by
each Partner for receipt of notice and the address for such notice is shown on
the execution page of this Agreement next to each Partner's signature. Such
designated person or address may be changed by a Partner by proper notice to all
other Partners and the Secretary of the Partnership Committee.
ACCEPTED and AGREED to on the date above written.
WTLPS, Inc.
WTLPS, Inc.'s Address for Notices:
By:
Title: President
HOUSTON, TX
FAX NUMBER (713)
PHONE NUMBER (713)
Chevron Pipe Line Company Chevron Pipe Line Company's
Address for Notices
By:
J. W. Martinelli
Title: President CHEVRON PIPE LINE COMPANY
FAX NUMBER
PHONE NUMBER
- 59 -
EXHIBIT A
OWNERSHIP INTERESTS
PARTNER OWNERSHIP INTEREST
WTLPS, Inc. 49%
Chevron Pipe Line Company-Subsidiary 51%
- 60 -
EXHIBIT C
FINANCIAL RESPONSIBILITY REQUIREMENTS
Each potential new Partner in the West Texas LPG Pipeline System Partnership
must demonstrate adequate financial responsibility itself or through a Credit
Worthy Affiliate. Such credit worthiness may be demonstrated by satisfying one
of the four methods of meeting financial responsibility described below.
METHOD I
The Partner or its Affiliate has senior unsecured debt outstanding which
is rated by:
(a) Moody's Investors Services Baa3 or better, and
(b) Standard and Poors BBB or better
METHOD II
If a Partner or its Affiliate fails to meet the above test, then the
following criteria will be applied to the Partner's or its Affiliate's financial
statements:
1. Debt/Capital less than or equal to 55%; or
2. Debt/EBITDA less than or equal to 3.5; or
3. Net worth greater than or equal to $250 million; or
4. Current assets/current liabilities greater than or equal to 1.0.
If the Partner or Affiliate meets any one of the above criteria, then such
Partner or Affiliate shall be deemed to have adequate financial capability to
fulfill the obligations of a Partner.
- 61 -
EXHIBIT D
ENABLING AGREEMENT
This Agreement, dated as of _________, 199_ , among WTLPS, Inc., a Delaware
corporation; Chevron Pipe Line Company, a Delaware corporation (herein
collectively the "Owners") and ___________, a______________ corporation ("C"),
is made with reference to the following facts and circumstances.
_________________, a __________________corporation ("X"), a wholly
owned subsidiary of C will become an Partner in the West Texas LPG Pipeline
Partnership (the "Partnership") by executing the West Texas LPG Pipeline System
Partnership Agreement (the "Partnership Agreement").
The parties desire to set forth the commitment of X to the Owners.
NOW THEREFORE, the parties agree as follows:
1. C will cause and enable X to comply at all times with the
terms and conditions of the Partnership Agreement, as it may be amended from
time to time. In the event X breaches the Partnership Agreement, C shall
indemnify and hold harmless the Owners for all costs, losses, damages and
expenses caused by such breach.
2. This Enabling Agreement is executed solely for the benefit of
the Owners and the Partnership and no other party shall have any rights
hereunder.
3. This Enabling Agreement shall remain in effect so long as the
Partnership Agreement is in effect.
4. This Enabling Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of such
counterparts shall together constitute but one document.
EXECUTED as of the date first above stated.
WTLPS, Inc.Chevron Pipe Line Company
By: ______________________ By: __________________
Title: ______________________ Title: ________________
- 62 -
"C"
By: __________________
Title: ________________
- 63 -
EXHIBIT E
Tax Matters
1. Tax RETURNS, PROCEEDINGS AND ELECTIONS. Tax returns, proceedings, and
elections shall be governed by the provisions of this Exhibit C as it may be
amended from time to time by a vote of the Partnership Committee.
(a) Chevron Pipeline Company is designated the tax matters
Partner ("TMP") as defined in Section 6231(a)(7) of the Code. The designation of
TMP shall be effective only for operations conducted by the Partners pursuant to
this Agreement.
(b) The TMP shall cause to be prepared all necessary federal,
state, and local Partnership income, excise, and property tax returns and,
except for excise taxes, furnish a copy of the proposed return to the Partners
for their review not later than one month prior to the due date, including
extensions, for filing such returns. The TMP shall timely file such returns and
shall provide the Partners with schedules which are consistent with the
treatment of all items on those returns. The TMP agrees to use its best efforts
in the preparation and filing of such tax returns but, in doing so, shall incur
no liability to any Partner with respect to such returns or any elections
relating thereto.
(c) The Partners shall furnish the TMP with such information as
it may reasonably request to aid in the preparation of the Partnership returns
and which will permit it to provide the Internal Revenue Service with sufficient
information so that proper notice can be mailed-to such Partners as provided in
Section 6223 of the Code.
(d) To the extent and in the manner provided by treasury
regulations, the TMP shall keep each Partner informed of all administrative and
judicial proceedings for the adjustment of Partnership items (as defined in
Section 6231(a)(3) of the Code) at the Partnership level.
(e) If an administrative proceeding contemplated under Section
6223 of the Code has begun, the Partners shall notify the TMP of their treatment
of any Partnership Item on their federal income tax return in a manner which is
or may be inconsistent with the treatment of that item on the Partnership
return.
(f) The TMP shall not enter into any extension of the period of
limitations as provided under Section 6229 of the Code without the prior written
consent of the Partners.
(g) Any Partner who enters into a settlement agreement with the
Secretary of the Treasury with respect to Partnership Items shall notify the
other Partners of such settlement agreement.
(h) The TMP shall not bind other Partners to a settlement
agreement without getting the concurrence, in writing, of the Partners which
will be bound by such agreement.
(i) The TMP shall notify all Partners of any intention to file a
petition with a court for a readjustment of any Partnership Items. Such notice
shall be given within a reasonable time so that the Partners may participate in
choosing the forum for the filing of any petition. This provision shall not
apply to any Partner who does not have an interest in the outcome. Whether a
Partner has an interest in the outcome will be determined using the standard in
Section 6226(d) of the Code. Further, the TMP or other Partner who had brought
the action under Section 6226 of the Code, shall provide other Partners with
notice of any intention to seek review of a determination by any court under
that Section.
- 64 -
(j) No Partner may file a request for an administrative
adjustment of Partnership Items for any Partnership taxable year pursuant to
Section 6227 of the Code without first notifying all other Partners. If the
other Partners agree with the requested adjustment, the TMP shall file the
request for administrative adjustment on behalf of the Partnership.
(k) If any part of an administrative adjustment request filed by
a Partner is not allowed by the Internal Revenue Service, the Partner filing
such request shall seek the concurrence of other Partners with regard to the
filing of a petition with a court and with regard to seeking review of the
determination by any court in the same manner as provided in Section l(i) of
this Exhibit.
(l) The TMP and other Partners shall use their best efforts to
comply with the responsibilities as outlined here and in Sections 6222 through
6233 of the Code but shall incur no liability to any other Partner for failure
to fulfill such responsibilities.
(m) The provisions of this Exhibit C shall survive the
termination of the Partnership or the termination of any Partner's interest in
the Partnership and shall remain binding on the Partners for a period of time
necessary to resolve with the Internal Revenue Service of the Department of the
Treasury any and all matters regarding the federal income taxation of the Tax
Partnership and any applicable state income tax matters.
2. ELECTIONS. The parties agree that the TMP is directed to make the
following elections on behalf of the Partnership in the appropriate returns of
the Partnership prepared pursuant to Section 1 above:
(a) To adopt the accrual method of accounting;
(b) To compute the allowance for depreciation or cost recovery
using the shortest permissible life and most rapid recovery method permitted
under the Code;
(c) To elect the Calendar Year as the Fiscal Year of the
Partnership;
(d) To elect in a timely manner pursuant to Section 266 of the
Code and the Treasury Regulations thereunder to charge to the capital account
with respect to the property acquired or constructed by the Partners under this
Agreement all taxes and carrying charges including interest on indebtedness,
which may be capitalized thereunder;
(e) To elect to amortize all organization costs of the
Partnership under Section 709 of the Code; and
(f) To make such other elections as the Partnership Committee may
direct.
3. SECTION 754 ELECTION. Upon the transfer of an interest in the
Partnership, the Partnership shall make an election pursuant to Section 754 of
the Code to adjust the basis of
Partnership Property.
- 65 -
EXHIBIT 10.66
PAGES WHERE CONFIDENTIAL
TREATMENT HAS BEEN GRANTED
ARE STAMPED 'CONFIDENTIAL
TREATMENT REQUESTED. THE
REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE
COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST,' THE APPROPRIATE
SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND IN THE
MARGIN WITH A STAR (*)."
OPERATING AGREEMENT
BETWEEN
WEST TEXAS LPG PIPELINE PARTNERSHIP
AND
CHEVRON PIPE LINE COMPANY
THIS AGREEMENT is made and entered into as of __________ , 1996 by and between
West Texas LPG Pipeline Partnership, a Texas general partnership (hereinafter
referred to as "Company"), and Chevron Pipe Line Company, a Delaware Corporation
(hereinafter referred to as "Operator").
WHEREAS, Company is the owner of certain LPG pipeline facilities ("Facilities")
more particularly identified in Attachment II and Attachment III; and
WHEREAS, Company does not have a working staff to operate the Facilities and
desires to engage Operator in these respects;
NOW, THEREFORE, in the consideration of the premises and mutual covenants
contained in this Agreement, Company and Operator agree as follows:
Section 1. DEFINITIONS
As used in this Agreement, the following words and terms shall have the meanings
set forth:
(a) "Accounting Procedure" means the accounting procedure set forth in
Attachment I, hereof.
(b) "AFE" means an approval for expenditure in the form approved by Company.
1
(c) "Affiliate" means with respect to any Person, (i) any other Person which
beneficially owns, directly or indirectly, 50% or more of such Person's stock or
50% or more of the ownership interest entitled to vote in such Person or (ii)
any other Person as to which 50% or more of the voting stock or 50% or more of
the ownership interest entitled to vote therein, is beneficially owned, directly
or indirectly, either by such Person or by an Affiliate of such Person as
defined in the preceding clause (i).
(d) "Agreement" means this Operating Agreement together with all Attachments.
(e) "Capital Commitment Budget" means the capital budget as further described in
Section 5A. of this Agreement.
(f) "Capital Expenditure Forecast" means the capital expenditure forecast as
further described in Section 5B. of this Agreement.
(g) "Cash Operating Costs" means amounts payable to Operator under Section 3 of
this Agreement.
(h) "Confidential Information" means any information relating to the identity of
shippers using the Facilities, the nature, kind, quantity, destination or
consignee or routing of Products using the Facilities, or any other information
which is in writing and has been labeled by Company as confidential.
Confidential Information shall not include any information which is acquired by
Operator in the course of its activities outside of the scope of this Agreement
or which becomes part of the public knowledge or literature without breach of
this Agreement.
(i) "Costs" means all costs charged to the Company as provided in the Accounting
Procedure.
(j) "Expenditure Authorities" means the expenditure authorities described in
Section 6. of this Agreement.
(k) "Facilities" means the facilities identified in Attachment II and Attachment
III hereto.
(l) "Force Majeure" means an occurrence not within the control of the party and
which by the exercise of reasonable efforts such party is unable to prevent or
overcome, and shall include, but not be limited to, acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, hurricanes, storm warnings requiring evacuation
of facilities, arrests or restraints of the government, either federal or state,
civil or military, civil disturbances, explosions, sabotage, breakage or
accident to equipment, machinery or lines of pipe, extreme heat or cold weather,
freezing of machinery, equipment or lines of pipe, electric power shortages,
inability of any Party to obtain necessary materials and supplies, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), temporary cleaning or testing of facilities, temporary failure of
supply, or any other causes, whether of the kind herein enumerated or otherwise,
which were not reasonably foreseeable on the effective date of this
2
Agreement, and which are not within the control of the Party claiming suspension
and which such Party is unable to overcome by the exercise of due diligence. The
term "Force Majeure" shall also include those instances in which either Party
hereto is required to furnish materials and supplies for the purpose of
constructing and maintaining facilities or is required to secure permits or
permission from any governmental agency to enable such Party to acquire, or the
delays on the part of such Party in acquiring, at reasonable cost and after the
exercise of due diligence, such materials and supplies, permits and permissions.
It is understood andagreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty, and that the
above requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of opposing parties when such course is inadvisable in the
discretion of the Party having difficulty. The term "Force Majeure" shall also
include any such event occurring with respect to the facilities or services of
either Operator's or Company's third-party suppliers or customers delivering or
receiving any product, fuel, feedstock, or other substance necessary to the
continuous operation of either Party's plants or facilities or performance of
such Party's obligations, and shall also include curtailment or interruption of
deliveries or service by such third-party suppliers or customers as a result of
(i) another event of Force Majeure or (ii) a breach by such third-party under
the applicable agreement(s).
(m) "GAAP" means generally accepted accounting principles.
(n) "Insurance Manual Rates" means the published insurance industry recognized
computations of standard accepted insurance rates.
(o) "LPG" means liquified petroleum gas or petroleum products, namely, natural
gasoline, ethane, propane, isobutane, normal butane, and pentanes or mixtures
thereof, recovered from gasoline recovery plants and gas recycling plants.
(p) "Major Maintenance Budget" means the major maintenance budget as further
described in Section 5C. of this Agreement.
(q) "Operating Expense Budget" means the operating expense forecast as further
described in Section 5D. of this Agreement.
(r) "Operator" means Chevron Pipe Line Company acting in its capacity as
operator of Facilities hereunder.
(s) "Parties" or "Party" means the Operator and/or Company.
(t) "Partnership Committee" means the managing unit of Company.
(u) "Person" means any individual, partnership, association, trust, corporation
or other entity.
(v) "Products" means, without restriction, natural gas liquids, LPG or products
derived from LPG.
3
(w) "Year" means a calendar year.
Section 2. OPERATIONS
Operator, on behalf of Company, agrees to operate, maintain and repair the
Facilities, and any modifications or improvements thereof, and to perform any
other duties as may be requested by Company in a good and workmanlike manner
and, in the absence of specific instructions from Company, shall have the right
and duty to act in accordance with its best judgment as a reasonable and prudent
operator would do under the same or similar circumstances. Company does hereby
authorize and empower Operator, on behalf of Company, to do and perform or cause
to be done and performed by others any and all acts and things which Operator
shall, in the exercise of its discretion and best judgment, deem necessary or
advisable for the operation, maintenance, and repair of such Facilities in
accordance with the Expenditure Authorities as set forth in Section 6, to the
end that the Facilities may be used in a safe, efficient and economical manner
for receipt, delivery, measurement and transportation of Products. Without
limiting the foregoing, subject to the limits otherwise set forth in this
Agreement, Operator shall specifically perform the following acts on behalf of
Company:
A. perform such mechanical activities as may be required to
receive, deliver, transport and/or otherwise handle Products
tendered to and accepted into the Facilities.
B. submit to Company recommended budgets and other information as
set forth in Section 5. hereof.
C. purchase or cause to be purchased for and in the name of
Company materials, supplies and services necessary for the
operation of the Facilities in accordance with the budgets
approved by Company (or as otherwise approved under this
Agreement);
D. maintain surveillance of the Facilities, conduct assessment,
and periodically inspect the Facilities for damage or other
conditions which could affect the safe, efficient and
economical operation of the Facilities, perform such repairs
to the Facilities as requested by Company or as may from time
to time be required and prepare appropriate reports that
document such activities;
E. act as representative for Company in contacts with government
agencies relating to the physical operation, maintenance and
repair of the Facilities, where required by audits, laws,
rules, regulations, orders, permit conditions, or right-of-way
agreements;
F. prepare, maintain and implement operating manuals, monitoring
programs, contingency plans and training programs satisfying
all applicable laws, rules, regulations, orders and any other
requirements of governmental authorities
4
together with such other operating procedures or manuals as
Company may require;
G. prepare custody transfer tickets, and other appropriate
accounting materials to document custody transfer and receipt
of Products, and sample and measure Products received and
delivered to verify quality and quantity as operations may
require;
H. provide Product shipments scheduling and 24-hour continuous
monitoring and control of pipeline flows for safe and
efficient operations;
I. file, store and maintain in a manner such that they shall be
available for periodic inspection by Company all as-built
drawings or descriptions of the Facilities, construction and
maintenance records, inspection and testing records, operating
procedures and manuals, custody transfer documents, and such
other records (all collectively "records") as may be necessary
or appropriate to the operation, maintenance and repair of
Facilities, or required by applicable laws, rules,
regulations, orders and any other requirements of governmental
authorities, or requested by Company. All of such records
shall remain the property of Company;
J. prepare and file all tariffs subject to approval of Company;
K. collect all tariffs, fees or other amounts derived from the
operation of the Facility, keep correct complete, and accurate
accounts of all receipts and disbursements made on the
Company's behalf, and deposit all monies or other valuable
effects in the name and to the credit of Company in such
depository banks, trust companies, savings and loan
associations or other similar institutions as may be
designated by Company, keep individual Book Capital Accounts
for each partner of Company, prepare partnership income tax
returns for approval and filing by Company, recommend for
approval by the Company amounts of cash distributions that
should be made to the partners of Company, and preparation of
any other financial accounts or statements that may be
required by Company;
L. upon request, attend meetings of the Partnership Committee of
Company, or, whenever otherwise required by Company, prepare
and distribute reports of all financial transactions involving
the Company hereunder and other reports reasonably requested
by Company or any partner of Company, but only to the extent
that Operator is legally authorized to do so ;
make all statutory and regulatory filings required of the
Company, including without limitation, all permit
applications, and filings with the Federal Energy Regulatory
Commission, Texas Railroad Commission and any other state
Public Utilities Commissions, Department of Transportation, or
other regulatory agencies having
5
jurisdiction over Company;
N. sign all checks, drafts, or orders for the payment of Costs
authorized pursuant to this Agreement;
O. facilitate the financing and investments including the
issuance of commercial paper in accordance with the policies
set forth by the Company;
P. administer the Facilities' regulatory, financial, contractual
and legal affairs to the extent such administration is
authorized by Company; and
Q. provide equipment, materials and services as legally required
or as Company may from time to time request, for discharge
prevention and response for Products and/or hazardous
substances. These services shall include, but not be limited
to, preparation, submission, and finalization of discharge
prevention and/or contingency plans for Products and/or
hazardous substances, and preparation for, prevention of,
response to and/or cleaning up of any discharge or threatened
discharge of Products and/or hazardous substances. Without
limiting the foregoing, Operator shall serve as response
action contractor for Company;
R. obtain rights-of-way, make renewal payments and do such other
tasks as may required to maintain rights-of-way.
S. supervise the construction of any expansions, modifications,
or extensions of the Facilities that are approved by Company;
T. provide engineering services that may be necessary in
operating, expanding or modifying the Facilities as approved
by Company; and
U. keep the Facilities free and clear of all material liens and
encumbrances not otherwise authorized by Company.
V. pay and discharge promptly all costs and expenses reasonably
incurred in operating the Facility.
Operator agrees to perform all services hereunder in a manner consistent with
the usual and customary practices, codes and standards in the pipeline industry
(including specifically the Federal Energy Regulatory Commission, the Texas
Railroad Commission and state Public Utilities Commissions as well as applicable
Department of Transportation and American National Standards Institute) and in
accordance with all valid and applicable laws, rules, regulations, orders and
any other requirements of governmental authorities. Operator in its capacity as
Operator pursuant to this Agreement, shall assume no other liability to Company
except in the case of Operator's own gross negligence or willful misconduct.
Notwithstanding the foregoing, the gross negligence standard shall apply only to
the operations performed hereunder and shall not apply to any actions, inactions
or negligence of the Operator in connection with the operation
6
of any pipeline other than Facilities. Operator shall furnish or arrange for the
necessary personnel to efficiently perform such services. None of such personnel
shall be employees or agents of Company, statutory or otherwise.
Section 3. PAYMENT FOR OPERATOR SERVICES
A. Company shall pay and Operator shall receive as full and
complete compensation for the performance of Operator's
services as Operator hereunder, the sum of the amounts
becoming due (hereinafter referred to as "Cash Operating
Costs") as described and authorized in Attachment I,
Accounting Procedure. Company shall make payment in the time
and manner specified herein.
B. Within the month immediately following the previous month of
service, Operator shall invoice Company for the actual Cash
Operating Costs for the immediately prior month. Company shall
pay to Operator the amount of such invoice, payable upon
receipt.
Section 4. ACCOUNTING
A. Operator shall keep and maintain proper and complete books and
accounts, in the name of Company, in conformity and consistent
with GAAP utilizing the principles and practices generally
employed in regulated oil pipeline accounting unless any
regulatory agency with jurisdiction over the System or the
Partnership shall rule otherwise; and shall furnish monthly
financial statements and such other reports, statistics and
statements as Company or any partner of Company may reasonably
from time to time request.
B. Operator shall maintain accurate accounts of all expenditures
and liabilities incurred by it in operating, maintaining and
repairing the Facilities and shall render a monthly statement
to Company and each partner of the Company of all such
expenditures and liabilities. The failure to include any item
in the current monthly statement rendered for the month in
which the same was incurred or expended shall not preclude
such item from being brought forward and included in any
subsequent monthly statement. All books, records and accounts
shall be open to inspection and audit by Company or Company's
authorized representatives at all reasonable times during
business hours.
C. Operator shall establish a separate bank account(s) on behalf
of Company and all revenues received in the operation of the
Facilities shall be deposited in the name and to the credit of
Company. All interest or other benefits generated by this
account shall accrue to the benefit of Company. Operator shall
not commingle any of its funds in the account established
hereunder.
7
Section 5. BUDGETS AND FORECASTS
On or before November 1 of each year, Operator shall prepare and submit to the
Partnership Committee of Company for review, approval, or modification the
following annual budgets and forecasts:
A. Capital Commitment Budget
The Capital Commitment Budget shall consist of an itemization
of commitments for each capital project equal to or in excess
of $50,000 (large projects) and a combined total of all Items
less than $50,000 (small projects) for the following calendar
year.
B. Capital Expenditure Forecast
The Capital Expenditure Forecast shall identify separately all
expenditures for capital items from prior budgets which are
not yet complete and all capital items anticipated to be
approved in the pending budget. Large projects shall be listed
individually and small projects may be combined. The forecast
shall indicate expenditures by quarter for the following
calendar year and indicate any appropriate carryover in
subsequent years.
C. Major Maintenance Budget
The Major Maintenance Budget shall consist of an itemization
of each maintenance project equal to or in excess of $50,000
(large projects) and a combined total of all items less than
$50,000 each (small projects) for the following calendar year.
D. Operating Expense Budget
The Operating Expense Budget shall identify for the following
calendar year the expected Operating Expenses including Direct
Costs, Management Fee, and Major Maintenance items.
E. Volume Forecast
All volumes expected to be handled through the Facilities
shall be identified for the following calendar year.
Company may at any time supplement or amend the budgets and forecasts as
necessary to carry out the purposes of this Agreement.
8
Section 6. EXPENDITURE AUTHORITIES
A. Projects or Expenses not Exceeding $50,000
The Operator shall have the authority to make expenditures for
any individual capital project, major maintenance project or
operating expense not exceeding $50,000 to the extent that
Operator deems such expenditures necessary and appropriate for
the operation or maintenance of the Facilities. The sum of any
such expenditures may not, during any Year, exceed the amounts
indicated for all such projects or expenses in the budget
which have been approved by Company for that Year.
B. Projects or Expenses in Excess of $50,000
The Operator shall have the authority to make expenditures for
any individual capital project, major maintenance project or
operating expense in excess of $50,000 if such project or
expense was specifically identified in an approved budget or
Company has approved an AFE for the project. The amount of the
Operator's authority under this subsection may be overrun by
the greater of 10% or $10,000 without seeking prior approval
by Company; provided, however that such overrun does not cause
any of the Capital Expenditure Forecast, Major Maintenance
Forecast or Operating Expense Forecast approved by the Company
to be exceeded.
C. Settlement of Claims
Operator shall have authority to make expenditures in
settlement of claims, demands and litigation resulting from or
arising out of operations of Facilities up to $25,000 for each
such claim. Operator shall notify Company and each partner of
Company immediately of any claim, demand or suit, and if the
amount required for full settlement exceeds the above
specified amount, Operator shall notify the Company and each
partner of Company and the Company shall determine how to
further handle the claim, demand or suit.
D. Operation In Lieu of An Approved Budget
In the event Company fails to deliver to the Operator on or
before December 31 an approved budget for the ensuing year,
the previous year's budget shall remain in effect until an
approved budget is delivered. Notwithstanding the foregoing,
the Operator may take such actions and make such expenditures
as may be deemed necessary, under laws, rules, regulations,
orders or good industry practices, in order to continue the
orderly conduct of the business of Company hereunder and to
preserve and maintain the Facilities. In the event that any
such expenditure was not specifically approved in an earlier
budget or otherwise approved by the Company, Operator's
authority shall be limited to a maximum
9
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
of $500,000 for any one expenditure and a total maximum of $
1,000,000 for all such expenditures in any one year. In the
event of such operation without an approved budget, the
Operator shall, on a monthly basis, give telephone notice or
otherwise contact Company and each partner of Company as soon
as practicable and advise it of the circumstances of such
operation without an approved budget, the actions taken or
proposed and the expenditures made, incurred, committed, or
proposed. All expenditures made pursuant to this Section 6.D.
shall be treated as Cash Operating Costs hereunder. Nothing in
this Section 6.D. shall in any way restrict the Operator's
authority as set forth in Section 6.E.
E. Emergencies
In an emergency, the Operator may take such actions and make
such expenditures as may be deemed necessary, under laws,
rules, regulations, orders or good industry practices, in
order to cure such emergency. This shall be true whether or
not the expenditure is within an approved budget or the action
has prior approval of Company. In the event of such an
emergency, the Operator shall give telephone notice or
otherwise contact Company as soon as practicable and advise it
of the circumstances of such emergency, the actions taken or
proposed and the expenditures made, incurred, committed, or
proposed. All expenditures made pursuant to this Section 6.E.
shall be treated as Cash Operating Costs hereunder.
Section 7. TERM
This Agreement shall take effect as of the day and year first above
* written and shall continue for a term of [REDACTED] and continue
thereafter until canceled on 180 days prior written notice by either
Party which such notice may be given for any reason or no reason in the
sole discretion of either Party; provided, however, in the event that
Company has not selected a replacement operator who is ready and
capable of assuming the operation of Facilities at the end of such
notice period, Operator shall continue to operate the Facilities
hereunder for such period until a replacement operator is selected who
is ready and capable of assuming the operation of Facilities but such
continuation by Operator shall not extend beyond 180 days following the
end of the notice period. Company shall have the right to terminate
this Agreement if Operator ceases to own a majority of the interest in
the Company.
Upon termination of this Agreement, Company shall pay Operator the amounts
chargeable to Company hereunder as of the date of termination which have not
already been paid by Company; Company shall also reimburse Operator for the full
amount of any obligations or commitments Operator has made in the interest of
performing the services hereunder in accordance with the annual budget and any
approved projects which were not paid by Company
10
prior to the date of such termination or, if agreeable to Operator, Company may
assume such obligations or commitments. Upon termination of this Agreement,
Operator shall turn over to Company all records, data, and information in
Operator's possession pertaining to operations hereunder, as well as materials,
equipment, facilities, and operating supplies on hand which had been purchased
by Company or in its name. Termination of this Agreement shall not affect the
rights and privileges or duties, liabilities and obligations of either Party
which arose or accrued prior to the date of termination.
Section 8. INSURANCE
Operator shall procure and maintain all insurance required by applicable law or
regulation for operation of the Facilities, including but not limited to
Workers' Compensation and Employer's Liability Insurance in accordance with all
applicable state, federal, and maritime laws. Where permitted, Operator may
fulfill its Workers' Compensation obligations by approved self-insurance and
shall charge Company its actual costs of self-insurance which shall not exceed
Insurance Manual Rates applicable to such operations in the place where the same
are performed. The Operator shall procure and maintain in effect such types and
amounts of insurance as Company shall determine to be necessary to cover loss or
damage to the Facilities. No other insurance shall be carried by Operator for
the account of Company without prior approval from Company.
Section 9. INDEMNITY
Company ("Indemnitor") shall indemnify and save harmless Operator, its
affiliates, agents and employees ("Indemnitees") in its or their role as
Operator from and against any and all loss, damage, injury, liability, expense
(including attorney's fees), and claims thereof which arise from any injury to
or death of a person, including third parties, Indemnitor, its agents,
contractors or subcontractors, or employees, , but excluding Indemnitees, from
loss of or damage to property or from penalties imposed or proceedings brought
by government agencies, resulting directly or indirectly from any operations
under or pursuant to this Agreement, including, but not limited to, the use of
equipment provided by others. The indemnity provided by Indemnitor shall remain
in full force and effect regardless of the passive, active or concurrent
negligence of, and regardless of whether liability without fault is imposed or
sought to be imposed on, one or more of the Indemnitees. However, such indemnity
shall not be given effect to the extent that such indemnity is void or otherwise
unenforceable under applicable law in effect or validly retroactive to the date
of the Agreement. Further excepted from such indemnity shall be any such loss,
damage, injury, liability or claim which is the result of the gross negligence
or willful misconduct of an Indemnitee. Operator shall give Company immediate
notice of any suit brought against Operator with respect to which Company is or
may be obligated to indemnify Operator hereunder.
Operator shall indemnify and save harmless Company, its affiliates, agents and
employees in its or their role as owner of Facilities from and against all loss,
damage, injury, liability, expense (including attorney's fees), and claims
thereof which arise from any injury to or death of a person, including third
parties, Operator's agents, contractors, subcontractors, or employees, or
11
from loss of or damage to property of Operator or Operator's agents,
contractors, subcontractors or employees resulting directly or indirectly from
any operations under or pursuant to this Agreement. The indemnity provided by
Operator shall remain in full force and effect regardless of the passive, active
or concurrent negligence of, and regardless of whether liability without fault
is imposed or sought to be imposed on Company. However, such indemnity shall not
be given effect to the extent that such indemnity is void or otherwise
unenforceable under applicable law in effect or validly retroactive to the date
of this Agreement. Further excepted from such indemnity shall be any such loss,
damage, injury, liability or claim which is the result of the gross negligence
or willful misconduct of Company. Company shall give Operator immediate notice
of any suit brought against Company with respect to which Operator is or may be
obligated to indemnify Company hereunder.
Section 10. CONFIDENTIALITY
A. Each Party agrees that it will maintain this Agreement, all terms and
conditions of this Agreement and all other Confidential Information (as
hereinafter defined) in strictest confidence and that it will not cause
or permit disclosure of Confidential Information to any third Party
without the express written consent of the other Party hereto.
Disclosures of Confidential Information otherwise prohibited by this
Section 10 may be made by either Party; (i) to the extent necessary for
such Party to enforce its rights hereunder against the other Party;
(ii) to the extent a Party is contractually or legally bound to
disclose financial information to a third Party (such as a shareholder
or commercial lender); (iii) only to the extent to which a Party hereto
is required to disclose all or part of this Agreement by a statute or
by the order of a Court, agency, or other governmental body exercising
jurisdiction over the subject matter hereof, by order, by regulations,
or by other compulsory process (including, but not limited to,
deposition, subpoena, interrogatory, or request for production of
documents); (iv) to the extent required by the applicable regulations
of a securities or commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the provisions of this
Section 10). "Confidential Information" shall mean any information
proprietary to either Party and maintained by it in confidence or as a
trade secret, including, without limitation, business plans and
strategies, proprietary software, financing statements, customer or
client lists, personnel records, analysis of general energy market
conditions, sales, transportation and service contracts and the
commercial terms thereof, relationships with current and potential
business partners, supplies customers, service providers and financial
sources, data base contents and valuable information of a like nature
relating to the business of such Party. It is understood and agreed
that Confidential Information shall not include information of a Party
that (i) was generally available to the public at the time of
disclosure to the other Party, (ii) after the time of disclosure to the
other Party, becomes generally available to the public, (iii) the Party
receiving the information can know that the information was in its
possession at the time of disclosure, or (iv) was rightfully acquired
by the recipient from third Persons who did not themselves obtain such
information under a confidentiality or other similar agreement with the
disclosing Party.
12
B. If either Party is or becomes aware of a fact, obligation, or
circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Section 10, it shall so
notify the other Party promptly and shall provide documentation or an
explanation of such disclosure as soon as it is available. Each Party
further agrees to cooperate to the fullest extent in seeking
confidential status to protect any Confidential Information so
disclosed.
C. The Parties hereto acknowledge that independent legal counsel may, from
time to time, be provided with a copy of this Agreement and agree that
such disclosure does not require consent by the other Party, provided
that such counsel agrees to be bound by the provisions of this Section
10.
D. Each Party will be deemed solely responsible and liable for the actions
of its employees, independent contractors, officers, agents and
Affiliates for maintaining the confidentiality commitments of this
Section 10, but will be required in that regard only to exercise such
care in maintaining the confidentiality of the Confidential Information
as such Party normally exercises in preserving the confidentiality of
its other commercially sensitive information.
Section 11. FORCE MAJEURE
A delay in or failure of performance of either Party hereto shall not constitute
default, nor shall either Party be held liable for loss or damage arising from
such delay or failure to the extent such delay, failure, loss or damage is
caused by Force Majeure.
The Party claiming Force Majeure as an excuse for delay in or failure of
performance shall immediately notify the other Party of the event and any steps
being taken to remove the impediment to performance.
Force Majeure shall not prevent either Party from terminating this Agreement
under Section 7.
Section 12. ASSIGNMENT
This Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the Parties hereto; provided, however, that such
Agreement and the obligations of the Parties hereunder shall not be assignable
by either Party hereto without the express prior written consent of the other
Parties hereto, except that any Party may assign this Agreement without consent,
including the performance thereof, in whole or in part to (i) an Affiliate of
the Party or the Party's shareholders; (ii) the successor of all or
substantially all of the Party's business and assets; or (iii) a corporation
which such Party may merge or be consolidated into. An assignment hereunder
shall not be effective unless and until the assignee agrees to be bound by all
the terms and conditions of this Agreement. Further, no assignment hereunder
shall relieve the assignor of any duties, liabilities or obligations accruing
hereunder before the effective date of the assignment. Any assignments
prohibited hereunder shall be void. This Agreement shall not be assignable by
operation of law and shall not become an asset in any bankruptcy or
13
receivership proceedings. The consent requirement set forth in this Section 12
shall apply to a sale or assignment of a controlling interest in an Affiliate to
whom a Party's interest has been assigned.
Section 13. NOTICES
Any notice, request, consent, approval or other similar communication of a
routine nature required or permitted under this Agreement shall be in writing
(including facsimile) and shall be deemed to have been properly given or
delivered to a Party when delivered personally to the person designated below to
receive such communication for each Party or when sent by telegram or United
States mail with postage prepaid and properly addressed to the Party to whom
given. Any such notice or other communication sent or mailed shall be deemed
given at the time it is received by the office of the individual to whom sent.
For purposes hereof the proper addresses of the Parties (unless otherwise
designated in writing which each Party may do from time to time) shall be as
follows:
If to Company:
West Texas LPG Pipeline Partnership
Attention:
Telecopy: (713) -
with a copy to:
-----------------------
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
If to Operator:
Chevron Pipe Line Company
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
Attention: Corridor Team Leader
Section 14. GOVERNING LAW
The validity, nature, obligations, effect and construction of this Agreement
shall be governed by the laws of the State of Texas without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any other jurisdiction other than the State of Texas.
14
Section 15. ATTACHMENTS
Attachment I, Attachment II, and Attachment III attached hereto are incorporated
in and made a part of this Agreement. In the event of any inconsistency between
the Attachments and this Agreement, the Agreement shall control.
Section 16. GIFTS PROHIBITED
The Parties shall maintain complete and accurate records in connection with any
commission, fee, rebate, gift or entertainment of significant cost or value in
connection with the performance of this Agreement and all transactions related
thereto for at least twenty-four months from the date of invoice to Company and
Operator. No director, officer, employee or agent of any Party hereto shall give
or receive any commission, fee, rebate, gift or entertainment of significant
cost or value in connection with the performance of this Agreement.
Section 17. FEDERAL COMPLIANCE
A. Insofar as applicable hereto, each Party hereto shall comply
with Executive Order No. I1246, as amended by Executive Order
No. I1375, and the rules and regulations issued thereunder, to
ensure that applicants are employed, and that employees are
treated during employment without regard to their race, creed,
color, sex or national origin. Also, if applicable, each Party
hereto shall comply with all provisions of the Vietnam Era
Veterans' Readjustment Assistance Act of 1974 and the rules
and regulations issued thereunder, including 41 C.F.R.,
Chapter 60, Part 60-250. Each Party hereto shall also, if
applicable, comply with all provisions of the Rehabilitation
Act of 1973, and the rules and regulations issued thereunder
including 41 C.F.R., Chapter 60, Part 60-74. Operator agrees
and covenants that none of its employees or employees of its
subcontractors who provide services to Company pursuant to
this Agreement are unauthorized aliens as defined in the
Immigration Reform and Control Act of 1986. All acts, orders,
rules and regulations hereinabove referred to are hereby
incorporated by reference unless this Agreement is excepted by
appropriate federal law, rules, regulations or orders.
B. Company and Operator shall comply with all laws and
regulations applicable to Company and Operator relating to
Facilities hereunder, including but not limited to any
regulations of the United States Department of Transportation
applicable to facilities operated by Company that are
connected to or a part of Facilities hereunder.
Section 18. SECTION HEADINGS
The headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
15
Section 19. WAIVER
No waiver by either Party of any breach of any of the terms and conditions
contained in this Agreement shall be construed as a waiver of any subsequent
breach of the same or any other terms or conditions.
Section 20. ENTIRE AGREEMENT
This Agreement and its Exhibits constitute the sole and entire Agreement among
the Parties pertaining to the subject matter hereof. Effective as of the
commencement of the term hereof, this Agreement supersedes and cancels any and
all other prior or contemporaneous oral or written agreements or understandings
between or assumed by the Parties or any of them with respect to the foregoing
matters or any part thereof. No amendment to this Agreement shall be effective
unless in writing and executed by a duly authorized representative of each
Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first above written.
COMPANY,
WEST TEXAS LPG PIPELINE PARTNERSHIP
By:_______________________________
Its:______________________________
OPERATOR,
CHEVRON PIPE LINE COMPANY
By:_______________________________
16
ATTACHMENT I
OPERATING AGREEMENT
ACCOUNTING PROCEDURE
1. DEFINITIONS
Unless defined otherwise below, terms used in this Accounting Procedure
shall have the same meaning as defined in the Agreement.
"Management Fee" means the management fees referenced in Section 2.B.
of this Attachment.
"Person" means any individual, partnership, association, trust,
corporation, government authority or other entity.
"Personal Expenses" means travel expenses and other reasonable
reimbursable expenses of Operator's employees in the operation and
maintenance of Facilities and in any other activities required of the
Operator pursuant to this Agreement; and such expenses of employees of
Operator's Affiliate(s) when such Affiliates perform activities
pursuant to this Agreement.
2. CASH OPERATING COSTS
A. DIRECT COSTS
Operator shall charge Company with the following items but
only to the extent such charges are incurred in the operation
and maintenance of Facilities and in any other activities
required of the Operator pursuant to the Agreement and then,
only that portion thereof that is attributable to work and/or
time allocated on a proportional basis to the Facilities if
the work performed can in any way benefit pipelines operated
by Operator other than the Facilities:
1. LABOR AND BENEFITS
a. Salaries and wages of Operator's employees
(or employees of Operator's Affiliate)
directly assigned to the operation, support
and maintenance of Facilities, including
that portion of such employees' time related
to ancillary activities such as training
required by Operator, and in any other
activities required of the Operator pursuant
to the Agreement.
17
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
b. Overhead related to direct labor salaries
* and wages, to be calculated as [REDACTED] of
the amount provided for in A.1.a. above.
c. Operator's cost of all payroll taxes, and
benefits and allowances and any other
payment paid or contributed by the Operator
which is measured by Operator's employees'
compensation; the above to include without
limitation F.I.C.A., Operator's cost of
holiday, vacation, sickness and disability
and other customary allowances, Operator's
current costs of established plans for
employees' group life insurance,
hospitalization, retirement, stock purchase,
and other benefit plans of a like nature.
Such costs will be charged on a percentage
assessment rate on the amount of salaries
and wages chargeable to the Company under
Paragraph 1.a. of this Section. The
percentage assessment rate shall be based on
the Operator's actual cost experience.
2. EMPLOYEE EXPENSES
a. Reasonable Personal Expenses of those
employees whose salaries and wages are
chargeable to the Company under Paragraph
1.a. of this Section, and for which expenses
the employees are reimbursed under the
Operator's usual practices.
3. CUSTOMER SERVICE CENTER
The allocated share attributable to the West Texas
LPG Pipeline of Operator's cost for its Customer
Service Center, including but not limited to;
a. Labor and benefits of Operator's employees
directly assigned to the operation and
support of Facilities, following the
methodology in Sections 2.A.1.a. and
2.A.1.c.
b. An allocation of depreciation for Customer
Service Center capitalized costs of facility
and equipment used in the scheduling of
shipments and 24-hour continuous monitoring
and control of pipeline flows for the
Facilities.
c. An allocation of other Customer Service
Center costs, including
18
support personnel and other expenses,
required for support of the Facilities.
4. MATERIALS AND SUPPLIES
Material purchased by Operator for use in the
operation and maintenance of Facilities shall be
charged to the Company at the price paid by Operator
after deduction of all discounts received. Material
furnished by Operator from its stocks or inventory
shall be charged in accordance with the accounting
guidelines established by COPAS (Council of Petroleum
Accountants Societies of North America). Cost of
warehousing and handling material shall be chargeable
to the Company. The accumulation of surplus stocks
shall be avoided, and if surplus stocks are
accumulated, such stocks shall be timely disposed of.
Proceeds from such disposition shall be credited to
the Company at the time they are received by
Operator. Operator does not warrant the material
furnished. In the case of material found to be
defective, or returned to a vendor or the Operator
for any other reason, Operator shall credit the
Company when adjustment is received by Operator.
5. CONTRACTS AND SERVICES
The cost of contracts and subcontracts, contract
services (including those for technical personnel),
professional consultants, equipment, and utilities
employed in the operation and maintenance of the
Facilities under the general direction of Operator.
6. EQUIPMENT FURNISHED BY OPERATOR
a. Use of equipment owned by Operator at the
lower of (1) rates commensurate with costs
of ownership and operation. Such rates shall
include costs of maintenance, repairs, other
operating expense, insurance, taxes, and
depreciation, or (2) commercial rates
prevailing in the geographic area of the
Company Facilities as published in Petroleum
Motor Transport Association rate schedules.
b. Whenever requested, Operator shall inform
Company of the rates it proposes to charge.
7. LEGAL EXPENSES
Expenses of investigating litigation or claims
incurred in or resulting from the operation and
maintenance of Facilities under the Agreement;
19
provided, however that no direct charge for services
of Operator's legal staff or fees or expense of
attorneys shall be made unless previously agreed to
by Company. All other legal expense incurred by
Operator hereunder is considered to covered by the
overhead provisions of Section 2.B. below, unless
otherwise agreed to by Company.
8. TAXES
All taxes of every kind and nature assessed or levied
upon, or in connection with the Company operations,
property or Facilities and which have been paid for
the benefit of Company, excluding any income or
franchise taxes.
9. INSURANCE
In accordance with Section 8 of the Agreement, net
premiums paid for insurance required by law or by the
Company to be carried for operation, maintenance and
repair of Facilities and for the protection of the
Company.
10. COMMUNICATIONS
Costs of purchasing, leasing, installing, operating,
and maintaining communications equipment and services
necessary for the conduct of Facilities' operation
and maintenance.
11. UTILITIES
Costs incurred for electricity and other utilities
necessary for the operations hereunder.
12. ECOLOGICAL AND ENVIRONMENTAL
Costs incurred for the benefit of the Company as a
result of statutory regulation for archeological and
geophysical surveys relative to the identification
and protection of cultural resources, or other
ecological surveys as may be required by regulatory
authority. Also, costs to provide or have available
pollution containment and removal equipment, plus
costs of actual control, cleanup and resulting
responsibilities of oil spills as required by
applicable laws and regulations.
13. PERMITS AND RIGHTS-OF-WAY
Costs incurred in obtaining or maintaining permits,
licenses, leases, certificates, rights-of-way,
easements, and other similar items necessary
20
for the operation or maintenance of the Facilities.
14. DISMANTLING, REMOVAL, AND RESTORATIVE COSTS
Costs incurred for dismantling, removal, and
restoration of Company property to the extent such
costs are incurred.
15. RENTALS
Rentals paid by Operator for the benefit of the
Company in the conduct of Facilities' operation and
maintenance.
16. DISCOUNTS AND ALLOWANCES
Operator shall take advantage of and credit to the
Company all cash and trade discounts, freight
allowances and equalization, annual volume and other
allowances, credits, salvages, commissions, insurance
discount dividends and retrospective premium
adjustments, and other such items which accrue.
17. OTHER EXPENDITURES
Any other expenditures directly attributable to
Facilities' operation and maintenance not covered and
dealt with in the foregoing provisions of this
Section 2.A., and which are incurred by the Operator
in the necessary and proper conduct of Facilities'
operation and maintenance, and which are:
(a) within the scope of the Agreement; and
(b) are included in the approved operating budget.
B. MANAGEMENT FEE
The purpose of this Section 2.B. is to provide for the
reimbursement of Operator's overhead in conjunction with
services rendered. Operator shall charge the Company as
follows to cover any portion of costs and expenses resulting
from the performance of services for Facilities not otherwise
chargeable under Section 2.A. herein:
21
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
1. OPERATOR'S MANAGEMENT FEE
* Operator shall receive [REDACTED] as an annual charge billed
monthly, hereinafter referred to as "Operator's Management
Fee" to cover all of Operator's overhead and indirect costs
incurred in the performance of services for the Facilities.
Such Operator's management duties hereunder shall not be
subcontracted by Operator to any other entity, without prior
approval of Company. The Operator's Management Fee shall be
adjusted annually by a calculated amount based upon the
Producers Price Index (excluding the Fuels And Related
Products And Power component) in effect on October 1 with a
base year of October 1, 1997. Such adjusted amount shall be
effective beginning January 1 of each ensuing year, starting
for the calendar year 1998.
22
ATTACHMENT II
PIPELINE FACILITIES
I) PIPELINE: There is about 1,950 miles of various sizes of pipe ranging from 2"
to 14", 0.156 Gr B to 0.365 x46 w.t., and 1957 - 1992 vintage. The lateral lines
are up to 8" and the trunk portion is all 10" and 14".
II) BOOSTER STATIONS: There are 18 pump stations, 24 pump and electric motor
units and associated electrical switchgear and control equipment. Total
horsepower is 28,200. Pumps are all horizontal centrifugal type.
III) COAHOMA FACILITY: There are 2 - 1,000 horsepower pump units with
centrifugal pumps and electric motors. It is an 80 acre site with three storage
wells(nominal 300,000 Bbls), two brine pits (nominal 350,000 Bbls capacity), and
all associated piping and electrical equipment.
** Of the 19 booster stations (including Coahoma), 13 are on separately
identifiable property.
IV) METER STATIONS: There are about 62 receipt, custody transfer meter stations
of which about 54 are at plant sites. There are another 18 check meter locations
with a total of 34 meter runs. Each facility generally includes turbine meter
runs, instrumentation, and equipment buildings.
V) MISCELLANEOUS:
* Sending and receiving swab trap facilities (22 on the trunk line
alone).
* Portable meter provers
* Spare parts inventory
ATTACHMENT III
MAP OF FACILITIES
Exhibit 10.67
April 2, 1996
Mr. Steve Furbacher
11233 South Vandalia
Tulsa, OK 74137
Dear Steve:
Subject to the ratification of this employment agreement by the
Compensation, Corporate Governance and Human Resources Committee ("Compensation
Committee") of the Board of Directors of NGC Corporation, set forth below are
the terms of your proposed employment by NGC Corporation (hereinafter referred
to collectively as "NGC" or the "Company").
1. TITLE AND DUTIES
Your title shall be President of Warren Petroleum and Senior Vice
President of NGC Corporation. Your duties will include such duties as may be
delegated from time to time by your immediate supervisor. The Company may change
your title, duties or reporting at any time so long as any such change does not
affect the term of this Agreement or reduce the compensation payable hereunder.
2. TERM
(a) Unless earlier terminated as provided for herein, the term of
this Agreement will be for five years, beginning on your date of employment (the
"Primary Term").
(b) If your employment with NGC is terminated due to your
voluntary resignation or if your employment is terminated for cause, this
Agreement shall terminate immediately (except for the confidentiality,
non-competition and non-solicitation provisions of Paragraph 4), and the Company
shall have no further obligation to you except for the payment to you of amounts
due before the date of such termination. You further agree that the benefits
which you have received from the execution of this agreement through the date of
such termination constitute sufficient consideration for your obligations
pursuant to Paragraph 4, notwithstanding the fact that the Company has no
further obligation to you except for the payment to you of amounts due before
the date of such termination. For purposes of this Agreement, you may be
terminated for cause as a result of (i) dishonesty or similar serious
misconduct, directly related to the
<PAGE>
Mr. Steve Furbacher
April 2, 1996
Page 2
performance of duties for the Company, which results from a willful act or
omission and which is materially injurious to the operations, financial
condition or business reputation of the Company or any significant subsidiary
thereof; (ii) your being convicted (or entering into a plea bargain admitting
criminal guilt) in any criminal proceeding; (iii) your drug or alcohol abuse, or
(iv) any other material breach of this Agreement by you not cured within ten
days after written notice of such breach to you from the Company.
(c) If your employment is terminated during the Primary Term for
any reason other than your voluntary resignation or discharge for cause, you
shall receive as your sole compensation (i) your base salary and guaranteed
bonus for (x) the remainder of the Primary Term or (y) two years from the date
of termination; whichever is shorter; and (ii) the Additional Compensation set
forth in Paragraph 3(c) subject to the terms and conditions set forth in
Paragraph 3(c). The confidentiality, non-competition and non- solicitation
provisions of Para-graph 4 shall remain in effect during the period of such
payments.
(d) If you die or become disabled and cannot perform your duties,
you (or your estate) shall be entitled to the Base Salary (as defined in
Paragraph 3(a)) payable to you hereunder for three months following the month in
which you die or become disabled, plus the amount of any Guaranteed Minimum
Payments (as defined in Paragraph 3(b)) guaranteed pursuant to Paragraph 3(b)
for the year of death or disability, prorated through the date of death or
disability. For purposes of this Agreement, you shall be disabled as of the
first date on which you become eligible to receive disability benefits under the
Company's long-term disability plan or Social Security benefits at a time when
the Company does not maintain a long-term disability plan or such plan is not
available to you.
3. COMPENSATION
(a) Each year during the Primary Term hereof, you will be paid a
base salary of $250,000 per annum at a minimum ("Base Salary"), payable in
accordance with the Company's payroll guidelines. Increases may be made to your
base pay at the discretion of the Company based upon your individual
performance.
(b) You shall be a participant in the Company's bonus plan. You
shall receive a guaranteed bonus of at least $100,000 per year during the five
year contract term (pro-rated for the portion of a contract year occurring
during any calendar year). Thereafter you will be eligible to participate in the
bonus plan, but there will be no guaranteed bonus amount.
<PAGE>
Mr. Steve Furbacher
April 2, 1996
Page 3
(c) In consideration of your obligations under Paragraph 4 of
this Agreement, you shall be entitled to receive additional compensation equal
to $1,500,000 in value (the "Additional Compensation"), under the following
terms and conditions:
(i) Such Additional Compensation will be payable on or
before the end of the Primary Term of this Agreement and
will be subject to forfeiture in the event that (i) your
employment with the Company is terminated for cause or as
a result of your voluntary resignation or as a result of
death or disability or (ii) you do not comply with your
obligations under Paragraph 4;
(ii) The Additional Compensation may be paid in cash or
may be in the form of an award under NGC Corporation's
Employee Equity Option Plan (EEOP) subject to the vesting,
forfeiture and other terms and conditions of the EEOP, or
any securities of the company of a class outstanding at
the time of award;
(iii) To the extent that your base salary and bonus
exceeds the amounts specified as your Base Salary and
guaranteed bonus as set forth in Paragraphs 3(a) and 3(b)
in any calendar year, such excess shall be deemed to be
Additional Compensation hereunder and shall be credited
against the aggregate Additional Compensation to which you
are entitled.
(d) The Company shall pay your reasonable relocation expenses to
Houston, Texas, in accordance with the Company's current relocation policy. The
Company will also pay you an amount equal to the difference between (x) the
purchase price of your current home in Tulsa, Oklahoma and (y) the net proceeds
to you from the sale of such home, with the amount of such payment not to exceed
$50,000. In addition, the Company will provide you with a bridge loan of up to
$100,000. The loan will be repaid with interest computed at six percent (6%) per
annum on the earlier to occur of (i) the sale of your Tulsa, Oklahoma residence
or (ii) March 31, 1997.
(e) You shall receive as a perquisite a country club membership.
(f) You shall be entitled to participate in such other plans and
receive such other prerequisites as the Board of Directors of the Company in its
discretion determines.
<PAGE>
Mr. Steve Furbacher
April 2, 1996
Page 4
4. CONFIDENTIALITY
You recognize and acknowledge that:
(a) You will have access to certain information concerning the
Company that is confidential and proprietary and constitutes valuable and unique
property of the Company. You agree that you will not at any time, either during
or after your employment, disclose to others, use, copy or permit to be copied,
except in pursuance of your duties on behalf of the Company or their successors,
assigns or nominees, any secret or confidential information of the Company
(whether or not developed by you) without the prior written consent of the Board
of Directors of the Company. The term "secret or confidential information of the
Company" (referred to collectively as "Confidential Information") shall include,
without limitation, the Company's plans, strategies, potential acquisitions,
costs, prices, systems for buying, selling, and/or trading natural gas, natural
gas liquids, crude oil, and electricity, client lists, pricing policies,
financial information, the names of and pertinent information regarding
suppliers, computer programs, policy or procedure manuals, training and
recruiting procedures, accounting procedures, the status and content of the
Company's contracts with their suppliers or clients, or servicing methods and
techniques at any time used, developed, or investigated by the Company, before
or during your tenure of employment to the extent any of the foregoing are (i)
not generally available to the public and (ii) maintained as confidential by the
Company. You further agree to maintain in confidence any confidential
information of third parties received as a result of your employment and duties
with the Company.
(b) At the termination of your employment you will deliver to the
Company, as appropriate, all correspondence, memoranda, notes, records, client
lists, computer systems, programs, or other documents and all copies thereof
(collectively, the "Documents"), made, composed or received by you, solely or
jointly with others, and which are in your possession, custody, or control at
such date and which are related in any manner to the past, present, or
anticipated business of the Company.
(c) To protect and safeguard the Company's trade secrets and
confidential information and also the Company's goodwill with its suppliers and
clients, during the remainder of the Primary Term of this Agreement (but in no
event more than twenty-four (24) months), you will not, within a 50 mile radius
of any location where the company had an office at any time during the term
hereof or any location where a client or supplier of the Company (which is a
client or supplier at any time during the term hereof) had an office at any time
during the term hereof, without the prior written consent of the Board of
Directors of the Company, directly or indirectly, engage in or be interested in
(as owner, partner, shareholder, employee, director, agent, consultant
<PAGE>
Mr. Steve Furbacher
April 2, 1996
Page 5
or otherwise), any business which is a competitor of the Company, as hereinafter
defined. For purposes of this Agreement, a "competitor of the Company" is any
entity, including without limitation a corporation, sole proprietorship,
partnership, joint venture, syndicate, trust or any other form of organization
or a parent, subsidiary or division of any of the foregoing, which, during such
period or the immediately preceding fiscal year of such entity, was engaged in
the unregulated marketing, gathering, transportation or processing of natural
gas or derivatives of natural gas or other hydrocarbons or electricity. For
purposes of this paragraph, the following entities shall be deemed to not be
competitors of the Company: (i) a Local Distribution Company ("LDC") to the
extent that any purchases or sales by such LDC are only for consumption on its
system; (ii) a natural gas producer to the extent that such producer sells only
its own production or production of other working interest owners in wells in
which it owns an interest; (iii) a natural gas pipeline company in the
jurisdictional aspects of its business, I.E., other than a nonjurisdictional
marketing affiliate or production affiliate (except as to such production
affiliates own production as described in clause (ii) of this Paragraph 4(c)).
(d) For a period of two years after the expiration or termination
of your employment for whatever reason, you shall not induce or otherwise entice
any employee of the Company to leave the Company, nor shall you attempt to hire
any of the Company's employees.
(e) The foregoing restrictions contain reasonable limitations as
to the time, geographical area, and scope of activity to be restrained and that
these restrictions do not impose any greater restraint than is necessary to
protect the goodwill and other legitimate business interests of the Company,
including but not limited to the protection of Confidential Information. Should
any provision in this Paragraph 4 be held unreasonably broad with respect to the
restrictions as to time, geographical area, or scope of activity to be
restrained, any such restriction shall be construed by limiting and reducing it
to the extent necessary to render it reasonable, and as so construed, such
provision shall be enforced.
5. OTHER PROVISIONS
(a) This agreement will be governed by, construed and enforced in
accordance with the laws of the state of Texas, excluding any conflicts of law,
rule or principle that might otherwise refer to the substantive law of another
jurisdiction.
(b) Except as otherwise indicated, this Agreement is not
assignable without the written authorization of both parties; provided that the
Company may assign this Agreement to any entity to which the Company transfers
substantially all of its assets
<PAGE>
Mr. Steve Furbacher
April 2, 1996
Page 6
or to any entity which is a successor to the Company by reorganization,
incorporation, merger or similar business combination.
(c) Except as otherwise provided herein, the provisions of
Paragraph 4 of this Agreement shall survive the termination of this Agreement.
(d) This Agreement supersedes all previous employment agreements,
written or oral, between the Company and you.
If the foregoing reflects your understanding of the terms of your
employment with the Company, please execute each copy of this letter in the
space provided below.
NGC CORPORATION
By: /s/ C. L. WATSON
C. L. Watson
AGREED AND ACCEPTED this
2nd day of April, 1996,
and effective as of May 22, 1996
/s/ STEVE FURBACHER
Steve Furbacher
<PAGE>
EXHIBIT 10.68
March 15, 1996
Mr. Mark Hazelwood
28876 King Arthur's Court
Rancho Palos Verdes, CA 90275
Dear Mark:
Subject to the ratification of this employment agreement by the
Compensation, Corporate Governance and Human Resources Committee ("Compensation
Committee") of the Board of Directors of NGC Corporation, set forth below are
the terms of your proposed employment by NGC Corporation (hereinafter referred
to collectively as "NGC" or the "Company").
1. TITLE AND DUTIES
Your title shall be President of Electric Clearinghouse, Inc.
and Senior Vice President of NGC Corporation. Your duties will include such
duties as may be delegated from time to time by your immediate supervisor. The
Company may change your title, duties or reporting at any time so long as any
such change does not affect the term of this Agreement or reduce the
compensation payable hereunder.
2. TERM
(a) Unless earlier terminated as provided for herein, the term
of this Agreement will be for five years, beginning on April 15, 1996, (the
"Primary Term").
(b) If your employment with NGC is terminated due to your
voluntary resignation or if your employment is terminated for cause, this
Agreement shall terminate immediately (except for the confidentiality,
non-competition and non-solicitation provisions of Paragraph 4), and the Company
shall have no further obligation to you except for the payment to you of amounts
due before the date of such termination. You further agree that the benefits
which you have received from the execution of this agreement through the date of
such termination constitute sufficient consideration for your obligations
pursuant to Paragraph 4, notwithstanding the fact that the Company has no
further obligation to you except for the payment to you of amounts due before
the date of such termination. For purposes of this Agreement, you may be
terminated for
Mr. Mark Hazelwood
March 15, 1996
Page 2
cause as a result of (i) dishonesty or similar serious misconduct, directly
related to the performance of duties for the Company, which results from a
willful act or omission and which is materially injurious to the operations,
financial condition or business reputation of the Company or any significant
subsidiary thereof; (ii) your being convicted (or entering into a plea bargain
admitting criminal guilt) in any criminal proceeding; (iii) your drug or alcohol
abuse, or (iv) any other material breach of this Agreement by you not cured
within ten days after written notice of such breach to you from the Company.
(c) If your employment is terminated during the Primary Term
for any reason other than your voluntary resignation or discharge for cause, you
shall receive as your sole compensation (i) your base salary and guaranteed
bonus for (x) the remainder of the Primary Term or (y) two years from the date
of termination; whichever is shorter; and (ii) the Additional Compensation set
forth in Paragraph 3(c) subject to the terms and conditions set forth in
Paragraph 3(c). The confidentiality, non-competition and non-solicitation
provisions of Paragraph 4 shall remain in effect during the period of such
payments.
(d) If you die or become disabled and cannot perform your
duties, you (or your estate) shall be entitled to the Base Salary (as defined in
Paragraph 3(a)) payable to you hereunder for three months following the month in
which you die or become disabled, plus the amount of any Guaranteed Minimum
Payments (as defined in Paragraph 3(b)) guaranteed pursuant to Paragraph 3(b)
for the year of death or disability, prorated through the date of death or
disability. For purposes of this Agreement, you shall be disabled as of the
first date on which you become eligible to receive disability benefits under the
Company's long-term disability plan or Social Security benefits at a time when
the Company does not maintain a long-term disability plan or such plan is not
available to you.
3. COMPENSATION
(a) Each year during the Primary Term hereof, you will be paid
a base salary of $250,000 per annum at a minimum ("Base Salary"), payable in
accordance with the Company's payroll guidelines. Increases may be made to your
base pay at the discretion of the Company based upon your individual
performance.
(b) You shall be a participant in the Company's bonus plan.
You shall receive a guaranteed bonus of at least $100,000 per year during the
five year contract term (pro-rated for the portion of a contract year occurring
during any calendar year). Thereafter you will be eligible to participate in the
bonus plan, but there will be no guaranteed bonus amount.
Mr. Mark Hazelwood
March 15, 1996
Page 3
(c) In consideration of your obligations under Paragraph 4 of
this Agreement, you shall be entitled to receive additional compensation equal
to $1,500,000 in value (the "Additional Compensation"), under the following
terms and conditions:
(i) Such Additional Compensation
will be payable on or before the end of the Primary
Term of this Agreement and will be subject to
forfeiture in the event that (i) your employment with
the Company is terminated for cause or as a result of
your voluntary resignation or as a result of death or
disability or (ii) you do not comply with your
obligations under Paragraph 4;
(ii) The Additional Compensation may
be paid in cash or may be in the form of an award
under NGC Corporation's Employee Equity Option Plan
(EEOP) subject to the vesting, forfeiture and other
terms and conditions of the EEOP, or any securities
of the company of a class outstanding at the time of
award;
(iii) To the extent that your base salary and bonus
exceeds the amounts specified as your Base Salary and
guaranteed bonus as set forth in Paragraphs 3(a) and
3(b) in any calendar year, such excess shall be
deemed to be Additional Compensation hereunder and
shall be credited against the aggregate Additional
Compensation to which you are entitled.
(d) The Company shall pay your reasonable relocation expenses
to Houston, Texas, in accordance with the Company's current relocation policy.
The Company's current relocation policy will pay for your reasonable temporary
living expenses in Houston, brokerage and other related fees incurred in selling
your California home and moving expenses. The Company will also pay you an
amount equal to the difference between (x) the purchase price of your current
home in California (excluding improvements thereon) and (y) the net proceeds to
you from the sale of such home with the amount of such payment not to exceed
$100,000.
(e) The Company agrees to pay up to an additional $5,000 on
your behalf for the purpose of providing additional life insurance and
disability insurance coverage.
(f) You shall receive as a perquisite a country club
membership.
(g) You shall be entitled to participate in such other plans
and receive such other prerequisites as the Board of Directors of the Company in
its discretion determines.
Mr. Mark Hazelwood
March 15, 1996
Page 4
4. CONFIDENTIALITY
You recognize and acknowledge that:
(a) You will have access to certain information concerning the
Company that is confidential and proprietary and constitutes valuable and unique
property of the Company. You agree that you will not at any time, either during
or after your employment, disclose to others, use, copy or permit to be copied,
except in pursuance of your duties on behalf of the Company or their successors,
assigns or nominees, any secret or confidential information of the Company
(whether or not developed by you) without the prior written consent of the Board
of Directors of the Company. The term "secret or confidential information of the
Company" (referred to collectively as "Confidential Information") shall include,
without limitation, the Company's plans, strategies, potential acquisitions,
costs, prices, systems for buying, selling, and/or trading natural gas, natural
gas liquids, crude oil, and electricity, client lists, pricing policies,
financial information, the names of and pertinent information regarding
suppliers, computer programs, policy or procedure manuals, training and
recruiting procedures, accounting procedures, the status and content of the
Company's contracts with their suppliers or clients, or servicing methods and
techniques at any time used, developed, or investigated by the Company, before
or during your tenure of employment to the extent any of the foregoing are (i)
not generally available to the public and (ii) maintained as confidential by the
Company. You further agree to maintain in confidence any confidential
information of third parties received as a result of your employment and duties
with the Company.
(b) At the termination of your employment you will deliver to
the Company, as appropriate, all correspondence, memoranda, notes, records,
client lists, computer systems, programs, or other documents and all copies
thereof (collectively, the "Documents"), made, composed or received by you,
solely or jointly with others, and which are in your possession, custody, or
control at such date and which are related in any manner to the past, present,
or anticipated business of the Company.
(c) To protect and safeguard the Company's trade secrets and
confidential information and also the Company's goodwill with its suppliers and
clients, during the remainder of the Primary Term of this Agreement (but in no
event more than twenty-four (24) months), you will not, within a 50 mile radius
of any location where the company had an office at any time during the term
hereof or any location where a client or supplier of the Company (which is a
client or supplier at any time during the term hereof) had an office at any time
during the term hereof, without the prior written consent of the Board of
Directors of the Company, directly or indirectly, engage in or be interested in
(as owner, partner, shareholder, employee, director, agent, consultant
Mr. Mark Hazelwood
March 15, 1996
Page 5
or otherwise), any business which is a competitor of the Company, as hereinafter
defined. For purposes of this Agreement, a "competitor of the Company" is any
entity, including without limitation a corporation, sole proprietorship,
partnership, joint venture, syndicate, trust or any other form of organization
or a parent, subsidiary or division of any of the foregoing, which, during such
period or the immediately preceding fiscal year of such entity, was engaged in
the unregulated marketing, gathering, transportation or processing of natural
gas or derivatives of natural gas or other hydrocarbons or electricity. For
purposes of this paragraph, the following entities shall be deemed to not be
competitors of the Company: (i) a Local Distribution Company ("LDC") to the
extent that any purchases or sales by such LDC are only for consumption on its
system; (ii) a natural gas producer to the extent that such producer sells only
its own production or production of other working interest owners in wells in
which it owns an interest; (iii) a natural gas pipeline company in the
jurisdictional aspects of its business, I.E., other than a nonjurisdictional
marketing affiliate or production affiliate (except as to such production
affiliates own production as described in clause (ii) of this Paragraph 4(c)).
(d) For a period of two years after the expiration or
termination of your employment for whatever reason, you shall not induce or
otherwise entice any employee of the Company to leave the Company, nor shall you
attempt to hire any of the Company's employees.
(e) The foregoing restrictions contain reasonable limitations
as to the time, geographical area, and scope of activity to be restrained and
that these restrictions do not impose any greater restraint than is necessary to
protect the goodwill and other legitimate business interests of the Company,
including but not limited to the protection of Confidential Information. Should
any provision in this Paragraph 4 be held unreasonably broad with respect to the
restrictions as to time, geographical area, or scope of activity to be
restrained, any such restriction shall be construed by limiting and reducing it
to the extent necessary to render it reasonable, and as so construed, such
provision shall be enforced.
5. OTHER PROVISIONS
(a) This agreement will be governed by, construed and enforced
in accordance with the laws of the state of Texas, excluding any conflicts of
law, rule or principle that might otherwise refer to the substantive law of
another jurisdiction.
(b) Except as otherwise indicated, this Agreement is not
assignable without the written authorization of both parties; provided that the
Company may assign this Agreement to any entity to which the Company transfers
substantially all of its assets
Mr. Mark Hazelwood
March 15, 1996
Page 6
or to any entity which is a successor to the Company by reorganization,
incorporation, merger or similar business combination.
(c) Except as otherwise provided herein, the provisions of
Paragraph 4 of this Agreement shall survive the termination of this Agreement.
(d) This Agreement supersedes all previous employment
agreements, written or oral, between the Company and you.
If the foregoing reflects your understanding of the terms of your
employment with the Company, please execute each copy of this letter in the
space provided below.
NGC CORPORATION
By: C. L. WATSON
AGREED AND ACCEPTED this
15th day of March, 1996,
and effective as of March 15, 1996
/s/ MARK HAZELWOOD
OFFICE LEASE
at
FIRST INTERSTATE BANK PLAZA
Between
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC. (LANDLORD)
And
NGC CORPORATION (TENANT)
DATED: _______________, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE ONE BASIC LEASE PROVISIONS.......................................... 1
1.01 BASIC LEASE PROVISIONS........................... 1
1.02 ENUMERATION OF EXHIBITS.......................... 1
1.03 DEFINITIONS...................................... 2
ARTICLE TWO PREMISES, TERM AND FAILURE
TO GIVE POSSESSION AND TAX ABATEMENT................................... 4
2.01 LEASE OF PREMISES................................ 4
2.02 TERM............................................. 5
2.03 DELIVERY CONDITION OF PREMISES................... 5
ARTICLE THREE RENT.......................................................... 5
ARTICLE FOUR RENT ADJUSTMENT................................................ 5
4.01 RENT ADJUSTMENT.................................. 5
ARTICLE FIVE SECURITY DEPOSIT............................................... 5
ARTICLE SIX SERVICES........................................................ 6
6.01 SERVICES TO BE FURNISHED BY LANDLORD............. 6
6.02 ELECTRICAL SERVICES.............................. 8
6.03 TELEPHONE SERVICES............................... 8
ARTICLE SEVEN USE AND CONDITION OF PREMISES................................. 9
7.01 USE OF PREMISES.................................. 9
7.02 LANDLORD ACCESS TO PREMISES...................... 10
7.03 QUIET ENJOYMENT.................................. 10
ARTICLE EIGHT MAINTENANCE................................................... 10
8.01 LANDLORD'S MAINTENANCE........................... 10
8.02 TENANT'S MAINTENANCE............................. 11
ARTICLE NINE ALTERATIONS AND IMPROVEMENTS................................... 11
9.01 TENANT'S ALTERATIONS............................. 11
9.02 LIENS............................................ 11
ARTICLE TEN ASSIGNMENT AND SUBLETTING....................................... 12
10.01 ASSIGNMENT AND SUBLETTING........................ 12
10.02 TENANT LIABILITY................................. 13
10.03 ASSUMPTION AND ATTORNMENT........................ 13
ARTICLE ELEVEN DEFAULT AND REMEDIES......................................... 13
11.01 EVENTS OF DEFAULT AND REMEDIES................... 13
11.02 ATTORNEY'S FEES.................................. 16
11.03 BANKRUPTCY....................................... 16
ARTICLE TWELVE SURRENDER OF PREMISES........................................ 16
12.01 IN GENERAL....................................... 16
12.02 LANDLORD'S RIGHTS................................ 16
ARTICLE THIRTEEN HOLDING OVER............................................... 16
13.01 HOLDING OVER..................................... 16
ARTICLE FOURTEEN DAMAGE BY FIRE OR OTHER CASUALTY........................... 17
14.01 CASUALTY DAMAGE.................................. 17
ARTICLE FIFTEEN EMINENT DOMAIN.............................................. 18
15.01..................................................... 18
ARTICLE SIXTEEN INSURANCE................................................... 18
16.01 TENANT'S INSURANCE............................... 18
16.02 FORM OF POLICIES................................. 18
16.03 LANDLORD'S INSURANCE............................. 18
16.04 WAIVER OF SUBROGATION............................ 19
16.05 NOTICE OF CASUALTY............................... 19
ARTICLE SEVENTEEN LIABILITY................................................. 19
17.01 LIABILITY........................................ 19
ARTICLE EIGHTEEN RULES AND REGULATIONS...................................... 20
18.01 RULES............................................ 20
18.02 ENFORCEMENT...................................... 20
ARTICLE NINETEEN LANDLORD'S RESERVED RIGHTS................................. 20
19.01 RESERVED RIGHTS.................................. 20
ARTICLE TWENTY ESTOPPEL CERTIFICATE......................................... 20
20.01 IN GENERAL......................................... 20
20.02 ENFORCEMENT........................................ 20
ARTICLE TWENTY-ONE RELOCATION OF TENANT..................................... 20
ARTICLE TWENTY-TWO REAL ESTATE BROKERS...................................... 20
ARTICLE TWENTY-THREE MORTGAGEE PROTECTION................................... 21
23.01 SUBORDINATION AND ATTORNMENT..................... 21
23.02 MORTGAGEE PROTECTION............................. 21
ARTICLE TWENTY-FOUR NOTICES................................................. 21
ARTICLE TWENTY-FIVE MISCELLANEOUS........................................... 22
25.01 LATE CHARGES..................................... 22
25.02 WAIVER OF JURY TRIAL............................. 22
25.03 DEFAULT UNDER OTHER LEASE........................ 22
25.04 OPTION........................................... 22
-i-
25.05 AUTHORITY........................................ 22
25.06 ENTIRE AGREEMENT................................. 22
25.07 MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE... 22
25.08 EXCULPATION...................................... 22
25.09 ACCORD AND SATISFACTION.......................... 22
25.10 LANDLORD'S OBLIGATIONS ON SALE OF BUILDING....... 22
25.11 BINDING EFFECT................................... 22
25.12 CAPTIONS......................................... 22
25.13 APPLICABLE LAW................................... 23
25.14 VACATION OF PREMISES............................. 23
25.15 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES...... 23
25.16 PARKING.......................................... 23
25.17 SIGNAGE.......................................... 23
25.18 EXPANSION OPTIONS................................ 23
25.19 CONTRACTION OPTION............................... 23
25.20 PREFERENTIAL RIGHTS.............................. 23
25.21 RENEWAL OPTIONS.................................. 23
25.22 PRESS RELEASE.................................... 23
25.23 MEMORANDUM OF LEASE.............................. 23
25.24 ROOFTOP ANTENNA.................................. 23
-ii-
OFFICE LEASE
ARTICLE ONE
BASIC LEASE PROVISIONS
1.01 BASIC LEASE PROVISIONS - In the event of any conflict between these
Basic Lease Provisions and any other Lease provision, such other Lease
provision shall control.
(1) BUILDING AND ADDRESS: First Interstate Bank Plaza, 1000 Louisiana
Street, Houston, Texas 77002.
(2) LANDLORD: Metropolitan Life Insurance Company, a New York corporation,
and Metropolitan Tower Realty Company, Inc., a Delaware
corporation, as tenants in common.
(3) TENANT:
(a) Name: NGC Corporation
(b) State of incorporation or partnership: Delaware
(4) DATE OF LEASE: _______________________________, 1996
(5) LENGTH OF LEASE TERM: approximately 132 months.
(6) PROJECTED COMMENCEMENT DATE: January 1, 1997, subject to the terms
hereof.
(7) PROJECTED EXPIRATION DATE: December 31, 2007, subject to the terms
hereof.
(8) BASE RENT: The base rental rate per annum shall be as follows:
LEASE YEARS RATE/SF OF RENTABLE AREA
1-2 $ 0.00
3-11 $15.595
(9) PREMISES shall mean collectively the following:
FLOOR SQUARE FOOT OF RENTABLE AREA
The entirety of the sixtieth floor 24,726 square feet
The entirety of the sixty-first floor 25,191 square feet
The entirety of the sixty-second floor 25,851 square feet
The entirety of the sixty-third floor 26,119 square feet
The entirety of the sixty-fourth floor 26,119 square feet
The entirety of the sixty-fifth floor 26,119 square feet
The entirety of the sixty-sixth floor 26,119 square feet
The entirety of the sixty-seventh floor 26,119 square feet
all as outlined on the floor plans attached to this Lease as EXHIBIT "B", and
incorporated herein. The Premises are stipulated for all purposes and shall be
deemed to contain 206,363 square feet of Rentable Area, and irrespective of the
actual square feet of Rentable Area or Usable Area that might otherwise be
calculable pursuant to this Lease or otherwise, such stipulated amounts of
Rentable Area shall be the amounts utilized for all applicable purposes in this
Lease. The Premises shall include but not be limited to (i) with respect to each
single tenant floor, the restrooms on such floor, and (ii) with respect to every
square foot of space, the entire vertical space from the top of the concrete
floor slab to the bottom of the next higher concrete floor slab. This Lease
provides Tenant certain options and rights to lease additional space in the
Building. Upon the Tenant leasing any such space in strict accordance with and
under the terms and conditions expressly stated herein but not otherwise, the
Rentable Area of such space shall be deemed to be a part of the Premises.
(10) SECURITY DEPOSIT: $0.00.
(11) TENANT'S USE OF PREMISES: As set forth in Section 7.01.
1.02 ENUMERATION OF EXHIBITS
The exhibits and riders set forth below and attached to this Lease are
incorporated in this Lease by this reference:
EXHIBIT A. Legal Description of Land
EXHIBIT B. Plan of Premises
EXHIBIT C. Workletter Agreement
EXHIBIT D. Rules and Regulations
EXHIBIT E. Parking
EXHIBIT F. Signage
EXHIBIT G. Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT H. Expansion Option
EXHIBIT I. Contraction Option
EXHIBIT J. Preferential Expansion Rights
EXHIBIT K. Renewal Options
EXHIBIT L. Janitorial Cleaning Specifications
EXHIBIT M. Certificate of Commencement Date
EXHIBIT N. Rent Adjustment
EXHIBIT O. Cafeteria Rules and Regulations
EXHIBIT P. Memorandum of Lease
EXHIBIT Q. Intentionally Deleted
EXHIBIT R. MG Corporation Property for Removal
EXHIBIT S. Current Building Standard
EXHIBIT T. Rooftop Antenna
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1.03 DEFINITIONS
For purposes hereof, the following terms shall have the following meanings:
ACTIVE NEGOTIATIONS: "Active Negotiations" shall mean as between Landlord and
any Third Party Prospect, material negotiations consisting of written
communications concerning the business terms and issues relating to a Third
Party Tenant Lease in the Building which are reasonably continual, other than
general solicitation letters to potential tenants to which the receiving tenant
does not respond within thirty (30) days. Such negotiations and written
communication shall be deemed to be reasonably continual if no more than thirty
(30) days' continuous interruption has occurred in communications during any
negotiations or following any date of delivery of proposals or response to
proposals or inquiries from either Landlord to the Third Party Prospect or vice
versa, whether directly or through their representatives or, if applicable, real
estate brokers, consultants and/or managers.
ADDITIONAL AREA: is defined in Paragraph 4 of EXHIBIT "E".
AFFILIATE: Any corporation or other business entity which is currently owned or
controlled by, owns or controls, or is under common ownership or control with
the entity for which affiliation is determined.
ALLOWANCE: "Allowance" shall mean an amount equal to the product of up to $25.00
times the number of square feet of Rentable Area included in the Premises plus
the one time sum of $165,782.00. Tenant may, by notifying Landlord of its
election in writing, elect to have Landlord increase the Allowance by an amount
not to exceed $5.00 per square foot of Rentable Area included in the Premises
("Allowance Increase"). In the event that Tenant elects to receive an Allowance
Increase, the Base Rent will be increased by $.17 per square foot of Rentable
Area of the Premises for each $1.00 of Allowance Increase per square foot of
Rentable Area of the Premises. If Landlord pays an Allowance Increase,
thereafter, references herein to the "Allowance" shall include the sum of the
initial Allowance and the Allowance Increase.
BUILDING: The office building located upon the Land.
BUILDING STANDARD: At the time of execution of this Lease, Building Standard is
that standard of type, brand, quality and/or quantity identified on EXHIBIT "S"
attached hereto. Building Standard may change after the date of the Lease and,
except where otherwise specifically already designated in this Lease, shall be
the type, brand, quality and/or quantity of materials and improvements that
Landlord designates from time to time, to be the minimum quality and standard
quantity constructed in or permitted to be constructed in the Building.
CAFETERIA RULES AND REGULATIONS: Is defined in EXHIBIT "O".
CENTRE: (Not Applicable)
COMMENCEMENT DATE: For specific space the earlier of (i) the date Tenant first
occupies such portion of the Premises for the purposes contemplated in Section
7.01(a) of this Lease, or (ii) January 1, 1997, which shall for all purposes be
the date the Term commences for such specific space. Notwithstanding the January
1, 1997 date aforesaid, as to any space within the Initial Premises which is
delivered to Tenant later than the respective Delivery Date for such space as
specified in Section 2.03(b), then the Commencement Date as to each such
respective space shall be the earlier of (1) the date which is the number of
days after January 1, 1997 equal to the aggregate number of days of Landlord
Delay and Excusable Commencement Delay, or (2) the date Tenant first occupies
such space for the purposes contemplated in Section 7.01(a) of this Lease. The
earlier of (i) the date Tenant first occupies at least fifty percent (50%) of
the Initial Premises for the purposes contemplated in Section 7.01(a) of this
Lease, or (ii) January 1, 1997 (as extended by Landlord Delay and Excusable
Commencement Delay, as aforesaid) shall for all purposes be the date the Term is
deemed to commence for the purposes of determining the Expiration Date of the
Lease ("Term Commencement Date").
COMMON AREAS: All areas of the Real Property made available by Landlord from
time to time for the general common use or benefit of the tenants of the
Building, and their employees and invitees, or the public, as such areas
currently exist and as they may be changed from time to time.
CRITICAL SERVICES: shall mean (i) HVAC substantially in accordance with Section
6.01(b), (ii) Electrical Services substantially in accordance with Section 6.02,
(iii) water (other than for drinking fountains) and sewer for restrooms, (iv)
reasonable access to the Building and elevator service to each floor of the
Premises, and (v) parking in the Parking Garage pursuant to EXHIBIT "E" (unless
the reasonable equivalent of such parking spaces is provided elsewhere in the
Houston Central Business District).
CUMULATIVE AREA: Is defined in Paragraph 8 of EXHIBIT "J."
DECORATION: Tenant Alterations which do not require a building permit and which
do not involve any of the structural elements of the Building, or any of the
Building's systems, including, without limitation, its electrical, mechanical,
plumbing and security and life/safety systems.
DEFAULT RATE: The lesser of fifteen percent (15%) per annum, compounded monthly,
or the maximum interest rate permitted by law..
ENVIRONMENTAL LAWS: Any Law governing the use, storage, disposal or generation
of any Hazardous Material, including without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended and
the Resource Conservation and Recovery Act of 1976, as amended.
EXCESS: Is defined in EXHIBIT "N."
EXCUSABLE COMMENCEMENT DELAY: Each day of delay in completion of the Tenant
Improvements which prevents the occupancy of the Premises by Tenant for normal
business purposes solely caused by non-local strikes, riots, acts of God, war,
governmental decree, court orders or injunctions or other cause beyond the
control of Tenant after the taking of all reasonable preventative measures.
EXCUSABLE DELAYS: Whenever a period of time is herein prescribed for the taking
of any action by a party hereto (other than the payment of money) such party
shall not be liable or responsible for, and there shall be excluded from the
computation of such period of time, any delays ("Excusable Delays") due to
strikes, riots, acts of God, shortages of labor or materials, war, governmental
decree, court orders or injunctions, or any other cause beyond the control of
such party after the taking of all reasonable preventative measures. Upon the
occurrence of any Excusable Delay, the party hereto whose performance is excused
shall promptly give written notice thereof to the other party hereto and shall
take all reasonable measures to overcome the effects of such events or
occurrences. An event of Excusable Delay shall be deemed to have begun on the
later of (i) the occurrence of such event or (ii) the date written notice of
such event is given to the other party hereto.
EXPENSE STOP: The Operating Costs per square foot of Rentable Area in the
Building for the calendar year 1997 (as grossed up in Paragraph 4 of EXHIBIT
"N").
EXPIRATION DATE: The last day of the eleventh (11th) full year following the
Term Commencement Date. (For example, if the Term Commencement Date is January
1, 1997, then the Expiration Date shall be December 31, 2007).
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HAZARDOUS MATERIAL: Such substances, material and wastes which are or become
regulated under any Environmental Law; or which are classified as hazardous or
toxic under any Environmental Law; and explosives and firearms, radioactive
material, asbestos, and polychlorinated biphenyls.
INDEMNITEES: Collectively, Landlord, any Mortgagee or ground lessor of the
Property, the property manager and the leasing manager for the Property and
their respective directors, officers, agents and employees.
INITIAL LEASE TERM: The Term, excluding any portion thereof constituting part of
the Renewal Term.
INITIAL PREMISES: The space located in the Building, described in Section
1.01(9) and depicted on EXHIBIT "B" attached hereto, and stipulated to contain
206,363 square feet of Rentable Area.
LAND: The parcels of real estate on which the Building is located, as legally
described in EXHIBIT "A" attached hereto.
LANDLORD DELAY: (a) Each day of delay of delivery of the space to Tenant beyond
the Delivery Date for each such space specified in Section 2.03(b), or (b) each
day of delay or in completion of the Tenant Improvements which would prevent
occupancy of the Premises by Tenant for the purposes contemplated in Section
7.01(a) of this Lease, in either event, solely caused by Landlord's failure to
comply with time periods applicable to Landlord set forth in the Workletter or
the other obligations of Landlord under this Lease which materially affect the
ability of Tenant to commence or complete the Tenant Improvements, or which
would prevent the occupancy of the Premises by Tenant for the purposes
contemplated in Section 7.01(a) of this Lease, which delay is so designated by
Tenant in a written notice to Landlord stating with particularity the Landlord
Delay so claimed. Landlord Delay shall begin on the later of (i) the date of
commencement of the delay or failure referred to above, or (ii) the date written
notice of such event is given by Tenant to Landlord.
LANDLORD'S RENT PROPOSAL: Is defined in EXHIBIT "K."
LAWS: All laws, ordinances, orders, rules, regulations, restrictions and other
requirements of or adopted by any governmental or regulatory body, agency or
department having jurisdiction over the Property, the Premises or Tenant's
activities at the Premises and any covenants, conditions or restrictions of
record which affect the Property, including, without limitation, all
requirements of the ADA and the TABA.
LEASE: This instrument and all exhibits and riders attached hereto, as may be
amended from time to time.
LEASE YEAR: The twelve month period beginning on the first day of the first
month following the Commencement Date for a specific portion of the Premises
(unless the Commencement Date for a specific portion of the Premises is the
first day of a calendar month in which case beginning on the Commencement Date
for such specific portion of the Premises), and each subsequent twelve month, or
shorter period (in the case of the final Lease Year) until the Expiration Date.
MONTHLY BASE RENT: The monthly rent specified in Section 1.01(8).
MORTGAGEE: Any holder of a mortgage, deed of trust or other security instrument
encumbering the Real Property.
NATIONAL HOLIDAYS: New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. If, in the case of any holiday set forth
herein, a day other than the day set forth above shall be observed as such
holiday by national banks located in Houston, Texas, then that day observed by
national banks in Houston, Texas as such holiday shall constitute the holiday
under this Lease.
NORMAL BUSINESS HOURS: 7:00 a.m. to 7:00 p.m. Mondays through Fridays, and 8:00
a.m. to 1:00 p.m. on Saturdays, but not on Sundays and exclusive of National
Holidays.
OPERATING COSTS: Is defined in EXHIBIT "N."
PREMISES: The space located in the Building, described in Section 1.01(9) and
depicted on EXHIBIT "B" attached hereto.
PREVAILING MARKET RENTAL RATE: Is defined in EXHIBIT "K."
PROPERTY: The Building, the Land, any other improvements located on the Land,
including, without limitation, any parking structures and the personal property,
fixtures, machinery, equipment, systems and apparatus located in or used in
conjunction with any of the foregoing.
REAL PROPERTY: The Property excluding any personal property.
RELEVANT BUILDINGS: Is defined in EXHIBIT "K."
RENEWAL TERM: Is defined in EXHIBIT "K."
RENT: Collectively, Monthly Base Rent, Rent Adjustments and all other charges,
payments, late fees or other amounts required to be paid by Tenant under this
Lease.
RENTABLE AREA OF THE BUILDING: 1,721,242 square feet.
RENTABLE AREA OF THE PREMISES: The amount of square footage set forth in Section
1.01(9), which represents the sum of (1) the "Usable Area" within the Premises
(i.e., the gross area enclosed by the interior surface of the exterior glass
walls, the mid-point of any walls separating portions of the Premises from those
of adjacent tenants, the slab penetration line separating the Premises from
Service Areas and the corridor side of walls separating the Premises from Common
Areas) plus (2) a pro rata part of the Common Areas within the Building, such
proration to be based upon the ratio of the Usable Area within the Premises to
the total Usable Area within the Building existing as of the date of this Lease,
including the area encompassed by any columns or other structural elements which
provide support to the Premises and/or the Building. Rentable Area shall not
include any Service Areas.
RENT ADJUSTMENT: Any amounts owed by Tenant for payment of Operating Costs. The
Rent Adjustments shall be determined and paid as provided in EXHIBIT "N"
attached hereto.
SECURITY DEPOSIT: (Not applicable)
SERVICE AREAS: "Service Areas" shall mean those areas within the outside walls
used for building stairs, elevator shafts, flues, vents, stacks, pipe shafts and
other vertical penetrations (but shall not include any such areas for the
exclusive use of a particular tenant).
SHELL IMPROVEMENTS: (i) lay-in acoustical ceiling grid with acoustical ceiling
tile inventory stored on the floor on which the Premises are located; (ii)
central air conditioning and heating ducts and diffusers in a placement deemed
typical by Landlord; (iii) lay-in fluorescent light fixtures in a placement
deemed typical by Landlord; (iv) sprinkler heads in a placement deemed typical
by Landlord; and (v) miniblinds.
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SUBSTANTIALLY COMPLETE: The completion of improvements, except for minor
insubstantial details of construction, decoration or mechanical adjustments
which remain to be done and which do not materially affect the use thereof.
TAXES: All federal, state and local governmental taxes, assessments and charges
of every kind or nature, whether general, special, ordinary or extraordinary,
which Landlord shall pay or become obligated to pay because of or in connection
with the ownership, leasing, management, control or operation of the Property or
any of its components, or any personal property used in connection therewith,
which shall also include any rental or similar taxes levied in lieu of or in
addition to general real and/or personal property taxes. For purposes hereof,
Taxes for any year shall be Taxes which are assessed or become a lien during
such year, whether or not such taxes are billed and payable in a subsequent
calendar year. There shall be included in Taxes for any year the amount of all
fees, costs and expenses (including those of any tax consultant and reasonable
attorneys' fees) paid by Landlord during such year in seeking or obtaining any
refund or reduction of Taxes. Taxes for any year shall be reduced by the net
amount of any tax refund received by Landlord attributable to such year. If a
special assessment payable in installments is levied against any part of the
Property, Taxes for any year shall include only the installment of such
assessment and any interest payable or paid during such year. Taxes shall not
include any federal or state inheritance, general income, gift or estate taxes,
except that if a change occurs in the method of taxation resulting in whole or
in part in the substitution of any such taxes, or any other assessment, for any
Taxes as above defined, such substituted taxes or assessments shall be included
in the Taxes.
TEMPORARY OFFICE SPACE: Is defined in Section 2.01(b).
TEMPORARY STORAGE SPACE: Is defined in Section 2.01(c).
TENANT ALTERATIONS: Any alterations, improvements, additions, installations or
construction in or to the Premises or any Building systems serving the Premises
pursuant to Section 9.01.
TENANT IMPROVEMENTS: Are defined in the Workletter.
TENANT'S RENT PROPOSAL: Is defined in EXHIBIT "K."
TERM: The term of this Lease commencing on the Term Commencement Date and
expiring on the Expiration Date.
TERM COMMENCEMENT DATE: The date defined within the definition of Commencement
Date above.
TERMINATION DATE: The Expiration Date or such earlier date as this Lease
terminates or Tenant's right to possession of the Premises terminates.
TERMINATION FEE: Is defined in Section 2.01(d).
THIRD PARTY PROSPECT: Is defined in EXHIBIT "J."
UPS: Is defined in Section 6.02(f).
WASTE MANAGEMENT REQUIREMENTS: Are defined in Section 7.01(c).
WORKLETTER: The Agreement regarding the manner of completion of the Initial
Improvements, attached hereto as EXHIBIT "C".
THIRD PARTY TENANT LEASE: Is defined in EXHIBIT "J."
ARTICLE TWO
PREMISES, TERM AND FAILURE TO GIVE POSSESSION AND TAX ABATEMENT
2.01 LEASE OF PREMISES
(a) Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises for the Term and upon the conditions provided in this
Lease. In the event Landlord delivers possession of the Premises to Tenant prior
to the Commencement Date, Tenant shall be subject to all of the terms, covenants
and conditions of this Lease (except with respect to the payment of Rent) as of
the date of such possession.
(b) Landlord hereby grants Tenant the option to lease the entirety of
the 44th Floor and/or the 45th Floor in the Building ("Temporary Office Space")
for the purpose of providing temporary office space during construction of the
Tenant Improvements, by notice delivered to Landlord not later than August 1,
1996. Failure of Tenant to deliver such notice by such date shall automatically
terminate Tenant's rights to this option. In the event Tenant elects to exercise
this option by written notice to Landlord, such lease will be subject to all of
the terms and conditions of this Lease, except: (i) the rental rate per square
foot of Rentable Area shall be $3.00 per year (or prorated for any part
thereof); (ii) the Temporary Office Space shall be delivered and rented on an
"AS IS" basis and Landlord shall have no obligation whatsoever for providing any
improvements or funds for improvement to the Temporary Office Space; (iii) the
term of the lease on the Temporary Office Space shall be from the date Tenant
begins its occupancy of such space until the occurrence of the Commencement Date
regarding the final portion of the Initial Premises to be occupied (or such
earlier date as this Lease is terminated). In no event shall Tenant have
additional parking rights in connection with the Temporary Office Space.
(c) Landlord hereby grants Tenant the option to lease up to 25,000
square feet in the Building ("Temporary Storage Space"), which may be on one or
more floors, for the purpose of providing Tenant storage space. The location of
the Temporary Storage Space will be designated by Landlord in its sole
discretion. In the event Tenant elects to exercise this option by written notice
to Landlord, such lease on the Temporary Storage Space will be subject to all of
the terms and conditions of this Lease, except (i) the rental rate for the
Temporary Storage Space will be equal to the Operating Costs for such space
during the term of Tenant's lease of the Temporary Storage Space and shall be
paid monthly; (ii) the Temporary Storage Space will be delivered and rented on
an "AS IS" basis and Landlord shall have no obligation whatsoever for providing
any services (other than freight elevator services), improvements, or funds for
improvement to the Temporary Storage Space; and (iii) the term of the lease of
the Temporary Storage Space shall, at Landlord's option, terminate on or after
the date that ninety percent (90%) of the Rentable Area of the Building is under
lease. Landlord may require the Tenant to relocate the Temporary Storage Space
to any space within the Building at any time and from time to time following
thirty (30) days written notice to Tenant. Tenant shall be solely responsible
for any costs incurred in relocating the Temporary Storage Space. Tenant may
terminate its lease of the Temporary Storage Space at any time upon thirty (30)
days written notice to Landlord. In no event shall Tenant have any additional
parking rights in connection with the Temporary Storage Space.
(d) Provided Tenant does not receive from the City of Houston and
Harris County, Texas, a tax abatement for Tenant's personal property on the
Premises, and further provided Tenant delivers to Landlord an amount equal to
the sum of (i) $2,100,000.00, plus (ii) the total of all amounts expended by
Landlord pursuant to the provisions of the EXHIBIT "C" Workletter ("Termination
Fee"), Tenant shall have the option, which must, in any event, be exercised by
delivery of written notice to Landlord on or before forty-five (45) days after
the date hereof, to terminate this Lease and all
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of Tenant's obligations hereunder (except obligations in this Lease which by
their terms, survive the termination of this Lease and the obligations in this
Section 2.01(d). In no event shall Landlord be obligated to pay any commissions
in connection with this Lease until after forty-five (45) days after the date
hereof, and then only if Tenant has not exercised its option to terminate
provided in this Section 2.01(d). Further, in the event Tenant elects to
exercise its option to terminate this Lease pursuant to this Section 2.01(d), no
commission shall be due on the Termination Fee.
(e) In no event shall Landlord have any liability or responsibility
under any tax abatement agreements entered into by Tenant and Tenant agrees to
reimburse Landlord all costs and expenses (including attorneys' fees and
expenses) incurred by Landlord in connection with any tax abatement agreements
affecting the Building or Tenant. FURTHER, TENANT AGREES TO INDEMNIFY AND HOLD
LANDLORD HARMLESS FROM ANY AND ALL LIABILITY, CLAIMS, OR DAMAGES (INCLUDING
ATTORNEYS' FEES AND EXPENSES) FOR LEASING COMMISSIONS DUE OR ALLEGED TO BE DUE
IN CONNECTION WITH THIS LEASE IF THIS LEASE IS TERMINATED AS PROVIDED IN SECTION
2.01(D), OR IN CONNECTION WITH THE TERMINATION FEE REQUIRED TO BE PAID BY TENANT
IF IT ELECTS TO EXERCISE ITS OPTION TO TERMINATE PROVIDED IN SECTION 2.01(D).
2.02 TERM
(a) Notwithstanding the fact that the Commencement Date will occur at a
date subsequent to the date of execution of this Lease, all rights under this
Lease shall vest upon execution hereof by both parties and the leasehold estate
created by this Lease shall be fully binding and in full force and effect from
the date of execution of this Lease and continuing until the expiration of the
Term, unless this Lease is sooner terminated or extended to a later date under
any other term or provision hereof.
(b) If, as the sole result of Landlord Delay, the Commencement Date for
each of Floors 60 through 67, inclusive, has not occurred by September 1, 1997
(as same may be extended by Excusable Delay), then thereafter Tenant shall have
the right to terminate this Lease by giving written notice thereof to Landlord
at any time prior to the date Landlord delivers the entirety of Floors 60
through 67, inclusive, to Tenant.
(c) Tenant and Landlord shall execute a Certificate of Commencement
Date in the form attached hereto as EXHIBIT "M" confirming the Commencement Date
for each respective portion of the Premises and, as applicable, the Term
Commencement Date, within thirty (30) days of the occurrence thereof.
2.03 DELIVERY CONDITION OF PREMISES
(a) The Initial Premises (together with all additional space leased
pursuant to EXHIBITS "H" AND "J"), (collectively called the "Space") shall be
delivered to Tenant and accepted by Tenant "AS IS, WITH ALL FAULTS, IF ANY, AND
WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED" and in accordance with the
schedule set forth in Section 2.03(b); provided, that Tenant's sole remedies
with respect to a failure to deliver Space in accordance with the schedule set
forth below shall be a delay in the Commencement Date as provided in the
definition thereof in Section 1.03 and the termination right in Section 2.02(b).
Without limiting the generality of the foregoing, but subject to Landlord's
repair and maintenance obligations set forth in this Lease, Landlord shall
deliver the Space and Tenant shall accept the Space without any warranty or
representation as to (i) the nature or quality of the construction, structural
design and/or engineering of the Building, Basic Construction of the Building or
Space; (ii) the existence of Shell Improvements in all or any portion of the
Premises; (iii) the quality of the labor or material included in the Building,
Basic Construction of the Building and/or Space; (iv) the presence or absence of
any hazardous substance or matter within or about the Building, Basic
Construction of the Building or Space (other than as set forth below); or (v)
the fitness of the Space for the purposes contemplated by Tenant.
(b)
SCHEDULE FOR DELIVERY OF SPACE
FLOORS DELIVERY DATE
Floors 60 through 62 8/1/96
Floors 63 through 64 30 days after lease execution
Floors 65 through 66 8/1/96
Floor 67 9/1/96
(c) Notwithstanding the foregoing, MG Corporation shall be entitled to
remove specific property and fixtures upon its vacation of Floors 65 and 66
which specific property and fixtures are more specifically described on EXHIBIT
"R" attached hereto.
ARTICLE THREE
RENT
Tenant agrees to pay to Landlord at the property management office specified in
Section 24(b)(1), or to such other persons, or at such other places designated
by Landlord by notice given in accordance with the terms of this Lease, without
any prior demand therefor in immediately available funds and without any
deduction whatsoever, Rent, including, without limitation, Monthly Base Rent and
Rent Adjustments in accordance with Article Four, during the Term. Monthly Base
Rent shall be paid monthly in advance on the first day of each month of the
Term. Monthly Base Rent shall be prorated for partial months within the Term. No
interest shall be due on any Unpaid Rent if same is paid prior to the end of any
grace period provided in this Lease, however, unpaid Rent shall bear interest at
the Default Rate from the date due until paid if the same is not paid within any
applicable grace period. Tenant's covenant to pay Rent shall be independent of
every other covenant in this Lease.
ARTICLE FOUR
RENT ADJUSTMENT
4.01 RENT ADJUSTMENT
The Base Rent payable hereunder shall be adjusted ("Rent Adjustment") from time
to time in accordance with EXHIBIT "N" attached hereto.
ARTICLE FIVE
SECURITY DEPOSIT
(Not applicable.)
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ARTICLE SIX
SERVICES
6.01 SERVICES TO BE FURNISHED BY LANDLORD
Landlord agrees to use reasonable efforts to furnish to or for the benefit of
Tenant at or for the benefit of the Premises throughout the Term (other than
when unavailable due to maintenance or repair) the following facilities,
utilities and services, in accordance with the following provisions:
(a) From and after the date when Tenant commences construction of
Tenant Improvements, facilities for hot water and cold domestic water in
restrooms, toilets and other locations (including drinking fountains),
sufficient and of a quality and pressure necessary for lavatory and drinking
fountains; and sewer service for applicable parts of the Premises.
(b) Central heat, ventilation, and air conditioning in season within
tolerances normal for buildings similar to the Building located in the Central
Business District of Houston, Texas. The foregoing notwithstanding, the parties
acknowledge that the design specifications for the Building's central heat,
ventilation, and air conditioning levels upon which such levels of services for
the Building are based on the following: (i) density factors of not more than
one (1) person per one hundred fifty (150) square feet of Usable Area nor more
than 3.5 watts of electrical heat load per square foot of Usable Area of each
area served, inside space conditions of 75(degree) F. dry bulb and 45% relative
humidity when outside conditions are 98(degree) F. dry bulb and 80(degree) wet
bulb; (ii) the total scheduled air conditioning capacity for each floor of the
Premises is no greater than 36 tons; (iii) that said 36 tons of air conditioning
is designed to air condition each such floor to 75(degree) F.D.B. ambient air at
the following interior load conditions: (x) 150 square feet of Usable Area per
person; (y) 2 watts/per square foot of Usable Area lighting load; and (z) 1.5
watts/per square foot of Usable Area power load; and (iv) with respect to
ventilation, is further based upon the following criteria: outdoor air will be
added to the Premises at an approximate rate of 0.10 cubic feet per minute per
square foot of floor area. Notwithstanding the foregoing, Tenant acknowledges
that the 71st Floor of the Building has 27 tons of air conditioning capacity.
All additional central heat, ventilation, and air conditioning required (if any)
to heat, ventilate, or air condition the Premises, or that is otherwise
requested by the Tenant for the Premises which requires additional equipment
and/or which results in Landlord providing additional hot or chilled water (as
the case may be) to service such additional requirements, shall be metered at
Tenant's sole cost and expense, billed to the Tenant on a monthly basis and paid
for by Tenant promptly upon receipt of an invoice therefor. Such additional hot
and chilled water consumption necessitated pursuant to the foregoing will be
determined as measured by BTU meters and submeters installed (at Tenant's cost
as aforesaid) and further maintained in good order and repair all at Tenant's
expense. Heating and air conditioning service at times other than for Normal
Business Hours for the Building shall be furnished only upon the request of
Tenant delivered to Landlord in such general manner as is then in effect for
other tenants in the Building. Landlord shall use reasonable efforts to furnish
to Tenant HVAC services for the Premises during Normal Business Hours. In
addition, Tenant shall bear the cost of additional service ("Additional HVAC
Service Cost"). The Additional HVAC Service Cost is currently $25 per hour per
air handler, which cost is subject to change. The Additional HVAC Service Cost
shall not exceed the then prevailing per hour charge generally charged, from
time to time, by Landlord to other tenants in the Building. Such charges by
Landlord shall be paid as additional Rent with the next following payment of
Monthly Base Rent due hereunder after presentation of a statement therefor by
Landlord.
(c) Routine maintenance and electric lighting service for all Common
Areas and Service Areas of the Building reasonably in keeping with the standards
of comparable Class A high rise office buildings located in the Central Business
District, Houston, Texas.
(d) Janitor service, exclusive of National Holidays, in accordance with
the cleaning specification attached hereto as EXHIBIT "L." Landlord has the
right to reasonably modify the cleaning specifications and adjust such service
as Landlord deems necessary from time to time so long as the level of cleaning
service is not materially reduced. If Tenant's floor covering or other
improvements require special treatment, Landlord shall have no obligation to
service same unless Landlord has entered into an agreement with Tenant to do so,
in which event, Tenant shall pay the additional cleaning cost attributable
thereto as additional Rent with the next following payment of Monthly Base Rent
due hereunder after presentation of a statement therefor by Landlord. Landlord's
provision of janitor service shall in no way reduce Tenant's obligations
regarding waste management required under Section 7.01 of this Lease, and Tenant
agrees to comply with Landlord's requests with respect to waste management as
may be required pursuant to the provisions of said Section 7.01(c).
(e) All fluorescent bulbs, starters and ballasts replacement in the
Premises, which are specified in Section 6.02(a) of this Lease, necessary to
maintain the lighting consistent with such standards and fluorescent and
incandescent bulb replacement in the Common Areas and Service Areas. To the
extent that the bulb replacement in the Premises is other than as so specified
in such standards, then in such event, such bulb replacement shall be provided
by Landlord at Landlord's actual cost of materials and replacement bulbs, plus
an additional administrative charge of fifteen percent (15%) imposed by Landlord
thereon.
(f) Elevator service to each floor of the Premises (and escalator
service between the tunnel and street levels, between floors 34 and 35, and
between floors 58 and 59) for access to and from the floors of the Building upon
which the Premises are located; provided, however, that Landlord may limit the
number of elevators & escalators to be in operation for purposes of inspection,
repair and maintenance and for other similar temporary purposes, but at all
times during Normal Business Hours Landlord shall use reasonable efforts to
provide at least four (4) operational elevators for Tenant's non-exclusive use
and shall during times other than Normal Business Hours provide at least two (2)
operational elevators for Tenant's non-exclusive use. Landlord may require use
of an Entry Card (as described below) to utilize such elevators during times
other than Normal Business Hours, so long as it is the same Entry Card as is
used for access to the Building. Landlord shall cooperate with Tenant in
implementing such reasonable elevator programming and control procedures as
Tenant shall reasonably request in order to ensure elevator service to the
Premises consistent with Tenant's security requirements, all at Tenant's cost.
The freight elevator shall be subject to reasonable scheduling requirements as
may be adopted from time to time by Landlord, consistent with the needs of
Tenant, Landlord and other tenants of the Building. Notwithstanding the
aforesaid, except as provided in the Work Letter the passenger elevators serving
the Premises shall not be used to carry freight, and Tenant shall abide by all
reasonable rules established by Landlord regarding the elevators.
(g) Access to the Building before and after Normal Business Hours in
the form of special limited access entry cards ("Entry Cards") for Tenant, its
permitted sublessees, and their respective employees and other persons
performing services for Tenant for which security purposes Tenant shall be fully
responsible. An Entry Card shall not automatically qualify Tenant or any of its
employees for an access card to the "Parking Garage" as defined in and pursuant
to the terms of EXHIBIT "E." Landlord agrees to provide Tenant with the number
of Entry Cards for access to the Building requested by Tenant, but not in excess
of three (3) cards per 1,000 square feet of the Rentable Area contained within
the Premises. However, Tenant shall pay Landlord for any additional or
replacement cards, in such amount as Landlord shall, from time to time,
reasonably determine. The current cost required for a replacement card is $10.00
per card. Landlord shall be entitled to cancel (by computer entry) any lost or
stolen cards of which it becomes aware, by notice from Tenant. Tenant shall
promptly notify Landlord of any lost or stolen cards. Landlord shall have no
liability to Tenant, its employees, agents, invitees, or licensees for losses
due to theft or burglary, or for damages committed by unauthorized persons on
the Premises; and neither shall Landlord be required to insure against any such
losses. Tenant shall cooperate fully in Landlord's efforts to maintain security
in the Building and shall follow all regulations promulgated by Landlord with
respect thereto. Tenant further agrees to surrender all Entry Cards in
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its possession upon the expiration or earlier termination of this Lease.
Landlord reserves the right, to the extent also applied to other tenants in the
Building, to discontinue the use of Entry Cards at any time.
(h) Subject to the other provisions hereof, security personnel,
equipment, procedures and systems generally consistent with comparable Class A
high-rise office buildings located in the Central Business District of Houston,
Texas. With respect to personnel, security shall include, but not be limited to,
a roving uniformed guard (such person, among other responsibilities, to be
generally available to walk Tenant's employees and/or visitors to their cars
during hours of darkness) in the Parking Garage from 7:00 a.m. to midnight, 7
days per week (exclusive of National Holidays), and at least one (1) stationary
guard as currently located in or about the command operation center currently
located on Level P-2 of the Basement Garage 24 hours per day, (however, Landlord
reserves the right to change the location of the command operation center from
time to time), including weekends and National Holidays. Tenant shall have the
right to install, at its sole cost, expense, and risk (a) access control
equipment compatible with the Building's security system to limit and monitor
after-hours elevator and premises access to any Single Tenant Floor in the
Premises and (b) stairwell access control systems to facilitate Tenant's use of
the Building stairwell for access between and among any floors of the Building
on which Tenant may occupy space. The foregoing notwithstanding, Tenant
acknowledges that it has inspected the Property with respect to the security
services (including the form of Entry Cards and in person security personnel,
from time to time, present on the Property) being provided on the date of this
Lease and Tenant agrees that Landlord need not provide any further security
personnel, equipment, procedures or systems on the date of this Lease.
Furthermore, Tenant acknowledges that the Building's stairwells are non-smoking
areas, and Tenant shall use reasonable efforts to prevent and prohibit Tenant's
employees, agents and invitees from smoking in the stairwells. Furthermore,
Tenant agrees that any access control system installed by Tenant must be
compatible with, tie-into and not interfere with or restrict the Building's
access control system or fire or life-safety systems. Except as set forth in
this Paragraph, Landlord shall not be (i) under any duty of any kind, express or
implied, to provide, on an ongoing basis, security for the Building or any
portions thereof or on any portion of the Property, (ii) obligated to upgrade
any existing security (whether as a result of new technology that may exist or
as may hereafter be developed) in or for other buildings (Class A or otherwise)
whether in the Central Business District of Houston, Texas or elsewhere.
Landlord makes no representation or warranty as to the effectiveness of any
security provided hereunder, either now or in the future (either as to personnel
or as to level or quality of service) or any procedures related thereto, from
all of which Landlord is expressly released from any act or omission.
(i) To the extent that any of the services or amenities required to be
provided by Landlord pursuant to the terms of this Lease require electricity,
gas and water supplied by public utility companies, Landlord's covenants
hereunder shall only impose on Landlord the obligation to furnish whatever
electricity, gas and water the public utility companies furnish. Except as
provided in Section 6.01(j) below and any other applicable provisions of this
Lease, no interruption or malfunction of any utility service shall constitute an
eviction or disturbance of Tenant's use or possession of the Premises or a
breach by Landlord of any of Landlord's obligations hereunder or render Landlord
liable or responsible to Tenant for any loss or damage which Tenant may sustain
or incur if either the quantity or character of any utility service is changed
or is no longer available to or is no longer suitable for Tenant's requirements
or, except as expressly set forth in this Lease, entitle Tenant to be relieved
from any of Tenant's obligations hereunder, including, without limitation, the
obligation to pay Rent, or grant Tenant any right to set-off, abatement, or
recoupment. Failure to any extent to make available, or any slowdown, stoppage,
or interruption of, the specified utility services resulting from any cause,
including, without limitation, Landlord's compliance with any Law, shall not
render Landlord liable in any respect for damages to either persons, property,
or business, nor be construed as an eviction of Tenant or work an abatement of
Rent, nor relieve Tenant of Tenant's obligations for fulfillment of any covenant
or agreement hereof, except as expressly set forth in this Lease. Should any
equipment or machinery furnished by Landlord breakdown or for any cause cease to
function properly, Landlord shall use reasonable diligence to repair same
promptly, but Tenant shall, except as expressly set forth in this Lease, have no
claim for abatement of Rent or damages on account of any interruption of service
occasioned thereby or resulting therefrom.
(j) In the event of an interruption of any of the Critical Services to
the Premises which is not caused by Tenant or Tenant's agents, employees,
officers, contractors, subcontractors, customers or invitees, and which results
in all or any part of the Premises being rendered unusable by Tenant in the same
general manner that the Premises were being used by Tenant immediately prior to
such interruption, then as Tenant's sole and exclusive remedies and relief:
(i) to the extent such interruption continues for three (3)
consecutive business days following receipt by Landlord from
Tenant of notice of the existence of such interruption, Tenant
will be entitled to an equitable abatement of Base Rent and
other Rent commensurate with that portion of the Premises
actually affected by such interruption for such number of
days, calculated on a per square foot of Rentable Area basis,
beginning with the date of such interruption and terminating
the first day after any such interruption is Cured by
Landlord. "Cured" shall mean Landlord, having resumed
furnishing the interrupted Critical Service on a continual
basis to the extent furnished prior to such interruption or
having again rendered the Premises (or relevant portion)
suitable for use by Tenant in the same manner as used prior to
the event giving rise to such interruption, irrespective of
whether or not Tenant then actually recommences use of the
portion of the Premises previously affected; and
(ii) in the event that the interruption of such Critical
Services was not a result of or in connection with fire or
other casualty (in which case the provisions of Article
Fourteen of this Lease rather than this Sub-section shall
apply with respect to Tenant's rights of termination of this
Lease) and to the extent such interruption also results in the
Tenant being unable to use and Tenant actually does not use
the Premises (or relevant portion thereof) and (A) such
interruption and non-use is caused by the gross negligence of
the Landlord, continues to exist on a daily consecutive basis,
and is not Cured by Landlord within three (3) months after
receipt by Landlord of notice from Tenant of the existence of
such interruption, or (B) such interruption and non-use is
caused by a failure of the Critical Services to be furnished
for any reason other than an act or omission of Tenant or
Tenant's agents, employees, officers, contractors,
subcontractors, customers or invitees which failure is not
Cured by Landlord within 180 days after receipt by Landlord of
the aforementioned notice, then Tenant, at its option may
(subject to the other terms set forth below with respect to
Tenant's right of termination), terminate this Lease and all
of its obligations for the remaining balance of the Term of
this Lease with respect only to the portion of the Premises so
affected by such interruption and non-use, by giving written
notice of such termination to Landlord within ten (10) days
from the expiration of the 90-day period or the 180-day
period, as applicable. Provided, however, in the event such
interruption results in Tenant being unable to use and Tenant
actually does not use fifty percent (50%) or more of the
Rentable Area of the Premises, then Tenant, at its option, may
(subject to other terms set forth below with respect to
Tenant's right of termination) terminate this Lease and all of
its obligations for the remaining balance of the Term as to
the entirety of the Premises by giving written notice of such
termination to Landlord within ten (10) days from the
expiration of the 90-day period or the 180-day period, as
applicable. Failure to give such notice within such periods
shall be deemed to be a waiver thereof by Tenant for all
purposes, as the case may be. If Tenant shall elect to
terminate this Lease as provided above, the Base Rent and any
and all other Rent payable by Tenant to Landlord hereunder
shall be apportioned and paid up to the date of such
termination, except as otherwise abated as permitted under the
terms hereof but not otherwise. Any provision of this Lease to
the contrary notwithstanding, the periods of time referred to
in this Section 6.01(j)(ii) shall not be affected by Excusable
Delays.
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If Tenant is entitled to an abatement of Rent for a period for
which Tenant has paid such Rent in advance, Tenant may deduct the amount of such
abatement from any future Rent or, at Tenant's request, Landlord shall refund
such amount to Tenant.
6.02 ELECTRICAL SERVICES
Tenant's use of electrical services furnished by Landlord shall be subject to
the following:
(a) Proper facilities so as to enable the appropriate utility company
to furnish electrical facilities for a total connected load of two (2) watts per
square foot of Usable Area of power for high voltage (277/480v) electrical
requirements ("Tenant's High Voltage Power Load") and four (4) watts per square
foot of Usable Area for low voltage (120/208v single phase) electrical
requirements ("Tenant's Low Voltage Power Load") (Tenant's Low Voltage Power
Load and Tenant's High Voltage Power Load collectively shall mean "Tenant
Standard Electrical Power"). All Tenant Standard Electrical Power shall be
supplied by Landlord and paid for by Tenant as a part of its proportionate share
of Operating Costs; provided, however, any Low Voltage Power consumed in the
Premises in excess of .43 kilowatt hours per square foot of Usable Area within
the Premises per month and any electricity for any item that requires a voltage
other than 120/208v single phase will be considered to be in excess of Tenant's
Low Voltage Power Load and will be separately metered and billed to Tenant on a
monthly basis. All low voltage electrical consumption will be measured by
Landlord or Landlord's representatives, utilizing electrical meters installed
and maintained at Tenant's sole cost and expense. Such low voltage meters shall
be installed on a floor by floor basis, connected to Landlord's central
electrical metering processor and system to facilitate the timely recording and
calculating of Tenant's total electrical consumption to establish Tenant's use
of Tenant's Standard Electrical Power. All electrical consumption in excess of
Tenant's Standard Electrical Power allowance will be billed to Tenant as
additional rent on a monthly basis. Notwithstanding the above, high voltage
power used for Building standard lighting will not be metered unless the
Building standard allowance for lighting (defined as Tenant's High Voltage Power
Load in Tenant Standard Electrical Power described above) is exceeded. Such high
voltage meters shall be installed and maintained at Tenant's sole cost and
expense on a floor by floor basis (meters may be installed to meter electrical
distribution which supplies power to multiple floors to the same tenant),
connected to Landlord's central electrical metering processor and system to
facilitate the time recording and calculating of Tenant's total electrical
consumption to establish Tenant's use of Tenant's Standard Electrical Power.
Meters shall communicate individually to the central processing unit with a
pulsed, voltage or current signal output. All electrical consumption in excess
of Tenant's Standard Electrical Power allowance will be billed to Tenant as
additional rent on a monthly basis.
(b) The electrical facilities in the Building available for Tenant's
use are (i) 277/480 volts, 3 phase, for large equipment loads and fluorescent
lighting; and (ii) 120/208 volts, 3 phase, for small equipment loads and
incandescent lighting. Tenant shall notify Landlord, in writing, of any
equipment that has a rated electrical load greater than 500 watts and/or that
requires a service voltage other than 120 volts, and Landlord's written approval
shall be required with respect to the installation of any such high electrical
consumption equipment in the Premises. Tenant covenants and agrees that at all
times its use of electrical current will never intentionally exceed the Tenant's
proportionate share of the capacity of existing feeders to the Building or the
high rise buss risers or wiring installations.
(c) Notwithstanding the aforesaid, Tenant may elect to upgrade the
electrical capacity serving the Initial Premises to have up to an average total
connected load of 9.0 watts of low voltage electrical capacity per square foot
of Usable Area, 2.5 watts per square foot of Usable Area for high voltage
lighting, 1.75 watts per square foot of Usable Area for computer room HVAC and
fan coil units, and 1.50 watts low voltage per square foot of Usable Area for
additional growth. Should Tenant expand, Tenant shall have the right to
designate one (1) additional floor to have up to 19.5 watts per square foot of
Usable Area combined high and low voltage capacity. All other floors leased by
Tenant during the term may have up to 9.5 watts per square foot of Usable Area
combined high and low voltage capacity. Tenant shall pay for all costs of
meters, submeters, wiring, risers, transformers, electrical panels, air
conditioning and other items required by Landlord, in Landlord's discretion, to
accommodate Tenant's design loads and capacities that exceed Standard Building
Capacity, including, without limitation, the installation and maintenance
thereof. Notwithstanding the foregoing, Landlord may refuse to install and
withhold consent for Tenant's installation of any wiring, risers, transformers,
electrical panels, or air conditioning if, in Landlord's sole judgment, the same
are not necessary or would cause damage or injury to the Building or the
Premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations or repairs to the Building or the
Premises, or would interfere with or create or constitute a disturbance to other
tenants or occupants of the Building. In no event shall Landlord incur any
liability for Landlord's refusal to install, or withholding of consent for
Tenant's installation of, any such electrical facility or equipment.
(d) Tenant shall pay to Landlord, upon demand, the cost of the
consumption of electrical service in excess of the Standard Building Capacity at
rates determined by Landlord which shall be in accordance with any applicable
laws.
(e) Landlord may, at its option, upon not less than thirty (30) days'
prior written notice to Tenant, discontinue the availability of such
extraordinary electrical service. If Landlord gives any such notice, Tenant will
contract directly with the applicable public utility for the supplying of such
electrical service to the Premises.
(f) Subject to the express conditions hereinafter set forth and not
otherwise, Tenant shall have the right to install, maintain and operate, at its
sole cost, expense and risk, an electrical power generator and facilities
related thereto (collectively, the "UPS") to provide emergency power solely for
its operations in the Premises. The express conditions to the right granted to
Tenant in the preceding sentence are: (1) that the exact location,
specifications, exhaustion and venting, installation and manner of operation
thereof shall (i) be subject to the prior written approval of Landlord in its
sole discretion; (ii) be subject in all respects to the terms of this Lease;
(iii) be subject to Tenant obtaining at its sole cost and expense, all permits
and licenses required in connection therewith; (iv) shall be subject to the
strictest compliance by Tenant with all Laws; and (v) be subject to the terms of
the Workletter; (2) that such UPS not affect in any adverse manner, as
reasonably determined by Landlord, or in any way be incompatible with, the
mechanical, electrical, security, life safety and/or plumbing systems of the
Building and the structure of the Building; (3) that such UPS not cause the
discharge or release of any Hazardous Materials or disturb any existing
Hazardous Materials (if any); (4) that the installation, operation (both during
Normal Business Hours and/or thereafter), testing and/or maintenance thereof
shall not cause or create a dangerous or hazardous condition or interfere or
disturb other tenants or occupants of the Building; (5) THAT TENANT AGREES TO
AND DOES HEREBY INDEMNIFY AND HOLD LANDLORD HARMLESS FROM ANY AND ALL
LIABILITIES, LOSSES, COSTS, DAMAGES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS' FEES) INCURRED BY LANDLORD AND ARISING OUT OF ANY CLAIMS
OR CAUSES OF ACTIONS RESULTING FROM SUCH INSTALLATION, OPERATION AND/OR USE of
the UPS; (6) that Landlord shall have no liability of any kind with respect to
such UPS or for any costs of maintenance or repair related thereto; (7) that the
UPS not be visible outside of the Premises, and if any portion thereof is
located outside of the Premises, said portion (and all matters related thereto)
including the aesthetics thereof, be fully satisfactory in all respects, to
Landlord, in Landlord's sole judgment; (8) that Tenant hereby agrees to comply
with all safety and testing procedures necessary or prudent in connection with
the operation of same; and (9) that Tenant hereby agrees to subject itself and
condition its installation, operation and use thereof on all reasonable
requirements, as determined in Landlord's sole judgment, that Landlord may
request in connection therewith.
6.03 TELEPHONE SERVICES
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All telegraph, telephone, and electric connections which Tenant may desire shall
be first approved by Landlord in writing, before the same are installed, and the
location of all wires and the work in connection therewith shall be performed by
contractors approved by Landlord and shall be subject to the direction of
Landlord (except to the extent already approved in the Workletter attached
hereto). Landlord reserves the right to designate and control the entity or
entities providing telephone or other communication cable installation, repair
and maintenance in the Building and to restrict and control access to telephone
cabinets. In the event Landlord designates a particular vendor or vendors to
provide such cable installation, repair and maintenance for the Building, Tenant
agrees to abide by and participate in such program. Tenant shall be responsible
for and shall pay all costs incurred in connection with the installation of
telephone cables and related wiring in the Premises, including, without
limitation, any hook-up, access and maintenance fees related to the installation
of such wires and cables in the Premises and the commencement of service
therein, and the maintenance thereafter of such wire and cables; and there shall
be included in Operating Costs for the Building all installation, hook-up or
maintenance costs incurred by Landlord in connection with telephone cables and
related wiring in the Building which are not allocable to any individual users
of such service but are allocable to the Building generally. If Tenant fails to
maintain all telephone cables and related wiring in the Premises and such
failure affects or interferes with the operation or maintenance of any other
telephone cables or related wiring in the Building, Landlord or any vendor hired
by Landlord may enter into and upon the Premises forthwith and perform such
repairs, restorations or alterations as Landlord deems necessary in order to
eliminate any such interference (and Landlord may recover from Tenant all of
Landlord's costs in connection therewith). Upon the Termination Date, Tenant
agrees to remove all telephone cables and related wiring installed by Tenant for
and during Tenant's occupancy, which Landlord shall request Tenant to remove.
Tenant agrees that neither Landlord nor any of its agents or employees shall be
liable to Tenant, or any of Tenant's employees, agents, customers or invitees or
anyone claiming through, by or under Tenant, for any damages, injuries, losses,
expenses, claims or causes of action because of any interruption, diminution,
delay or discontinuance at any time for any reason in the furnishing of any
telephone service to the Premises and the Building.
ARTICLE SEVEN
USE AND CONDITION OF PREMISES
7.01 USE OF PREMISES
(a) Tenant shall only use and occupy the Premises primarily for general
business office purposes and secondarily for the following special purposes in
connection therewith: the operation of computer facilities for Tenant's
business; air-conditioning equipment, telephone switch and other equipment and
services relating to Tenant's regular business (provided that such regular
business of Tenant does not include any telecommunications-type business or
services now or in the future); cafeteria and lunchroom facilities (including
vending machines) solely for use by Tenant's employees and visitors ("Cafeteria
Facilities"); coffee bars solely for use by Tenant's employees and visitors;
executive or other dining areas (including kitchen facilities in support
thereof) solely for use by Tenant's employees and visitors; conference
facilities solely for use by Tenant's employees and visitors; physical fitness
training rooms (including showers, saunas, bathrooms, and exercise rooms) solely
for use by Tenant's employees and visitors; nurse's station solely for use by
Tenant's employees and visitors; duplicating and other printing operations for
Tenant's business; document shredding facilities for Tenant's business; a credit
union solely for use by Tenant's employees; travel services solely for use by
Tenant's employees; provided that Tenant shall first obtain any and all licenses
and permits which may be required in connection with such special purposes and
Tenant's use of the Premises shall be in compliance with all other provisions of
this Lease and all Laws. Tenant agrees not to use or permit the use of the
Premises for any purpose which is illegal, dangerous to life, limb or property
or which, in Landlord's reasonable opinion, constitutes waste, creates a
nuisance or unreasonable annoyance to Landlord or any other tenant, or which
would cause Landlord's insurance coverage to be cancelled or which would
increase the cost of insurance coverage with respect to the Building (unless
Tenant agrees to pay the cost of such increase). In addition to the foregoing,
Tenant's use of the Cafeteria Facilities shall be subject to the Cafeteria Rules
and Regulations which are attached to this Lease as EXHIBIT "O" and made a part
hereof for all purposes.
(b) Subject to the terms of this Lease, Tenant shall have the right, on
a non-exclusive basis in common with other tenants of the Building and other
parties (except as hereinafter expressly provided) and subject to the rights of
public utilities, to use the following areas of the Building and the Property on
the following basis:
(i) Tenant shall have the right to use, and on Single Tenant
floors occupied only by Tenant, the exclusive right to control
access to and from, the Building stairwells on floors on which
the Premises are located; provided, however, such use and
control of access must be in compliance with applicable Laws,
must not obstruct the fire stairwell, and further provided
that Tenant must pay for all costs and expenses of installing,
operating and maintaining access control systems within the
Premises in excess of that installed in the other stairwells
of the Building. Tenant's rights herein are subject to the
prohibition of smoking in the stairwells and the requirement
that Tenant's access control system must be compatible with
and not restrict Landlord's system, as more specifically
referenced in Section 6.01(h).
(ii) Tenant shall have the non-exclusive right to use the
Common Areas including, without limitation, all lobbies and
restrooms (other than lobbies and restrooms on floors occupied
entirely by one tenant or within such tenant's premises),
public corridors, tunnels, stairways (exclusive of any
internal stairways which are wholly located within a tenant's
premises, as to which such tenant shall have the exclusive
right to use), elevators, entranceways, landscaped areas,
sidewalks, driveways, all service roads, loading docks, public
mailrooms and all other common areas, facilities and
appurtenances which, from time to time, benefit and serve, or
are designated and intended to benefit and serve, tenants of
the Building, subject to the Building and Property Rules and
Regulations; the foregoing notwithstanding Landlord shall have
the right to close off, on a temporary basis, any such areas
for any purposes permitted by this Lease and as may be
necessary to prevent any dedication thereof to the public.
(c) Tenant and Landlord shall each comply with all Environmental Laws
concerning the proper storage, handling and disposal of any Hazardous Material
with respect to the Property. Tenant shall not, without Landlord's prior written
consent, use, store, install, spill, remove, release or dispose of, within the
Premises or any portion of the Building or the Property, any asbestos-containing
materials or any solid, liquid, or gaseous material now or hereafter considered
toxic or hazardous under any applicable Environmental Laws which may now or
hereafter be in existence, provided, however, the foregoing provision shall not
prevent the use on the Premises of typical office supplies and cleaning products
(if used in compliance with all applicable Environmental Laws) and Tenant shall
be responsible for the costs of any cleanup or other costs of remediation which
relates to Tenant's violation of this provision. Without limiting its
obligations under Article Eighteen (and the Rules and Regulations attached to
this Lease as EXHIBIT "D"), Tenant covenants and agrees to comply with all Laws
and all rules and guidelines now or hereafter made applicable to the Premises
respecting the disposal of waste, trash, garbage and other matter (liquid or
solid), generated by Tenant, the disposal of which is not otherwise the express
obligation of Landlord under this Lease, including, without limitation, laws,
rules, regulations and guidelines respecting recycling and other forms of
reclamation (all of which are herein collectively referred to as "Waste
Management Requirements"). Tenant covenants and agrees to comply with Waste
Management Requirements applicable to the conduct of its business at the
Premises. TENANT COVENANTS AND AGREES TO INDEMNIFY, DEFEND, PROTECT AND HOLD THE
INDEMNITEES HARMLESS FROM AND AGAINST ALL LIABILITY (INCLUDING COSTS, EXPENSES
AND ATTORNEYS' FEES) THAT INDEMNITEES MAY SUSTAIN BY REASON OF TENANT'S BREACH
OF ITS OBLIGATIONS UNDER THIS SECTION 7.01(C). Tenant's indemnity under this
Section 7.01(c) shall survive the termination of this Lease. Tenant covenants
and agrees to comply with all reasonable rules and regulations established by
Landlord to enable Landlord from time to
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time to avail itself of the lowest rate available for the disposal of waste,
trash, garbage and other matter (liquid or solid), generated by Tenant, provided
(unless required by Law) such rules and regulations do not materially
inconvenience Tenant or its employees or cause Tenant increased costs. If any
Hazardous Material is released, discharged or disposed of on or about the
Property and such release, discharge or disposal is not caused by Tenant or
other occupants of the Premises, or their employees, agents or contractors, such
release, discharge or disposal shall be deemed casualty damage under Article
Fourteen to the extent that the Premises are affected thereby; in such case,
Landlord and Tenant shall have the obligations and rights respecting such
casualty damage provided under such Article.
(d) Tenant agrees to comply with all requirements of the Americans with
Disabilities Act [Public Law 101-336 (July 26, 1990) ("ADA")] and the Texas
Architectural Barriers Act [Article 9102, Tex. Rev. Civ. St. (1993)] applicable
to the Premises, Building and Property to accommodate its employees, invitees
and customers in accordance with the provisions of this paragraph. Tenant
acknowledges that it shall be wholly responsible for any accommodations or
alterations which need to be made to the Premises to accommodate Tenant's
employees, customers and invitees, but Tenant shall not be responsible for
making any additional accommodations or alterations to the Building or the
Property except those accommodations and alterations which are to accommodate
Tenant's employees, customers and/or invitees and which exceed standard ADA
requirements for the Building and/or the Property. Tenant shall be solely
responsible for requirements under Title I of the ADA relating to Tenant's
employees. No provision in this Lease should be construed in any manner as
permitting, consenting to or authorizing Tenant to violate requirements under
either such Act and any provision of the Lease which could arguably be construed
as authorizing a violation of either Act shall be interpreted in a manner which
permits compliance with such Act and is hereby amended to permit such
compliance.
(e) Landlord and Tenant acknowledge that the Texas Architectural
Barriers Act, Art. 9102, Tex. Civ. Stat. Ann. (1994), and regulations and
guidelines promulgated thereunder, as all of the same may be amended and
supplemented from time to time (collectively referred to herein as "TABA")
establish requirements for accessibility and barrier removal. The parties hereby
agree that: (1) Tenant shall be responsible for compliance with TABA, including,
without limitation, submission (through the Property manager) of required plans
and documents to the State of Texas for approval of accessibility design
features, in connection with the work set forth in the Workletter attached
hereto, if any, and any other construction or alterations to the Premises during
the Term; and (2) Landlord shall be responsible for compliance with TABA,
including, without limitation, submission of required plans and documents to the
State of Texas for approval of accessibility design features, in connection with
construction or alterations to the Common Areas, except that Tenant agrees to be
responsible for such compliance in connection with any such work which may be
necessitated solely as a result of Tenant's use of the Premises.
7.02 LANDLORD ACCESS TO PREMISES
(a) Tenant shall permit Landlord to erect, use and maintain pipes,
ducts, wiring and conduits in and through the Premises, so long as Tenant's use,
layout or design of the Premises is not materially affected or altered. Landlord
or Landlord's agents shall have the right to enter upon the Premises at any time
in the event of an emergency, or during Normal Business Hours (after reasonable
prior verbal notice) to inspect the Premises, to perform extraordinary
janitorial and other services, to conduct safety and other testing in the
Premises, to make such repairs, alterations, improvements or additions to the
Premises or the Building as Landlord may deem necessary or desirable, and for
the purpose of conducting such inspections, tests and studies as Landlord may
deem desirable or necessary to confirm Tenant's compliance with all Laws and
Environmental Laws or for other purposes necessary in Landlord's reasonable
judgment to ensure the sound condition of the Building and the systems serving
the Building. Landlord's rights under this Section are for Landlord's own
protection only, and Landlord has not, and shall not be deemed to have assumed
any responsibility to Tenant or any other party for compliance with Laws or
Environmental Laws, as a result of the exercise or non-exercise of such rights.
Janitorial and cleaning services shall be performed after Normal Business Hours.
Except as aforesaid, any entry or work by Landlord may be during Normal Business
Hours and Landlord shall use reasonable efforts to ensure that any entry or work
shall not materially interfere with Tenant's occupancy of the Premises, however,
any such interference shall not be a default by Landlord. Notwithstanding the
foregoing, Landlord shall use reasonable efforts to give Tenant prior written
notice of its intent to enter upon the Premises (except in the case of
emergencies) to perform repairs to portions of the Premises containing Tenant's
trading activities, main frame or principal computer, telephone switching
equipment and executive areas, which activities shall be performed by Landlord,
if reasonably possible, in such areas at times other than during Normal Business
Hours. Landlord's obligation under the preceding sentence shall be conditioned
upon Tenant first providing Landlord with a diagram satisfactory to Landlord
depicting the location of such areas of the Premises. Tenant shall pay to
Landlord upon demand the costs and expenses incurred by Landlord in excess of
the costs and expenses which would have been incurred by Landlord if the repairs
were performed during Normal Business Hours. To the extent pursuant to this
Lease the Tenant is solely responsible for repairs on the Premises, Tenant shall
pay the entirety of the costs and expenses of performing such repairs regardless
of when the repairs are performed.
(b) If Tenant shall not be personally present to permit an entry into
the Premises when for any reason an entry therein shall be necessary or
permissible, Landlord (or Landlord's agents), after attempting to notify Tenant
(unless Landlord believes an emergency situation exists), may enter the Premises
without rendering Landlord or its agents liable therefor (if during such entry
Landlord or Landlord's agent shall accord reasonable care to Tenant's property),
and without relieving Tenant of any obligations under this Lease. Landlord shall
use reasonable efforts to ensure that any entry or work shall not materially
interfere with Tenant's occupancy of the Premises, however, any such
interference shall not be a default by Landlord.
(c) Landlord may do any of the foregoing, or undertake any of the
inspection or work described in and subject to the preceding paragraphs without
such action constituting an actual or constructive eviction of Tenant, in whole
or in part, or giving rise to an abatement of Rent by reason of loss or
interruption of business of the Tenant, or otherwise.
7.03 QUIET ENJOYMENT
Landlord covenants that so long as there is then no existing Event of Default by
Tenant under this Lease, Tenant shall have the right to quiet enjoyment of the
Premises without hindrance or interference from Landlord or those claiming
through Landlord.
ARTICLE EIGHT
MAINTENANCE
8.01 LANDLORD'S MAINTENANCE
Subject to the provisions of Article Fourteen, Landlord shall reasonably
maintain and make necessary repairs to the foundations, roofs, exterior walls,
and the structural elements of the Building, the electrical, plumbing, heating,
ventilation and air-conditioning systems of the Building and the public
corridors, washrooms and lobby of the Building, Common Areas, Service Areas,
curtainwall, exterior windows of the Building, and equipment used to provide the
services referred to in Section 6.01, consistent with maintaining and operating
the Building in the same manner as other comparable Class A high rise office
buildings located in the Central Business District, Houston, Texas.
Notwithstanding the aforesaid, (a) Landlord shall not be responsible for the
maintenance or repair of any floor or wall coverings in the Premises or any of
such systems which are located within the Premises and are supplemental or
special to the Building's standard systems; and (b) subject to Section 16.04
below, the cost of performing any of said maintenance or
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repairs whether to the Premises or to the Building caused by the negligence of
Tenant, its employees, agents, servants, licensees, subtenants, contractors or
invitees, shall be paid by Tenant. Landlord shall not be liable to Tenant for
any expense, injury, loss or damage resulting from work done in the Building or
upon the Property, or the use of, any adjacent or nearby building, land, street,
or alley except as provided in Section 17.01.
8.02 TENANT'S MAINTENANCE
Tenant shall, at its own cost and expense, reasonably maintain and repair the
Premises, and shall not commit or allow any waste to be committed on any portion
of the Premises or to the Building, and at the termination of this Lease shall
deliver up the Premises to Landlord in a clean, good and tenantable condition,
ordinary wear and tear excepted and subject to the provisions of Section 9.01(b)
hereof. Any repairs or maintenance shall be completed with materials of as good
as or better quality than the original materials.
ARTICLE NINE
ALTERATIONS AND IMPROVEMENTS
9.01 TENANT'S ALTERATIONS
(a) Tenant agrees not to make or allow to be made any alterations or
physical additions (including fixtures) to the Premises, install any vending
machines (unless such machines are for the exclusive use of Tenant's employees)
on the Premises, or place signs on the Premises which are visible from outside
the Premises, without first obtaining the prior written consent of Landlord in
each such instance, which consent may be given or withheld on such conditions as
Landlord may deem appropriate; provided, however, Tenant shall be permitted, at
Tenant's sole cost and expense, to make minor alterations, additions,
installations or improvements to the interior of the Premises (but not any area
located on the lobby level of the Building) without Landlord's prior written
consent. For the purposes hereof an alteration, addition, installation or
improvement shall be deemed to be minor if, but only if: (i) it is
non-structural in nature; (ii) it does not adversely involve or affect, directly
or indirectly to any material degree, as may be determined by Landlord in its
sole judgment, reasonably exercised, the Building's mechanical, electrical,
plumbing, security or life-safety systems; and (iii) it does not cause the
discharge or release of any toxic or hazardous substances, or disturb any
existing toxic or hazardous substances (if any), or otherwise violate applicable
Laws, now or hereafter in existence. Any repairs or maintenance shall be
completed with materials of as good as or better quality than the original
materials. Tenant shall also be permitted, at Tenant's sole cost and expense, to
install interior stairwells between floors within the Premises; provided,
however, space located in any internal stairwell shall be deemed a part of the
Premises and, accordingly, subject to all of the terms, provisions and
conditions of this Lease. Landlord shall have the right at any time to cancel
Tenant's right to use the stairwells in the event such use thereof becomes
illegal or prohibited by applicable Laws. Tenant agrees that, with respect to
any permitted or deemed permitted alterations, additions, installations or
improvements, all such work shall be performed by Tenant in strict compliance
with all applicable Laws, and at its sole cost and expense and it will furnish
Landlord copies of all "as built" plans, pertaining thereto, such information to
be in form sufficient for Landlord to place such information in Landlord's data
base system (which currently is in Autocadd Release No. 12 format) for the
Building. The contractor to perform such work for Tenant shall be subject to
Landlord's prior reasonable written approval; provided, however, that so long as
(i) Tenant is utilizing a contractor approved by Landlord pursuant to the Work
Letter with respect to the Tenant Improvements and (ii) so long as such
contractor does not default under its obligations under any such construction
contract, then Landlord's consent shall be deemed given Tenant to utilize such
contractor to provide permitted or deemed permitted alterations, installations
or improvements to the Premises if such alterations, installations or
improvements are completed prior to the end of the second Lease Year. Tenant
agrees not to place anything in the Premises which exceeds the structural and
weight-bearing capability (which may vary in different floor areas) at any
location on the floor of the Premises, based on the structural and
weight-bearing capabilities of the Building, which information as to
weight-bearing capability Landlord shall deliver to Tenant within sixty (60)
days from the date hereof.
(b) Any and all alterations, additions, installations or improvements
to the Premises, including without limitation escalators, glass walls, signage,
partitions, internal stairwells, improvements made on elevator cross-over floors
or related improvements to the elevators themselves, security desks and
equipment, shall become part of the Premises and shall remain the property of
Landlord upon termination of this Lease or Tenant's right to possession (except
for movable equipment and furniture owned by Tenant). At the time of such
termination, Landlord may, nonetheless, require Tenant to remove, at Tenant's
sole cost and expense (except as expressly provided below) and with a contractor
or contractors first approved in writing by Landlord (which approval shall not
be unreasonably withheld) or Landlord may elect to itself remove, at Tenant's
sole cost and expense, which in such case shall be limited to the actual and
reasonable costs incurred by Landlord, any and all of the following: escalators,
if any, glass walls and other lobby level improvements (including built-in
security desks and equipment) made by Tenant, if any, Signage, the internal
stairwells (if any) (collectively "Special Additional Improvements"); provided,
however, with respect to the removal of the Special Additional Improvements, if
required by Landlord to be removed, such removal must be accomplished by Tenant
within ninety (90) days of such termination, but otherwise subject to all of the
other terms hereof relating to removal of such additions; provided, however, the
cost to remove the internal stairwells and the restoring of the pertinent floor
slabs to their original condition upon removal of the internal stairwells (but
not any other Special Additional Improvements), if so requested to be removed by
Landlord (but not otherwise), shall be shared equally by Landlord and Tenant.
Tenant shall be responsible for repairing any damage to the Premises or the
Building resulting from the removal of any Special Additional Improvements or
Tenant's personal property and for restoring the Premises, the Building or any
areas, as applicable, to their condition existing prior to the making of such
improvements, including, without limitation, restoring the floor slabs to their
original condition upon removal of the internal stairwells and escalators. In
the event that Landlord so elects, and Tenant fails to remove the Special
Additional Improvements, Landlord may remove the Special Additional Improvements
at Tenant's cost, and Tenant shall pay Landlord on demand all actual and
reasonable costs (except for the portion of such costs to be borne by Landlord
as set forth herein) incurred in removing the Special Additional Improvements.
Notwithstanding the foregoing, Tenant shall have no obligation to repair or
restore any thru-slab areas that existed as of the delivery of same to Tenant
(stairwell between sixty-fifth (65th) and sixty-sixth (66th) floors). At the
expiration or other termination of this Lease as to all or a portion of the
Premises, or upon the termination of Tenant's right to possession, Tenant shall
remove from the Premises, or such portion thereof, Tenant's personal property
(including movable equipment and furniture) within thirty (30) days after such
expiration or other termination, and shall be responsible for repairing any
damage to the Premises or the Building resulting from the removal of any of such
personal property. Except as may otherwise be provided in the Workletter, all
Tenant Alterations shall be at Tenant's cost, and, to the extent separately
assessed by the applicable taxing authorities, Tenant shall pay all ad valorem
taxes and increased insurance on the Tenant Improvements in excess of the
Allowance, otherwise such costs shall be payable by Tenant to Landlord upon
demand as Rent.
9.02 LIENS
Tenant shall use reasonable efforts to not permit any lien or claim for lien of
any mechanic, laborer or supplier or any other lien to be filed against the
Building, the Land, the Premises, or any part thereof arising out of work
performed, or alleged to have been performed by, or at the direction of, or on
behalf of Tenant. If any such lien or claim for lien is filed, Tenant shall
within thirty (30) days of receiving notice of such lien or claim (a) have such
lien or claim for lien released of record or (b) deliver to Landlord a bond in
form, content, amount, and issued by surety, satisfactory to Landlord,
indemnifying, protecting, defending and holding harmless the Indemnities against
all costs and liabilities resulting from such lien or claim for lien and the
foreclosure or attempted foreclosure thereof.
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If Tenant fails to take any of the above actions, Landlord, without
investigating the validity of such lien or claim for lien, may bond around or
discharge the same and Tenant shall, as payment of additional Rent hereunder,
reimburse Landlord upon demand for the amount so paid by Landlord, including
Landlord's expenses and attorneys' fees.
ARTICLE TEN
ASSIGNMENT AND SUBLETTING
10.01 ASSIGNMENT AND SUBLETTING
(a) Tenant shall have the right, without the consent of Landlord, to
assign this Lease, in whole but not in part, or sublease the Premises or any
portion thereof, to, or to permit the occupancy of any portion of Premises only
to the following provided Tenant gives Landlord prior written notice and
provided the same does not conflict with the sub-leasing criteria itemized in
Sub-Section 10.01(f): (i) an Affiliate of Tenant; (ii) British Gas Corporation
but not to exceed 20,000 square feet of the Premises; and/or (iii) an entity
which acquires, by merger or otherwise, all or substantially all of the capital
stock or assets of Tenant, and, provided further, no assignment or sublease to
such parties shall relieve Tenant of any liability hereunder. Except as provided
in the immediately preceding sentence, neither Tenant, nor Tenant's legal
representatives or successors-in-interest by operation of law or otherwise,
shall assign this Lease or any interest therein, sublease the Premises or any
portion thereof, or mortgage, pledge, or hypothecate its leasehold interest or
grant any concession or license within the Premises without the prior express
written consent of Landlord, which consent may be given or withheld by Landlord
in its sole discretion and any attempt to do any of the foregoing without the
prior express written consent of Landlord, shall be void and of no effect AB
INITIO. This prohibition against assigning or subletting shall be construed to
include a prohibition against any assignment or subletting by operation of law.
Notwithstanding the foregoing, Tenant may sublease all or any portion of the
Premises provided (i) Tenant gives written notice of its intent to sublease all
or a portion of the Premises at least thirty (30) days prior to the date the
Tenant desires to sublease and in such notice specifies the space, terms of the
proposed agreement, the identity of, and all available information on, the
proposed subtenant previously provided to Tenant by such proposed sublessee, and
such other information as Landlord shall reasonably request; (ii) no advertising
of such space shall imply in any manner that Tenant or any Tenant representative
is a representative of the Building, or has such authority; (iii) no signage
shall be displayed advertising any portion of the Premises for sublease; (iv)
Landlord's consent will be given (and will not be conditioned or unreasonably
delayed) unless Landlord has the right under Sub-section 10.01(f) to refuse its
consent; and (v) Landlord does not exercise its option to terminate pursuant to
Section 10.01(b) the portion of the Premises proposed to be subleased.
(b) In the event Tenant requests Landlord's permission as to any such
assignment or sublease (other than to an Affiliate of Tenant) Landlord shall
have the right and option (but no obligation), as of the requested effective
date of such assignment or sublease, to terminate this Lease as to the portion
of the Premises with respect to which Landlord has been requested to permit (1)
such assignment for the remainder of the Term, or (2) such sublease for the term
of the sublease. If Landlord so terminates this Lease as to such portion of the
Premises, all of Tenant's rights and obligations with respect to such portion of
the Premises (including, without limitation, the Rent applicable thereto) that
would have accrued thereafter will terminate. At the end of the sublease term
for which Landlord so terminated, the portion of the Premises subleased shall
automatically be and become part of the Premises and subject to all of the terms
and conditions of this Lease for the remainder of the Term.
(c) In the event of any such attempted assignment or attempted sublease
or should Tenant, in any other nature of transaction, permit or attempt to
permit anyone to occupy the Premises (or any portion thereof) without the prior
express written consent of Landlord, such attempted assignment or attempted
sublease shall be deemed automatically void and of no effect AB INITIO and
Tenant shall be deemed to be in default of its obligations hereunder.
(d) Tenant shall pay Landlord on the first day of each month during the
term of the sublease or assignment, fifty percent (50%) of the amount by which
the sum of all rent and other consideration (direct or indirect) due from the
subtenant or assignee for such month exceeds: (i) that portion of the Monthly
Base Rent and Rent Adjustments due under this Lease for said month which is
allocable to the space sublet or assigned; and (ii) the following costs and
expenses for the subletting or assignment of such space: (1) brokerage
commissions and attorneys' fees and expenses, (2) advertising for subtenants or
assignees; (3) the actual costs paid in making any improvements or substitutions
in the Premises required by any sublease or assignment; and (4) "free rent"
periods, costs of any inducements or concessions given to subtenant or assignee,
moving costs, and other amounts in respect of such subtenant's or assignee's
other leases or occupancy arrangements. All such costs will be amortized over
the term of the sublease or assignment pursuant to sound accounting principles.
(e) Except as otherwise specifically provided in this Section 10.01, if
Tenant requests Landlord's consent to an assignment of the Lease or subletting
of all or part of the Premises, Landlord shall either (i) approve such sublease
or assignment (but no approval of an assignment or sublease shall relieve Tenant
of any liability hereunder), or (ii) in the case of a request for an assignment,
terminate this Lease for the remainder of the Term, upon twenty (20) days'
notice, whether or not Landlord wishes to directly lease any space in this
Building to any such proposed assignee, or (iii) in the case of a request for a
sublease, terminate this Lease for the term of the sublease, with respect to the
space requested to be sublet, upon twenty (20) days' notice, whether or not
Landlord wishes to directly lease any space in the Building to any such proposed
subtenant, or (iv) refuse to consent, provided, however, if Landlord shall fail
to notify Tenant in writing of its decision within a twenty (20) day period
after Landlord is notified in writing of the proposed assignment or sublease,
Landlord shall be deemed to have refused to consent to such assignment or
subleasing; provided, however, Tenant may thereupon give Landlord a second
written notice of such proposed assignment or sublease, and if Landlord shall
fail to notify Tenant in writing of its decision within a ten (10) day period
after receipt of such second notice, then Landlord shall be deemed to have
consented to such assignment or subleasing.
(f) With respect to Landlord's consent to a sublease, the following are
the only reasons Landlord may refuse its consent, and the same reasons shall
preclude, at Landlord's option, any further subleasing of all or any portion of
the Premises by any Successor:
(i) the proposed subtenant is a tenant in the Building;
provided, however, Landlord shall not refuse to approve such sublease
to such proposed subtenant if Landlord either does not have available,
or the ability to make available, the same square footage space in the
Building to lease to such proposed subtenant, unless one of the
following other reasons for refusal also exists; or
(ii) the proposed subtenant is a Third Party Prospect in
Active Negotiations with Landlord concerning space in the Building; or
(iii) the proposed subtenant's use of the Premises would
violate the use clause of the Lease; or
(iv) the proposed subtenant is either a governmental agency, a
school or similar operation or a medical-related practice; or
(v) in Landlord's reasonable judgment, the proposed subtenant
would substantially and materially diminish the value or reputation of
the Building; or
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(vi) the proposed subtenant's use of the Premises would
conflict with any other of the Building's tenants' exclusive rights; or
(vii) the occupancy of the Premises by the proposed subtenant
would cause Landlord's fire and extended coverage insurance to be
cancelled or the rate therefor to be increased (unless Tenant agrees to
pay the cost of such increase); or
(viii) an Event of Default at such time exists.
(g) Each of the Successors shall fully observe all covenants of this
Lease including, without limitation, engaging only in uses of the Premises that
complies with the primary use provision of Section 7.01(a), and no consent by
Landlord to an assignment or sublease shall be deemed in any manner to be a
consent to a use not permitted under Section 7.01(a). No assignment or
subletting by Tenant or any of the Successors, whether or not with Landlord's
consent, shall ever relieve Tenant of any obligation under this Lease and Tenant
shall remain fully liable hereunder. Any attempted assignment or sublease by
Tenant in violation of the terms and covenants of this Section 10.01 shall be
void. Any consent by Landlord to a particular assignment or sublease shall not
constitute Landlord's consent to any other or subsequent assignment or sublease,
and any proposed sublease or assignment by a sublessee or assignee of Tenant
shall be subject to the provisions of this Section 10.01 as if it were a
proposed sublease or assignment by Tenant. The restriction against an assignment
or sublease described in this Article Ten shall be deemed to include a
restriction against Tenant's mortgaging its leasehold estate as well as against
an assignment or sublease which may occur by operation of law. If, at the time
an Event of Default occurs under this Lease, and the Premises or any part
thereof have been sublet, Landlord, in addition to any other remedies herein
provided or available at law or in equity, may, at its option, collect directly
from such subtenant all rents due and becoming due to Tenant under such sublease
and apply such rent against the Rent due to Landlord from Tenant hereunder, and
no such collection shall be construed to constitute a novation or a release of
Tenant from the further performance of its obligations hereunder or construed to
create any type of privity of contract between Landlord and any such sublessee.
Each assignee of this Lease shall execute a document (in form and content
reasonably satisfactory to Landlord) in favor of Landlord acknowledging and
agreeing, as an express condition of the validity of the assignment of this
Lease, that such assignee assumes and agrees to perform all the obligations of
Tenant hereunder. Each sublessee of all or a portion of the Premises shall
likewise execute a document (in form and content reasonably satisfactory to
Landlord) in favor of Landlord acknowledging and agreeing, as an express
condition of the validity of the sublease of such portion of the Premises, that
such sublessee acknowledges and agrees that all of its rights under any such
sublease are expressly subject, inferior to and subordinate to the terms and
conditions of this Lease.
10.02 TENANT LIABILITY
In the event of any sublease or assignment, whether or not with Landlord's
consent, Tenant shall not be released or discharged from any liability, whether
past, present or future, under this Lease, including any liability arising from
the exercise of any renewal or expansion option, to the extent expressly
permitted by Landlord. If Landlord grants consent to such sublease or
assignment, Tenant shall pay all reasonable attorneys' fees and expenses
incurred by Landlord with respect to such assignment or sublease. In addition,
if Tenant has any options to extend the term of this Lease or to add other space
to the Premises, such options shall not be available to any subtenant or
assignee, directly or indirectly without Landlord's express written consent.
10.03 ASSUMPTION AND ATTORNMENT
If Tenant shall assign this Lease as permitted herein, the assignee shall
expressly assume all of the obligations of Tenant hereunder in a written
instrument satisfactory to Landlord and furnished to Landlord not later than
fifteen (15) days prior to the effective date of the assignment.
ARTICLE ELEVEN
DEFAULT AND REMEDIES
11.01 EVENTS OF DEFAULT AND REMEDIES
(a) Each of the following events shall be deemed to be an event of
default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any Rent or other sum of money
due and payable hereunder and such failure shall continue for a period
of ten (10) days after notice from Landlord ; provided, however, Tenant
shall only be entitled to receive two (2) such notices during any
calendar year, and thereafter, during the remainder of such calendar
year, it shall be an Event of Default if Tenant shall fail to pay any
Rent or other sum of money due and payable hereunder for a period of
ten (10) days after the date such sum is due;
(ii) Tenant shall fail to comply with any provision of this
Lease not requiring the payment of money, all of which terms,
provisions and covenants shall be deemed material and such failure
shall continue for a period of sixty (60) days after written notice of
such default is delivered to Tenant; provided, however, that in case of
emergency resulting from such failure of Tenant to comply with any such
provision not requiring the payment of money, Landlord may commence
remedial actions immediately upon notice to Tenant. If the nature of
the default is such that it cannot be cured with the exercise of
Tenant's good faith diligent efforts within such 60-day period, and
provided that Tenant shall promptly commence and diligently proceed to
cure such default within thirty (30) days after written notice of such
default is delivered to Tenant, and provided that Tenant provides
Landlord with a satisfactory written explanation of why such default
has not been cured within such 60-day period, then Tenant shall have a
reasonable additional period (not to exceed one hundred eighty (180)
days) from the date of Landlord's notice to cure such default, provided
Tenant undertakes such curative action within the thirty (30) day
period and diligently and continuously proceeds with such curative
action (and provided that Excusable Delays shall not operate to extend
said one hundred eighty (180) day period). This subsection 11.01(a)(ii)
shall not apply to a default under Article Twenty. Notwithstanding the
aforesaid, nothing herein shall prohibit Landlord from taking whatever
action it deems reasonable and necessary to cure such default in the
event of an emergency or to prevent waste;
(iii) the leasehold hereunder demised shall be taken on
execution or other process of law in any action against Tenant;
(iv) Tenant shall abandon any portion of the Premises
(provided, however, Tenant shall not be deemed to have "abandoned" the
Premises so long as (1) Tenant timely pays all Base Rent and other sums
of money due hereunder and (2) the Premises do not appear to be either
abandoned or unsightly;
(v) Tenant shall become insolvent or unable to pay its debts
as they become due, or Tenant notifies Landlord that it anticipates
either condition;
(vi) Tenant takes any action to, or notifies Landlord that
Tenant intends to, file a petition under any section or chapter of the
Bankruptcy Code, as amended from time to time, or under any similar law
or statute
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of the United States or any State thereof; or any petition in
bankruptcy is filed by Tenant or against Tenant by Tenant's creditors,
which petition remains undischarged for a period of sixty (60) days;
(vii) a receiver or trustee shall be appointed for Tenant's
leasehold interest in the Premises or for all or a substantial part of
the assets of Tenant; or
(viii) failure of Tenant to execute an Estoppel Certificate
timely in accordance with the provisions of Section 20.02.
(b) Upon the occurrence of any Event of Default by Tenant, Landlord
shall have the option to pursue any one or more of the following remedies
without any notice (except for such notice expressly required by Section
11.01(a)(i) or (ii) or demand for possession whatsoever (and without limiting
the generality of the foregoing, Tenant hereby specifically waives notice and
demand for payment of Rent or other obligations due and waives any and all other
notices or demand requirements imposed by applicable law):
(i) terminate this Lease in which event Tenant shall
immediately surrender the Premises to Landlord;
(ii) terminate Tenant's right to occupy the Premises and
re-enter and take possession of the Premises (without terminating this
Lease);
(iii) enter upon the Premises and do whatever Tenant is
obligated to do under the terms of this Lease including, without
limitation, the right to remove and store Tenant's property located
therein; and Tenant agrees to reimburse Landlord on demand for any
expenses which Landlord may incur in effecting compliance with Tenant's
obligations under this Lease, and Tenant further agrees that Landlord
shall not be liable for any damages resulting to the Tenant from such
action; and
(iv) exercise all other remedies available to Landlord at law
or in equity, including, without limitation, injunctive relief of all
varieties.
(c) In the event Landlord elects to re-enter and take possession of the
Premises after an Event of Default, Tenant hereby waives notice of such re-entry
and repossession and of Landlord's intent to re-enter and retake possession.
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in or future Rent, expel or remove Tenant and any other
person who may be occupying said Premises or any part thereof. In addition, the
provisions of Article Thirteen (Holding Over) hereof shall apply with respect to
the period from and after the giving of notice of such repossession by Landlord.
All Landlord's remedies shall be cumulative and not exclusive. Forbearance by
Landlord to enforce one or more of the remedies herein provided upon an Event of
Default shall not be deemed or construed to constitute a waiver of such default.
Landlord's right to enter the Premises may be accomplished by Landlord without
service or notice or resort to legal process and without being guilty of any
trespass or becoming liable for any loss or damage and without any liability
therefore.
(d) In the event that Landlord elects to terminate this Lease upon an
Event of Default, then, notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord the sum of all Rents and other indebtedness
accrued to the date of such termination, plus, as damages, an amount equal to
the total of:
(i) the cost of recovering the Premises,
(ii) the cost of removing the Special Additional Improvements
and the cost of removing and storing Tenant's and other occupant's
property located in the Building,
(iii) the costs of reletting the Premises, or portion thereof
(including, without limitation, brokerage commissions),
(iv) the cost of decorations, demolitions, repairs, changes,
alterations, and additions to the Premises to a condition, reasonably
necessary to release the space, whether accomplished in one or more
steps or phases,
(v) the cost of collecting such amounts from Tenant hereunder,
(vi) (in the event that Tenant's default constitutes a
material breach) damages in an amount equal to the difference between
(1) the total Base Rent due under this Lease for the remainder of the
Term and (2) the then fair market rental value of the Premises during
such period, such differences to be discounted to present value at a
rate of ten percent (10%) per annum (such difference, as so discounted,
the "Discounted Future Rent"), and
(vii) any other sums of money or damages that may be owed to
Landlord as the result of default by Tenant or the exercise of
Landlord's rights at law or in equity.
In such event, Landlord shall have no responsibility to attempt to relet the
Premises or to apply any rentals received by Landlord as a result of any such
reletting to Tenant's obligations hereunder; and the aggregate amount of all
damages due to Landlord, including the Discounted Future Rent hereunder, shall
be immediately due and payable to Landlord upon demand. To the extent Landlord
is obligated by law to mitigate its damages, mitigation for these purposes shall
only mean that Landlord agrees to list or advertise the Premises for rent in
accordance with Landlord's standard advertising and rental policies, and to rent
the Premises to prospective tenants only if there are no other comparable
available leasehold premises in the Building or in other projects of Landlord or
its Affiliates in the Central Business District of Houston, Texas.
(e) In the event that Landlord elects to take possession of the
Premises and terminate Tenant's right to occupy the Premises without terminating
this Lease, Tenant shall remain liable, and shall pay to Landlord, from time to
time, on demand, any deficiency between the total Base Rent as it becomes due
under this Lease for the remainder of the Term and rents, if any, which Landlord
is able to collect from another tenant(s) for the Premises, or portion thereof,
during the remainder of the Term ("Rental Deficiency"). In addition, Tenant
shall be liable for and shall pay to Landlord, on demand, an amount equal to:
(i) the cost of recovering possession of the Premises,
(ii) the cost of removing the Special Additional Improvements
and the cost of removing and storing Tenant's or any other occupant's
property located in the Building,
(iii) the costs of reletting the Premises, or applicable
portion thereof, and whether accomplished in one or more phases
(including, without limitation, brokerage commissions),
(iv) the cost of decorations, demolitions, changes,
alterations, and additions to the Premises, or applicable portion
thereof, to a condition, reasonably necessary to release the space, and
whether accomplished in one or more phases,
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(v) the cost of collection of the rent accruing from any such
reletting,
(vi) the cost of collecting any sums billable to Tenant by
Landlord hereunder, and
(vii) any other sum of money or damages that may be owed to
Landlord as a result of Tenant's default or the exercise of Landlord's
rights at law or in equity.
Landlord may file suit to recover any sums falling due under the terms hereof
from time to time, and no delivery to or recovery by Landlord of any portion of
the sums due Landlord hereunder shall be any defense in any action to recover
any amount not theretofore reduced to judgment in favor of Landlord. Nothing
contained herein shall be deemed to require Landlord to relet the Premises. Any
sums received by Landlord through reletting shall reduce the sums owing by
Tenant to Landlord hereunder, but in no event shall Tenant be entitled to any
excess of any sums obtained by reletting over and above the Base Rent provided
in this Lease to be paid by Tenant to Landlord. For the purpose of such
reletting, Landlord is authorized to decorate or to make any repairs, changes,
alterations, or additions in and to the Premises or applicable portion thereof,
that Landlord may deem necessary or advisable, but not more costly than the then
improvements. No reletting shall be construed as an election on the part of
Landlord to terminate this Lease unless a written notice of such intention is
given to Tenant by Landlord. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous Event of Default. In such event (but only in the event that
Tenant's Event of Default constitutes a material breach), Landlord may elect to
terminate Tenant's right to occupy the Premises and to immediately recover as
damages, in lieu of the Rental Deficiency, a sum equal to the Discounted Future
Rent. In such event, Landlord shall have no responsibility to attempt to relet
the Premises or to apply any rentals received by Landlord as a result of any
such reletting to Tenant's obligations hereunder; and the aggregate amount of
all damages due to Landlord, including the Discounted Future Rent hereunder,
shall be immediately due and payable to Landlord upon demand. To the extent
Landlord is obligated by law to mitigate its damages, mitigation for these
purposes shall only mean that Landlord agrees to list or advertise the Premises
for rent in accordance with Landlord's standard advertising and rental policies,
and to rent the Premises to prospective tenants only if there are no other
comparable available leasehold premises in the Building or in other projects of
Landlord or its Affiliates in the Central Business District of Houston, Texas.
(f) In addition to the remedies set forth in Section 11.01(b) of this
Lease, upon the occurrence of any Event of Default by Tenant under the Lease
with respect to which Landlord elects to either terminate the Lease, or without
terminating the Lease, to terminate Tenant's possession of the Premises,
Landlord shall be entitled to receive, in lieu of the portions of the Rent that
would otherwise be collectible by Landlord under this Section 11.01 and that are
attributable thereto, a cash payment from Tenant on demand in an amount equal to
all unamortized "Reimbursable Costs" (as defined below), terminate any remaining
lease concessions which have not yet accrued under the Lease, and terminate all
of Tenant's parking and signage rights under the Lease. As used herein, the term
"Reimbursable Costs" shall mean the total of (i) the difference between the
average monthly Base Rent payable by Tenant over the entire Term and the average
monthly Base Rent payable by Tenant from the Commencement Date to the date of
default multiplied by the number of months from the Commencement Date through
the date of default; and (ii) the aggregate dollar amount which has been paid
and/or is payable by Landlord to or on behalf of Tenant under the Lease,
including, without limitation, (x) any brokerage commissions, (y) any Allowances
(for leasehold improvements or otherwise) and (z) any expenses incurred in
relocating or terminating the leasehold rights of existing tenants in order to
accommodate Tenant for this Lease. Since the Reimbursable Costs were incurred by
Landlord in reliance upon Tenant fully performing Tenant's obligations under the
Lease and are or were to be recovered by Landlord as a component of Rent, Tenant
hereby acknowledges that Landlord will be damaged, upon a default by Tenant, in
an amount equal to the aggregate dollar value of the Reimbursable Costs which
have not yet been amortized by Tenant as a result of the payment of such Rent.
Reimbursable Costs shall be deemed to be amortized by Tenant on a pro rata basis
for each calendar month during that part of the Term for which Tenant has paid
rent, commencing with the third full Lease Year. No amortization shall occur
with respect to any month for which Tenant has not paid rent hereunder.
Unamortized Reimbursable Costs shall accrue interest at the rate of ten percent
(10%) per annum, compounded monthly, during the Term. Notwithstanding the
provisions of this Sub-section 11.01(f), nothing contained herein is intended to
nor shall it be interpreted so as to duplicate any other remedies or recoveries
set forth in any other provisions of this Lease.
(g) This Article Eleven shall be enforceable to the maximum extent
allowed by applicable law, and the unenforceability of any portion thereof shall
not thereby render unenforceable any other portion. No act or failure to act by
Landlord or its agents during the Term shall be deemed an acceptance of an
attempted surrender of the Premises, and no agreement to accept a surrender of
the Premises shall be valid unless made in writing and signed by Landlord. No
re-entry or taking of possession of the Premises by Landlord shall be construed
as an election on Landlord's part to terminate this Lease unless a written
notice of such termination is given to Tenant.
(h) Except as elsewhere provided in this Lease, Landlord shall be in
default hereunder with respect to any obligation of Landlord under this Lease
(other than an obligation involving the payment of money to Tenant as referenced
below) in the event Landlord has not begun and pursued with reasonable diligence
the cure of any failure of Landlord to meet its obligations hereunder within
sixty (60) days of the receipt by Landlord of written notice from Tenant of the
alleged failure to perform. If the nature of the default is material and such
that it cannot be cured with the exercise of Landlord's good faith diligent
efforts within such 60-day period, and provided that Landlord provides Tenant
with a satisfactory written explanation of why such default has not been cured
within such 60-day period, then Landlord shall have a reasonable additional
period (not to exceed one hundred eighty (180) days from the date of Tenant's
notice) to cure such default, provided Landlord undertakes such curative action
within the sixty (60) day period and diligently and continuously proceeds with
such curative action. Except as elsewhere provided in this Lease, in no event
shall Tenant have the right to terminate or rescind this Lease as a result of
Landlord's default as to any covenant or agreement contained in this Lease.
Except as elsewhere provided in this Lease Tenant hereby waives such remedies of
termination and rescission and hereby agrees that Tenant's remedies for default
hereunder and for breach of any promise or inducement shall be limited to a suit
for damages and/or injunction. If Landlord owes any amount to Tenant under or in
connection with this Lease and such amount is not paid within fifteen (15) days
after Landlord receives written notice from Tenant, Tenant shall have the right
to give Landlord a second written notice, and if such amount is not paid within
ten (10) days after Landlord receives said second notice, then Landlord shall be
in default hereunder. In the event of a conflict between Landlord's rights and
obligations set forth in this Sub-section 11.01(h) and Paragraph 3 of EXHIBIT
"N," the provisions of Paragraph 3 of EXHIBIT "N" shall prevail. In addition,
Tenant hereby covenants that, prior to the exercise of any such remedies, it
will give the mortgagees holding mortgages on the Building notice and a
reasonable time to cure any default by Landlord as referenced in Section 23.02.
TENANT AND LANDLORD EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
AND FOREVER RELINQUISHES ANY AND ALL CLAIMS OR RIGHTS THAT SUCH PARTY MAY HAVE
TO ANY TRIAL BY JURY ON ANY ISSUE ARISING OUT OF ANY LITIGATION OR DISPUTES OR
CLAIMS UNDER THIS LEASE OR IN ANY WAY ASSOCIATED THEREWITH, SUCH PARTY INTENDING
TO WAIVE AND FOREVER RELINQUISH ANY RIGHT UNDER THE SEVENTH AMENDMENT OF THE
UNITED STATES CONSTITUTION TO TRIAL BY JURY AND ANY CLAIMS OR RIGHTS UNDER THE
CONSTITUTION OF THE STATE OF TEXAS OR ANY OTHER CONSTITUTIONAL OR STATUTORY OR
OTHER PROVISIONS DEALING WITH TRIAL BY JURY.
(i) Except with respect to those counterclaims or claims by Tenant
which, under the laws of the State of Texas, may only be asserted in the
hereafter referred to proceedings brought by Landlord or be forever barred if
not asserted in said proceedings, in the event Landlord commences any
proceedings against Tenant for nonpayment of rent or any other sum due and
payable by Tenant hereunder, Tenant will not interpose any counterclaim or other
claim against Landlord of whatever nature or description in any such
proceedings; and in the event Tenant interposes any such counterclaim or other
claim against Landlord in such proceedings, Landlord and Tenant stipulate and
agree that, in addition to any other lawful remedy of Landlord, upon motion by
Landlord, such counterclaim or other claim asserted by Tenant shall be severed
out of the proceedings instituted.
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(j) Landlord may seek to have restrained or enjoined any breach or
threatened breach of any covenant, duty or obligation of Tenant herein
contained. The remedies of Landlord hereunder, including, without limitation,
injunctive relief, shall be deemed cumulative and no remedy of Landlord, whether
exercised by Landlord or not, shall be deemed to be in exclusion of any other.
Except as may be otherwise herein expressly provided, in all circumstances under
this Lease where prior consent or permission of one party ("first party") is
required before the other party ("second party") is authorized to take any
particular type of action, the matter of whether to grant such consent or
permission shall be within the sole and exclusive judgment and discretion of the
first party; and it shall not constitute any nature or breach by the first party
hereunder or any defense to the performance of any covenant, duty or obligation
of the second party hereunder that the first party delayed or withheld the
granting of such consent or permission, whether or not the delay or withholding
of such consent or permission was prudent or reasonable or based on good cause.
11.02 ATTORNEY'S FEES
In the event either party hereto finds it necessary to bring an action at law or
other proceeding against the other party to enforce any of the terms, covenants
or conditions hereof or any instrument executed pursuant to this agreement, or
by reason of any breach or default hereunder or thereunder, the party prevailing
in any such action or proceeding shall be paid all costs and reasonable
attorneys' fees by the other party, and, in the event any judgment is secured by
such prevailing party, all such costs and attorneys' fees shall be included in
any such judgment. The reasonableness of such costs and attorneys' fees shall be
determined by the court and not the jury. With respect to any monetary claim, in
order for a prevailing party to recover attorneys fees, such party must be
awarded at least fifty percent (50%) of the highest amount which such party
claimed at any time in such suit.
11.03 BANKRUPTCY
Subject to all of the restrictions upon assignment and subleasing set forth in
Article Ten, the following provisions shall apply in the event of the bankruptcy
or insolvency of Tenant:
(a) In connection with any proceeding under Chapter 7 of the Bankruptcy
Code where the trustee of Tenant elects to assume this Lease for the purposes of
assigning it, such election or assignment, may only be made upon compliance with
the provisions of (b) and (c) below, which conditions Landlord and Tenant
acknowledge to be commercially reasonable. In the event the trustee elects to
reject this Lease then Landlord shall immediately be entitled to possession of
the Premises without further obligation to Tenant or the trustee.
(b) Any election to assume this Lease under Chapter 11 or 13 of the
Bankruptcy Code by Tenant as debtor-in- possession or by Tenant's trustee (the
"Electing Party") must provide for:
The Electing Party to cure or provide to Landlord adequate assurance
that it will cure all monetary defaults under this Lease within fifteen
(15) days from the date of assumption and it will cure all nonmonetary
defaults under this Lease within thirty (30) days from the date of
assumption. Landlord and Tenant acknowledge such condition to be
commercially reasonable.
(c) If the Electing Party has assumed this Lease or elects to assign
Tenant's interest under this Lease to any other person, such interest may be
assigned only if the intended assignee has provided adequate assurance of future
performance (as herein defined), of all of the obligations imposed on Tenant
under this Lease. For the purposes hereof, "adequate assurance of future
performance" means that Landlord has ascertained that each of the following
conditions has been satisfied:
(i) The assignee has submitted a current financial
statement, certified by its chief financial officer, which shows a net
worth and working capital in amounts sufficient to assure the future
performance by the assignee of Tenant's obligations under this Lease;
and
(ii) Landlord has obtained consents or waivers from any third
parties which may be required under a lease, mortgage, financing
arrangement, or other agreement by which Landlord is bound, to enable
Landlord to permit such assignment.
(d) Landlord's acceptance of rent or any other payment from any
trustee, receiver, assignee, person, or other entity will not be deemed to have
waived, or waive, the requirement of Landlord's consent, Landlord's right to
terminate this Lease for any transfer of Tenant's interest under this Lease
without such consent, or Landlord's claim for any amount of Rent due from
Tenant.
ARTICLE TWELVE
SURRENDER OF PREMISES
12.01 IN GENERAL
Upon the Termination Date, Tenant shall surrender and vacate the Premises
immediately and deliver possession thereof to Landlord in a clean, good and
tenantable condition, ordinary wear and tear, and damage caused by Landlord
excepted, and subject to the provisions of Article Nine, Article Fourteen and
Article Fifteen. Tenant shall deliver to Landlord all keys to the Premises.
Tenant shall be entitled to remove from the Premises all movable personal
property of Tenant, Tenant's trade fixtures, furniture and equipment, and such
Tenant Alterations which at the time of their installation Landlord and Tenant
agreed may be removed by Tenant. Tenant shall also remove other Tenant
Alterations in accordance with the Article Nine, and any Tenant Alterations
containing Hazardous Materials. Tenant immediately shall repair all damage
resulting from removal of any of Tenant's property, furnishings or Tenant
Alterations, shall close all floor, ceiling and roof openings and shall restore
the Premises to a tenantable condition as reasonably determined by Landlord,
subject to Article Nine. If any of the Tenant Alterations which were installed
by Tenant involved the lowering of ceilings, raising of floors or the
installation of specialized wall or floor coverings or lights, then Tenant shall
also be obligated to return such surfaces to their condition prior to the
commencement of this Lease. Tenant shall also be required to close any
staircases or other openings between floors subject to Article Nine. In the
event possession of the Premises is not delivered to Landlord when required
hereunder, or if Tenant shall fail to remove those items described above, or
make any such repairs as required above, Landlord may, at Tenant's expense,
remove any of such property therefrom without any liability to Landlord and
undertake, at Tenant's expense such restoration or repair work as Landlord deems
necessary or advisable.
12.02 LANDLORD'S RIGHTS
All property which may be removed from the Premises by Landlord shall be
conclusively presumed to have been abandoned by Tenant and Landlord may deal
with such property as provided in Section 11.02(d).
ARTICLE THIRTEEN
HOLDING OVER
13.01 HOLDING OVER
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(a) If on or before ninety (90) days prior to the expiration of the
Term, Tenant gives Landlord written notice that it desires to remain in the
Premises after the end of the expiration of the Initial Lease Term, then Tenant,
provided there is then no Event of Default, shall have the right to extend the
Term for a period of thirty (30) days (the "Holdover Period") and during such
period shall pay, as liquidated damages for the entire Premises, an amount equal
to 150% of the Base Rent and 150% of the Excess in effect immediately prior to
the date of commencement of the Holdover Period together with any other sums to
which Landlord is entitled under this Lease. During such Holdover Period, Tenant
shall not be entitled to any rental or lease concessions.
(b) During any holding over after the Holdover Period, there shall be a
tenancy at sufferance relationship between Landlord and Tenant, and during such
period Tenant shall pay an amount equal to one hundred fifty percent (150%) of
the Base Rent and one hundred fifty percent (150%) of the Excess in effect
immediately prior to such holding over period, and Landlord shall have the right
to pursue any and all remedies available to evict the Tenant from the Premises
and in addition pursue any and all remedies available at law or equity, with
respect to any damage or loss actually suffered by Landlord as a result of such
holding over, including without limitation (i) all claims for damages by any
other tenants to whom Landlord may have leased all or any part of the Premises
and (ii) for all other losses, costs and expenses, including reasonable
attorneys fees, and (iii) all consequential damages sustained or incurred by
reason of such holding over.
(c) In addition to Landlord's other rights under this Section, if
Tenant's holding over (including the Holdover Period) pursuant to this Section
13.01 prevents Landlord from delivering all or any portion of the Premises to a
new tenant for the Premises, then Tenant shall pay the applicable percentage of
Base Rent and the Excess described in (a) above for the holdover period for the
entire portion of the Premises to be leased to such new tenant, regardless of
whether Tenant actually holds over with respect to all of such portion of the
Premises.
(d) Except as expressly provided for the Holdover Period, no holding
over by Tenant after the expiration of the Term of this Lease shall be construed
to extend the Term of this Lease or give rise to any renewal or other option(s)
in favor of Tenant. Tenant's access to the Premises for the purpose of removing
Special Additional Improvements and other permitted access to the Premises
during the first ninety (90) days after the expiration of the Term shall not
constitute a holding over.
ARTICLE FOURTEEN
DAMAGE BY FIRE OR OTHER CASUALTY
14.01 CASUALTY DAMAGE
(a) If the Premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord. In
case the Building shall be damaged such that substantial alteration or
reconstruction of the Building shell, in Landlord's sole but reasonable opinion,
is required (whether or not the Premises shall have been damaged by such
casualty) which will take in excess of two hundred ten (210) days to repair, or
in the event any mortgagee of Landlord's should require that the insurance
proceeds payable as a result of a casualty be applied to the payment of the
mortgage debt, Landlord may, at its option, terminate this Lease by notifying
Tenant in writing of such termination within ninety (90) days after the date of
such casualty. If Landlord does not thus elect to terminate this Lease, Landlord
shall advise Tenant in writing ("Repair Notice") of Landlord's election and of
the estimated time to complete restoration of the Building and/or the Premises
to the condition same were in immediately prior to the occurrence of the damage.
If such estimated restoration time for the Premises is longer than one hundred
eighty (180) days after the date of such occurrence, then Landlord shall have
the option (at Landlord's expense) of moving Tenant to another space in the
Building similar in size to that part of the Premises which were damaged and
improved to at least Building Standard ("Substitute Space") for Tenant to occupy
until the damaged Premises is repaired and ready for Tenant to re-occupy.
Provided, that such casualty was not caused by Tenant, and in the event that
Landlord is unable to provide Tenant with a Substitute Space within thirty (30)
days after the date of the Repair Notice, then within thirty (30) days
thereafter Tenant may give notice to Landlord of Tenant's intention to terminate
this Lease and, unless Landlord shall provide Tenant with a Substitute Space
during said thirty (30) day period, then this Lease shall terminate within
thirty (30) days after the date of Tenant's notice of election to terminate, and
Tenant shall thereupon vacate the Premises. The failure of Tenant to timely
notify Landlord of Tenant's election to terminate this Lease shall be deemed to
be Tenant's election not to terminate this Lease. If Tenant elects not to
terminate this Lease, Landlord shall commence and proceed with reasonable
diligence to restore the Building shell and Shell Improvements located on the
Premises. When the repairs described in the preceding sentence have been
completed by Landlord, Landlord shall then complete the restoration of all
improvements in excess of the Shell Improvements pursuant to the final working
drawings and specifications approved by Landlord pursuant to the Work Letter
("Improvements Restoration"). Landlord shall not be obligated to expend for the
completion of the Improvements Restoration a sum in excess of a dollar amount
equal to the dollar amount of the "Allowance" ("Reconstruction Allowance").
Except for the Reconstruction Allowance, all cost and expense of completing the
Improvements Restoration shall be borne by Tenant and the amount of such excess,
as determined by Landlord, is herein referred to as the "Reconstruction Excess".
Fifty percent (50%) of the Reconstruction Excess (as then estimated by Landlord)
shall be paid by Tenant to Landlord, in cash, prior to commencement of the
Improvements Restoration. After substantial completion of the Improvements
Restoration, but prior to reoccupancy of the Premises by Tenant, Tenant shall
pay Landlord, in cash, an amount equal to ninety percent (90%) of the then
unpaid balance of the Reconstruction Excess (as then estimated by Landlord). As
soon as a final accounting can be prepared and submitted to Tenant, Tenant shall
pay Landlord, in cash, the entire unpaid balance of the Reconstruction Excess,
based on Landlord's final cost. Each increment of the Reconstruction Excess
payable by Tenant to Landlord shall be paid by Tenant within ten (10) days after
a written request therefor by Landlord to Tenant. Tenant shall not be entitled
to receive any credit or payment with respect to any portion of the
Reconstruction Allowance not actually spent upon restoration of the Premises.
Notwithstanding anything herein seemingly to the contrary, if Landlord elects to
rebuild the same and neither party has elected to terminate as aforesaid, then
Landlord shall have the continuing option (at Landlord's expense) of moving
Tenant to a Substitute Space for Tenant to occupy until the damaged Premises is
repaired and ready for Tenant to re-occupy. Provided, however, in the event that
Landlord is unable to either (i) repair the Premises or (ii) provide Tenant with
a Substitute Space within two hundred ten (210) days following such casualty as
such period may be extended by Excusable Delays, and provided that such casualty
was not caused by Tenant, then, within ten (10) days following such two hundred
ten (210) day period, Tenant may give notice to Landlord of Tenant's intention
to terminate this Lease in which event this Lease shall terminate as to the
damaged Premises within thirty (30) days after Landlord receives such notice,
unless Landlord completes the repair of the Premises within thirty (30) days
after Landlord receives such notice. The failure of Tenant to timely notify
Landlord of Tenant's election to terminate this lease shall be deemed to be
Tenant's election not to terminate this Lease. In addition, in the event that
Landlord has diligently and continuously prosecuted such restoration or repair
during such period, the exercise by Tenant of the option to terminate set forth
in the previous two (2) sentences shall be delayed until such time as Landlord
has failed to diligently and continuously prosecute such restoration or repair
to completion. Landlord shall not be liable for any inconvenience or annoyance
to Tenant or injury to the business of Tenant resulting in any way from such
damage or the repair thereof, and, provided that such casualty was not caused by
the gross negligence or willful misconduct of Tenant, and unless Landlord has
been able to provide Substitute Space for Tenant, Landlord shall allow Tenant a
fair diminution of Rent during the time and to the extent the Premises are unfit
for occupancy (based upon that portion of Base Rent applicable to the portion of
the Premises subject to such casualty); provided, however, the Premises shall
not be considered unfit for occupancy at any time that (i) such of the
Improvements Restoration has been completed so as to permit occupancy as
evidenced by the issuance of a Certificate of Occupancy or its equivalent for
the Premises by the appropriate governmental entity having jurisdiction over the
Premises for the purpose of issuing such certificate, or (ii) if no such
certificate can be or is required to be issued by any appropriate governmental
entity under applicable
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laws, ordinances, or regulations, at such time as the Improvements Restoration
have been substantially completed and tendered to Tenant.
(b) Tenant acknowledges that Landlord shall be entitled to the full
proceeds of any insurance coverage, whether carried by Landlord or Tenant, for
damages to the Premises, except for those proceeds of Tenant's insurance of its
own personal property and equipment which would be removable by Tenant at the
Termination Date. All such insurance proceeds shall be payable to Landlord
whether or not the Premises are to be repaired and restored.
(c) If either Tenant or Landlord shall elect to terminate this Lease as
permitted in this Section 14.01, then (i) such termination shall be effective
thirty (30) days after such notice is deemed received and (ii) all Base Rent and
other sums payable by Tenant to Landlord hereunder shall be prorated and paid up
to the time of such fire or other casualty.
(d) If the casualty occurs during the last twelve (12) months of the
Term and the Premises cannot be repaired or reconstructed within one (1) month
of the date of such casualty, then either party shall have the right to elect to
terminate this Lease by written notice of such election delivered to the other
party within ten (10) days after the date of such casualty.
ARTICLE FIFTEEN
EMINENT DOMAIN
15.01 EMINENT DOMAIN
If the whole or substantially the whole of the Building or the Premises should
be taken for any public or quasi-public use, by right of eminent domain or
otherwise or should be sold in lieu of condemnation, then this Lease shall
terminate as of the date when physical possession of the Building or the
Premises are taken by the condemning authority. If less than the whole or
substantially the whole of the Building or the Premises are thus taken or sold
(whether or not the Premises are affected thereby) and Landlord determines in
its sole discretion that it is not feasible to operate the portion of the
Building remaining after such taking, then Landlord may terminate this Lease by
giving written notice thereof to the Tenant, in which event this Lease shall
terminate as of the date when physical possession of such portion of the
Building or Premises are taken by the condemning authority. If less than the
whole or substantially the whole of the Premises are taken or sold and the
remainder of the Premises are rendered untenantable, in Tenant's reasonable
opinion, Tenant may indicate its intent to terminate this Lease by giving
Landlord written notice of same within thirty (30) days after the date of
receiving notice of condemnation by the condemning authority (the "Premises
Taking Date"). Such notice shall specify with particularity the items or
characteristics of the remainder of the Premises which render it untenantable.
Landlord shall thereafter have a period of ninety (90) days to cure the items of
untenantability, including, without limitation, the relocation of Tenant to
another space in the Building reasonably comparable to the condemned portion of
the Premises, in which case Landlord shall pay Tenant's reasonable moving costs
if Tenant relocates. This Lease shall terminate on, and no further rentals shall
accrue after the Premises Taking Date, unless the taking is cured within the
above described cure period or unless Landlord has filed a court action,
contesting Tenant's claims that the remainder of the Premises is untenantable.
In the event that Tenant fails to give such notice in the manner and within the
time period specified in this Section, such right to terminate shall be deemed
to have been irrevocably waived by Tenant and the remainder of the Premises
shall be deemed to be tenantable. If this Lease is not so terminated upon any
such taking or sale, the Base Rent payable hereunder shall be diminished by an
amount representing that portion of Base Rent applicable to the portion of the
Premises subject to such taking or sale, and Landlord shall restore the Building
and the Premises to substantially their former condition, but such work shall
not exceed the scope of the work done by Landlord in originally constructing the
Building and installing Shell Improvements and Initial Improvements in the
Premises, nor shall Landlord in any event be required to spend for such work an
amount in excess of the amount received by Landlord as compensation for such
taking. All amounts awarded upon a taking of any part or all of the Property,
Building and/or the Shell Improvements, Initial Improvements and Tenant
Improvements shall belong to Landlord, and Tenant shall not be entitled to and
expressly waives all claims to any such compensation. Nothing contained herein
shall be deemed to deny Tenant its right to claim from the condemning authority
compensation damages for its trade fixtures and personal property, provided the
condemning authority makes a separate award therefore, and provided Landlord's
condemnation claim is in no way diminished thereby.
ARTICLE SIXTEEN
INSURANCE
16.01 TENANT'S INSURANCE
Tenant, at Tenant's expense, agrees to maintain in force, with a company or
companies acceptable to Landlord, during the Term: (a) Commercial General
Liability Insurance on a primary basis and without any right of contribution
from any insurance carried by Landlord covering the Premises on an occurrence
basis against all claims for personal injury, bodily injury, death and property
damage, including contractual liability covering the indemnification provisions
in this Lease. Such insurance shall be for such limits that are reasonably
required by Landlord from time to time but not less than a combined single limit
of Five Million and No/100 Dollars ($5,000,000.00); (b) Workers' Compensation
and Employers' Liability Insurance for an amount of not less than One Million
and No/100 Dollars ($1,000,000.00), both in accordance with the laws of The
State of Texas; (c) "All Risks" property insurance in an amount adequate to
cover the full replacement cost of all personal property of Tenant, including,
without limitation, equipment, installations, and fixtures installed at Tenant's
expense, and contents of the Premises in the event of loss, and in such
additional amounts as are required to meet Tenant's obligations pursuant to
Section 14.01(a), and any such policy shall contain a provision requiring the
insurance carriers to waive their rights of subrogation against Landlord,
subject to Section 16.04 below; (d) In the event a motor vehicle is to be used
by Tenant in connection with its business operation from the Premises,
Comprehensive Automobile Liability Insurance coverage with limits of not less
than Three Million and No/100 Dollars ($3,000,000.00) combined single limit
coverage against bodily injury liability and property damage liability arising
out of the use by or on behalf of Tenant, its agents and employees in connection
with this Lease, of any owned, non-owned or hired motor vehicles; and (e) such
other insurance or coverages as Landlord reasonably requires. Tenant shall also
be responsible for its own deductibles applicable to any insurance carried by
it. Notwithstanding the foregoing, NGC Corporation shall have the right to self
insure as to the insurance coverage set forth in item (c) of this Section 16.01.
16.02 FORM OF POLICIES
Each policy referred to in 16.01 shall satisfy the following requirements. Each
policy shall (i) (other than the coverage set forth in Section 16.01(b) above)
name Landlord and the Indemnitees as additional insureds, (ii) be issued by one
or more responsible insurance companies licensed to do business in Texas
reasonably satisfactory to Landlord, (iii) where applicable, provide for
deductible amounts reasonably satisfactory to Landlord and not permit
co-insurance, (iv) shall provide that such insurance may not be canceled or
amended without thirty (30) days' prior written notice to the Landlord, and (v)
shall provide that the policy shall not be invalidated should the insured waive
in writing prior to a loss, any or all rights of recovery against any other
party for losses covered by such policies. Tenant shall deliver to Landlord,
certificates of insurance and at Landlord's request, copies of all policies and
renewals thereof to be maintained by Tenant hereunder, not less than ten (10)
days prior to the Commencement Date and not less than ten (10) days prior to the
expiration date of each policy.
16.03 LANDLORD'S INSURANCE
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Landlord agrees to purchase and keep in full force and effect during the Term
hereof, including any extensions or renewals thereof, insurance under policies
issued by insurers of recognized responsibility, qualified to do business in
Texas on the Building in amounts not less than the greater of eighty (80%)
percent of the then full replacement cost (without depreciation) of the Building
(above foundations) or an amount sufficient to prevent Landlord from becoming a
co-insurer under the terms of the applicable policies, against fire and such
other risks as may be included in standard forms of all risk coverage insurance
reasonably available from time to time. Landlord agrees to maintain in force
during the Term, Commercial General Liability Insurance covering the Building on
an occurrence basis against all claims for personal injury, bodily injury, death
and property damage. Such insurance shall be for a combined single limit of Five
Million and No/100 Dollars ($5,000,000.00). Neither Landlord's obligation to
carry such insurance nor the carrying of such insurance shall be deemed to be an
indemnity by Landlord with respect to any claim, liability, loss, cost or
expense due, in whole or in part, to Tenant's negligent acts or omissions or
wilful misconduct.
16.04 WAIVER OF SUBROGATION
(a) Landlord agrees that, so long as the same is permitted under the
laws of Texas, it will include in its "All Risks" policies appropriate clauses
pursuant to which the insurance companies (i) waive all right of subrogation
against Tenant with respect to losses payable under such policies and/or (ii)
agree that such policies shall not be invalidated should the insured waive in
writing prior to a loss any or all right of recovery against any party for
losses covered by such policies.
(b) Tenant agrees to include, so long as the same is permitted under
the laws of Texas, in its "All Risks" insurance policy or policies on its
furniture, furnishings, fixtures and other property removable by Tenant under
the provisions of its lease of space in the Building, appropriate clauses
pursuant to which the insurance company or companies (i) waive the right of
subrogation against Landlord and/or any tenant of space in the Building with
respect to losses payable under such policy or policies and/or (ii) agree that
such policy or policies shall not be invalidated should the insured waive in
writing prior to a loss any or all right of recovery against any party for
losses covered by such policy or policies. If Tenant is unable to obtain in such
policy or policies either of the clauses described in the preceding sentence,
Tenant shall, if legally possible and without necessitating a change in
insurance carriers, have Landlord named in such policy or policies as an
additional insured. If Landlord shall be named as an additional insured in
accordance with the foregoing, Landlord agrees to endorse promptly to the order
of Tenant, without recourse, any check, draft, or order for the payment of money
representing the proceeds of any such policy or representing any other payment
growing out of or connected with said policies, and Landlord does hereby
irrevocably waive any and all rights in and to such proceeds and payments.
(c) Landlord hereby waives any and all right of recovery which it might
otherwise have against Tenant, its servants, agents, employees, contractors,
visitors or invitees for loss or damage occurring to the Building and the
fixtures, appurtenances and equipment therein, to the extent the same is covered
by Landlord's insurance, notwithstanding that such loss or damage may result
from the negligence or fault of Tenant, its servants, agents, employees,
contractors, visitors or invitees. Tenant hereby waives any and all right of
recovery which it might otherwise have against Landlord, its servants, agents,
employees, contractors, visitors or invitees and against every other tenant in
the Building who shall have executed a similar waiver as set forth in this
Section 16.04 (c) for loss or damage to Tenant's furniture, furnishings,
fixtures and other property removable by Tenant under the provisions hereof to
the extent that same is covered by Tenant's insurance, notwithstanding that such
loss or damage may result from the negligence or fault of Landlord, its
servants, agents employees, contractors, visitors or invitees or such other
tenant and the servants, agents or employees thereof.
(d) Landlord and Tenant hereby agree to advise the other promptly if
the clauses to be included in their respective insurance policies pursuant to
subparagraphs (a) and (b) above cannot be obtained on the terms hereinbefore
provided and thereafter to furnish the other with a certificate of insurance or
copy of such policies showing the naming of the other as an additional insured,
as aforesaid. Landlord and Tenant hereby also agree to notify the other promptly
of any cancellation or change of the terms of any such policy which would affect
such clauses or naming. All such policies which name both Landlord and Tenant as
additional insureds shall, to the extent obtainable, contain agreements by the
insurers to the effect that no act or omission of any additional insured will
invalidate the policy as to the other additional insureds.
(e) Notwithstanding the foregoing provisions of this Section 16.04, the
failure of Tenant to take out or maintain any insurance policy required under
Article Sixteen hereof, or NGC Corporation's election to self-insure shall be a
defense for the Landlord to any claim asserted by Tenant against Landlord by
reason of any loss sustained by Tenant that would have been covered by any such
required policy. Similarly, the failure of Landlord to take out or maintain any
insurance policy required under Article Sixteen hereof shall be a defense for
the Tenant to any claim asserted by Landlord by reason of any loss sustained by
Landlord that would have been covered by any such required policy. THE FOREGOING
WAIVERS SHALL APPLY REGARDLESS OF THE NEGLIGENCE OR FAULT OF LANDLORD OR TENANT.
It is also the intent that neither party will make a claim against the other for
any deductibles which may be applicable to any insurance policies carried by
either of the parties.
16.05 NOTICE OF CASUALTY
Tenant shall give Landlord notice in case of a fire or accident in the Premises
promptly after Tenant is aware of such event.
ARTICLE SEVENTEEN
LIABILITY
17.01 LIABILITY
LANDLORD SHALL NOT BE LIABLE TO TENANT, OR TO TENANT'S AGENTS, SERVANTS,
EMPLOYEES, CUSTOMERS, CONTRACTORS, SUBCONTRACTORS, OR INVITEES FOR: (A) ANY
INJURY TO PERSON OR DAMAGE TO PROPERTY CAUSED BY AN ACT, OMISSION, OR NEGLECT OF
TENANT, ITS AGENTS, SERVANTS, EMPLOYEES, INVITEES, LICENSEES, CONTRACTORS,
SUBCONTRACTORS, OR ANY OTHER PERSON ENTERING THE BUILDING UNDER THE INVITATION
OF TENANT OR ARISING OUT OF THE USE OF THE BUILDING BY TENANT OR ARISING OUT OF
THE CONDUCT OF TENANT'S BUSINESS OR OUT OF A DEFAULT BY TENANT IN THE
PERFORMANCE OF ITS OBLIGATIONS HEREUNDER; (B) ANY INJURY TO PERSON, DAMAGE OR
OTHER LOSS CAUSED BY OR THROUGH THE ACTS OR OMISSIONS OF OTHER TENANTS OF THE
BUILDING OR OTHER PERSONS WHOMSOEVER; OR (C) ANY CONSEQUENTIAL DAMAGES
REGARDLESS OF CAUSATION. WITH RESPECT TO TORT CLAIMS AGAINST LANDLORD, LANDLORD
SHALL NOT BE LIABLE TO TENANT OR TO ANY OTHER PERSON FOR ANY ACT OR OMISSION OF
LANDLORD OR OF ITS AGENTS OR EMPLOYEES, NEGLIGENT OR OTHERWISE, EXCEPT FOR
ACTUAL DAMAGES OR COSTS INCURRED AS A DIRECT RESULT OF AND CAUSED DIRECTLY BY
THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF LANDLORD (OR OF LANDLORD'S AGENTS
OR EMPLOYEES) IN CIRCUMSTANCES IN WHICH LANDLORD IS DEEMED TO BE LIABLE AT LAW
FOR SUCH ACTS OR OMISSIONS. NOTHING CONTAINED IN THE IMMEDIATELY PRECEDING
SENTENCE SHALL EVER BE CONSTRUED AS CREATING LIABILITY IN EXCESS OF THAT
EXISTING AT LAW OR, IN ANY EVENT, INCREASING THE LIABILITY OF LANDLORD, UNDER
ANY THEORY OR CAUSE OF ACTION, HOWEVER DENOMINATED, FROM THAT EXISTING AT LAW.
TENANT SHALL NOT BE LIABLE TO LANDLORD, OR TO LANDLORD'S AGENTS, SERVANTS,
EMPLOYEES, CUSTOMERS, CONTRACTORS, SUBCONTRACTORS, OR INVITEES FOR: (A) ANY
INJURY TO PERSON OR DAMAGE TO PROPERTY CAUSED BY AN ACT, OMISSION, OR NEGLECT OF
LANDLORD, ITS AGENTS, SERVANTS, EMPLOYEES, INVITEES, LICENSEES, CONTRACTORS,
SUBCONTRACTORS, OR ANY OTHER PERSON ENTERING THE BUILDING UNDER THE INVITATION
OF LANDLORD OR ARISING OUT OF THE USE OF THE BUILDING BY LANDLORD OR ARISING OUT
OF THE CONDUCT OF LANDLORD'S BUSINESS OR OUT OF A DEFAULT BY LANDLORD IN THE
PERFORMANCE OF ITS OBLIGATIONS
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HEREUNDER; OR (B) ANY CONSEQUENTIAL DAMAGES REGARDLESS OF CAUSATION. REGARDING
DAMAGE TO PROPERTY, THIS SECTION 17.01 IS SUBJECT TO SECTION 16.04.
ARTICLE EIGHTEEN
RULES AND REGULATIONS
18.01 RULES
Tenant agrees for itself and for its subtenants, employees, agents, and invitees
to comply with the rules and regulations listed on EXHIBIT "D" attached hereto
and with all reasonable modifications and additions thereto which Landlord may
make from time to time. In the event of a conflict between the rules and
regulations and the terms of this Lease, the terms of this Lease shall prevail.
18.02 ENFORCEMENT
Nothing in this Lease shall be construed to impose upon the Landlord any duty or
obligation to enforce the rules and regulations as set forth on EXHIBIT "D" or
as hereafter adopted, or the terms, covenants or conditions of any other lease
as against any other tenant, and the Landlord shall not be liable to the Tenant
for violation of the same by any other tenant, its servants, employees, agents,
visitors or licensees. Landlord shall use reasonable efforts to enforce the
rules and regulations of the Building in a uniform and non-discriminatory
manner. Tenant shall pay to Landlord all damages caused by Tenant's failure to
comply with the provisions of this Article Eighteen.
ARTICLE NINETEEN
LANDLORD'S RESERVED RIGHTS
19.01 RESERVED RIGHTS
Landlord shall have the following rights exercisable without notice to Tenant
and without liability to Tenant for damage or injury to persons, property or
business and without being deemed an eviction or disturbance of Tenant's use or
possession of the Premises or giving rise to any claim for setoff or abatement
of Rent: (1) Subject to the provisions of the Signage Exhibit attached hereto as
EXHIBIT "F," to change the Building's name or street address upon thirty (30)
days' prior written notice to Tenant; (2) To install, affix and maintain all
signs on the exterior and/or interior of the Building; (3) To designate and/or
approve prior to installation, all types of signs, window shades, blinds,
drapes, awnings or other similar items, and all internal lighting that may be
visible from the exterior of the Premises; (4) Upon reasonable notice to Tenant,
to display the Premises to prospective tenants at reasonable hours during the
last twelve (12) months of the Term; (5) Upon reasonable notice to Tenant, to
allow prospective mortgagees and purchasers (or their designees) to inspect the
Premises at reasonable hours any time during the Term; (6) To grant to any party
the exclusive right to conduct any business or render any service in or to the
Building, provided such exclusive right shall not operate to prohibit Tenant
from using the Premises for the purpose permitted hereunder; (7) To change the
arrangement and/or location of entrances or passageways, doors and doorways,
corridors, elevators, stairs, washrooms or public portions of the Building, and
to close entrances, doors, corridors, elevators or other facilities, provided
that such action shall not materially and adversely interfere with Tenant's
access to the Premises or the Building; and (8) To close the Building after
Normal Business Hours, except that Tenant and its employees and invitees shall
be entitled to admission at all times in accordance with the other provisions of
this Lease and under such regulations as Landlord prescribes for security
purposes.
ARTICLE TWENTY
ESTOPPEL CERTIFICATE
20.01 IN GENERAL
Within fifteen (15) days after request therefor by Landlord, Mortgagee or any
prospective mortgagee or owner, Tenant agrees as directed in such request to
execute and deliver an Estoppel Certificate in recordable form, binding upon
Tenant, certifying (i) that this Lease is unmodified and in full force and
effect (or if there have been modifications, a description of such modifications
and that this Lease as modified is in full force and effect; (ii) the dates to
which Rent has been paid; (iii) that Tenant is in the possession of the Premises
if that is the case; (iv) that to the best of Tenant's knowledge Landlord is not
in default under this Lease, or, if Tenant believes Landlord is in default, the
nature thereof in detail; (v) that to the best of Tenant's knowledge, Tenant has
no off-sets or defenses to the performance of its obligations under this Lease
(or if Tenant believes there are any off-sets or defenses, a full and complete
explanation thereof); (vi) that the Premises have been completed in accordance
with the terms and provisions hereof or the Workletter, that Tenant has accepted
the Premises and the condition thereof and of all improvements thereto and to
the best of Tenant's knowledge has no claims against Landlord or any other party
with respect thereto; (vii) that if an assignment of rents or leases has been
served upon the Tenant by a Mortgagee, Tenant will acknowledge receipt thereof
and agree to be bound by the provisions thereof provided same do not alter the
provisions of this Lease; (viii) that Tenant will give to the Mortgagee copies
of all notices required or permitted to be given by Tenant to Landlord; and (ix)
to any other information reasonably requested.
20.02 ENFORCEMENT
In the event that Tenant fails to deliver an Estoppel Certificate, pursuant to a
request made under Section 20.01, and, if Landlord gives Tenant another notice
of such failure and such failure continues for an additional period of ten (10)
days thereafter, then such failure shall be an Event of Default for which there
shall be no cure or grace period. In addition to any other remedy available to
Landlord, Landlord may impose a penalty equal to $500.00 for each day that
Tenant fails to deliver an Estoppel Certificate and Tenant shall be deemed to
have irrevocably appointed Landlord as Tenant's attorney-in-fact to execute and
deliver such Estoppel Certificate.
ARTICLE TWENTY-ONE
RELOCATION OF TENANT
(Not applicable.)
ARTICLE TWENTY-TWO
REAL ESTATE BROKERS
Tenant represents that, except for Cushman Realty Corporation, Tenant is not
being represented by any other real estate broker, sales person, or finder in
connection with this Lease. Tenant hereby agrees to indemnify, protect, defend
and hold Landlord and the Indemnitees, harmless from and against any and all
liabilities and claims for commissions and fees arising out of a breach of the
foregoing representation. Landlord shall be responsible for the payment of all
commissions to the broker, if any, specified in this Article.
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ARTICLE TWENTY-THREE
MORTGAGEE PROTECTION
23.01 SUBORDINATION AND ATTORNMENT TO MORTGAGE
This Lease shall be subject and subordinate to any mortgage, deed of trust or
other lien hereafter arising upon the Premises, or upon the Building and/or the
Property and to any renewals, modifications, consolidations, refinancing, and/or
extension thereof ("Landlord's Mortgage"), provided (and only if) the holder of
any such future mortgage, deed of trust, or lien ("Landlord's Future Mortgagee")
executes an agreement with Tenant containing provisions substantially the same
as those set forth in EXHIBIT "G". Tenant further agrees to execute such
instruments as may be reasonably requested by Landlord or such Landlord's Future
Mortgagee confirming the subordination provision of this Section. Tenant agrees
that the holder of any Landlord's Future Mortgage shall have the right at any
time to subordinate Landlord's Future Mortgage to this Lease.
23.02 MORTGAGEE PROTECTION
Tenant agrees to give any Mortgagee or ground lessor, by registered or certified
mail, a copy of any notice of default served upon the Landlord by Tenant,
provided that prior to such notice Tenant has received notice (by way of service
on Tenant of a copy of an assignment of rents and leases, or otherwise) of the
address of such Mortgagee or ground lessor. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee or ground lessor shall have an additional thirty
(30) days after receipt of notice thereof within which to cure such default or
if such default cannot be cured within that time, then such additional notice
time as may be necessary, if, within such thirty (30) days, any Mortgagee or
ground lessor has commenced and is diligently pursuing the remedies necessary to
cure such default (including but not limited to commencement of foreclosure
proceedings or other proceedings to acquire possession of the Real Property, if
necessary to effect such cure). Such period of time shall be extended by any
period within which such Mortgagee or ground lessor is prevented from commencing
or pursuing such foreclosure proceedings or other proceedings to acquire
possession of the Real Property by reason of Landlord's bankruptcy. Until the
time allowed as aforesaid for Mortgagee or ground lessor to cure such defaults
has expired without cure, Tenant shall have no right to, and shall not,
terminate this Lease on account of default. This Lease may not be modified or
amended so as to reduce the rent or shorten the term, or so as to adversely
affect in any other respect to any material extent the rights of the Landlord,
nor shall this Lease be canceled or surrendered, without the prior written
consent, in each instance, of the ground lessor or the Mortgagee.
ARTICLE TWENTY-FOUR
NOTICES
(a) All notices, demands or requests provided for or permitted to be
given pursuant to this Lease must be in writing and shall be personally
delivered, sent by Federal Express or other overnight courier service, or mailed
by first class, registered or certified mail, return receipt requested, postage
prepaid.
(b) All notices, demands or requests to be sent pursuant to this Lease
shall be deemed to have been properly given or served by delivering or sending
the same in accordance with this Section, addressed to the parties hereto at
their respective addresses listed below:
(1) Notices to Landlord shall be addressed:
Metropolitan Life Insurance Company
Attn: Property Manager
1000 Louisiana Street, Suite 500
Houston, Texas 77002
with a copy to the following:
Metropolitan Life Insurance Company
Attn: Assistant Vice-President
5420 LBJ Freeway, Suite 1310
Dallas, Texas 75240
(2) Notices to Tenant shall be addressed:
(a) PRIOR TO COMMENCEMENT DATE:
NGC Corporation
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Rich H. Niermeyer, Manager of
Office Administration
with a copy to:
NGC Corporation
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Kenneth Randolph, Vice President
and Legal Counsel
(b) AFTER COMMENCEMENT DATE:
NGC Corporation
1000 Louisiana, Suite 5800
Houston, Texas 77002
Attention: Rich H. Niermeyer, Manager of
Office Administration
with a copy to:
NGC Corporation
1000 Louisiana, Suite 5800
Houston, Texas 77002
Attention: Kenneth Randolph, Vice President
and Legal Counsel
(c) If notices, demands or requests are sent by registered or certified
mail, said notices, demands or requests shall be effective as of the date same
are postmarked as having been deposited in the United States mail.
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However, the time period in which a response to any such notice, demand or
request must be given shall commence to run from the date of receipt on the
return receipt of the notice, demand or request by the addressee thereof.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt of
notice, demand or request sent. Notices may also be served by personal delivery
to Landlord or Tenant at the above addresses, or in the case of delivery by
Federal Express or other overnight courier service, in which event, notices
shall be effective upon acceptance of delivery by an employee, officer, director
or partner of Landlord or Tenant.
(d) By giving to the other party at least thirty (30) days written
notice thereof, either party shall have the right from time to time during the
term of this Lease to change their respective addresses for notices, statements,
demands and requests, provided such new address shall be within the United
States of America.
ARTICLE TWENTY-FIVE
MISCELLANEOUS
25.01 LATE CHARGES
All payments required hereunder (other than the Monthly Base Rent and Rent
Adjustments, which shall be due as hereinbefore provided) to Landlord shall be
paid within ten (10) days after Landlord's demand therefor. All such amounts
(including, without limitation Monthly Base Rent and Rent Adjustments not paid
when due shall bear interest from the date due until the date paid at the
Default Rate in effect or the date such payment was due as provided in Article
Three of this Lease.
25.02 WAIVER OF JURY TRIAL
THIS LEASE CONTAINS A WAIVER OF JURY TRIAL BY LANDLORD AND TENANT IN SECTION
11.01(H).
25.03 DEFAULT UNDER OTHER LEASE
(Not applicable).
25.04 OPTION
This Lease shall not become effective as a lease or otherwise until executed and
delivered by both Landlord and Tenant. The submission of the Lease to Tenant
does not constitute a reservation of or option for the Premises, except that it
shall, when executed by Tenant, constitute an offer on the part of Tenant in
effect for fifteen (15) days to lease the Premises on the terms and conditions
herein contained.
25.05 AUTHORITY
Each party represents and warrants to the other party that it has full authority
and power to enter into and perform its obligations under this Lease, that the
person executing this Lease is fully empowered to do so, and that no consent or
authorization is necessary from any third party. Landlord may request that
Tenant provide Landlord evidence of Tenant's authority.
25.06 ENTIRE AGREEMENT
This Lease, the Exhibits attached hereto and the Workletter contain the entire
agreement between Landlord and Tenant concerning the Premises and there are no
other agreements, either oral or written. This Lease shall not be modified
except by a writing executed by Landlord and Tenant.
25.07 MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE
(Not applicable).
25.08 EXCULPATION
Tenant agrees, on its behalf and on behalf of its successors and assigns: (a)
that any liability or obligation under this Lease; (b) that any liability or
obligation of Landlord to Tenant (or any other party) for a tort related to the
Property; and (c) that any other circumstance in which Landlord is judicially
determined to have liability or obligation to Tenant (or any other party)
related to the Property shall only be enforced against Landlord's equity
interest in the Property and in no event against any other assets of the
Landlord, or Landlord's officers or directors. Provided, however, in the event
Landlord shall sell the Property, any such enforcement may extend (but shall be
strictly limited) to the amount of any proceeds of the sale received by
Landlord, which amount shall not include the amount of any debt paid from the
sales proceeds, and Landlord shall not be liable for any obligations or causes
of action arising, occurring or accruing after the date of Landlord's sale or
transfer of the Property provided that all of such obligations hereunder are
specifically assumed by the buyer or transferee. This Section 25.08 is not
intended, nor shall it be deemed, to increase Landlord's liability beyond that
set forth in Sections 17.01 and/or 25.10 hereof.
25.09 ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of Rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or any letter
accompanying any check or payment of Rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or payment of Rent
or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term.
25.10 LANDLORD'S OBLIGATIONS ON SALE OF BUILDING
In the event of any sale or other transfer of the Building, Landlord shall be
entirely freed and relieved of all agreements and obligations of Landlord
hereunder accruing or to be performed after the date of such sale or transfer,
provided that all of Landlord's obligations hereunder are specifically assumed
by the buyer or transferee.
25.11 BINDING EFFECT
This Lease shall be binding upon and inure to the benefit of Landlord and Tenant
and their respective heirs, legal representatives, successors and permitted
assigns.
25.12 CAPTIONS
The Article and Section captions in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe, or describe the scope or
intent of such Articles and Sections.
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25.13 APPLICABLE LAW
This Lease shall be construed in accordance with the laws of the State of Texas.
If any term, covenant or condition of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term, covenant or
condition to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each item, covenant
or condition of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
25.14 VACATION OF PREMISES
In the event Tenant vacates the Premises but is otherwise in compliance with all
the other terms, covenants and conditions of this Lease, Landlord shall (i) have
the right to enter into the Premises in order to show the space to prospective
tenants, and (ii) have the right to reduce the services provided to Tenant
pursuant to the terms of this Lease to such levels as Landlord reasonably
determines to be adequate services for an unoccupied premises.
25.15 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES
If Tenant fails timely to perform any of its duties under this Lease or the
Workletter, Landlord shall have the right (but not the obligation) to perform
such duty on behalf and at the expense of Tenant without prior notice to Tenant,
and all sums expended or expenses incurred by Landlord in performing such duty
shall be deemed to be additional Rent under this Lease and shall be due and
payable upon demand by Landlord. This Section is subject to the provisions of
Article Eleven.
25.16 PARKING
Certain limited parking rights in the Building Garage, the 1400 Louisiana Garage
and the 777 Clay Garage are granted to Tenant in accordance with and subject to
the terms of EXHIBIT "E" attached to this Lease and incorporated herein for all
purposes.
25.17 SIGNAGE
Tenant is permitted the right to erect the Signage in accordance with and
subject to the terms of EXHIBIT "F" attached to this Lease and incorporated
herein for all purposes.
25.18 EXPANSION OPTIONS
Certain limited rights regarding expansion of the Premises are granted to Tenant
in accordance with and subject to the terms of EXHIBIT "H" attached to this
Lease and incorporated herein for all purposes.
25.19 CONTRACTION OPTION
Certain limited rights regarding contraction of the Premises are granted to
Tenant in accordance with and subject to the terms of EXHIBIT "I" attached to
this Lease and incorporated herein for all purposes.
25.20 PREFERENTIAL RIGHTS
Certain limited preferential rights regarding expansion of the Premises are
granted to Tenant in accordance with and subject to the terms of EXHIBIT "J"
attached to this Lease and incorporated herein for all purposes.
25.21 RENEWAL OPTIONS
Certain limited rights of renewal are granted to Tenant in accordance with and
subject to the terms of EXHIBIT "K" attached to this Lease and incorporated
herein for all purposes.
25.22 PRESS RELEASE
Prior to the Commencement Date, except as required by Laws, neither Landlord nor
Tenant shall unilaterally publicize the existence or terms of this Lease
(including, without limitation, by press release or other announcement other
than strictly within the respective companies) until written permission is given
to do so by the other. If an announcement is made within either company it shall
be accompanied by a request that the information be kept confidential. Provided,
however, notwithstanding the foregoing, in no event shall either Tenant or
Landlord (or anyone acting on their respective behalves) be liable for damages
of any kind whatsoever whether actual, consequential, liquidated, punitive, or
otherwise if a unilateral publication is made in contravention of this Section.
25.23 MEMORANDUM OF LEASE
Within thirty (30) days after the date of this Lease Landlord and Tenant shall
execute and acknowledge a Memorandum of Lease in the form attached hereto as
EXHIBIT "P". Nothing in such Memorandum of Lease shall modify or amend any
provisions of this Lease.
25.24 ROOFTOP ANTENNAE
Certain limited rights regarding two (2) rooftop antennae are granted to Tenant
in accordance with and subject to the terms of EXHIBIT "T" attached to this
Lease and incorporated herein for all purposes.
NOTICE OF INDEMNIFICATION: THE PARTIES TO THIS LEASE HEREBY ACKNOWLEDGE AND
AGREE THAT THIS LEASE (AND ATTACHED EXHIBITS) CONTAINS CERTAIN INDEMNIFICATION
PROVISIONS.
-23-
IN WITNESS WHEREOF, this Lease has been executed as of the date set forth in
Section 1.01(4) hereof.
LANDLORD:
METROPOLITAN LIFE INSURANCE COMPANY
By:
David G. Rogers
Assistant Vice-President
Date:
METROPOLITAN TOWER REALTY COMPANY, INC.
By:
David G. Rogers
Vice-President
Date:
TENANT:
NGC CORPORATION
By:
C.L. Watson
Chairman & Chief Executive Officer
Date:
-24-
Exhibit 10.70
FIRST AMENDMENT TO OFFICE LEASE AGREEMENT
This First Amendment to Office Lease ("First Amendment"), by and
between METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation, and
Metropolitan Tower Realty Company, Inc., a Delaware corporation (collectively
"Landlord"), and NGC Corporation, a Delaware corporation ("Tenant"), is dated
the _____ day of ___________________, 1996.
WITNESSETH:
WHEREAS, Landlord and Tenant heretofore entered into that certain
Office Lease of even date herewith ("Lease"); and
WHEREAS, under and pursuant to the terms of the Lease, Tenant has
leased from Landlord certain office space consisting of the entirety of Floors
60 through 67 inclusive, deemed to contain 206,363 square feet of Rentable Area
("Existing Premises") in that certain office building commonly known as "First
Interstate Bank Plaza" ("Building"), which is located at 1000 Louisiana Street,
Houston, Texas, as more particularly described in the Lease; and
WHEREAS, Tenant desires to exercise its Expansion Option, pursuant to
EXHIBIT "H" attached to the Lease, and add approximately 17,791 square feet of
Rentable Area located on the Fifty-Eighth (58th) Floor, and approximately 10,067
square feet of Rentable Area located on the Seventy-First (71st) Floor
(collectively the "Expansion Area"), which Expansion Area is outlined on Exhibit
"A" attached hereto;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and in the Lease, the parties hereto do hereby
covenant and agree as follows:
1. DEFINED TERMS. Terms defined in the Lease and delineated herein by
initial capital letters shall have the same meaning ascribed thereto in the
Lease, except to the extent that the meaning of such term is specifically
modified by the provisions hereof. In addition, other terms not defined in the
Lease but defined herein will, when delineated with initial capital letters,
have the meanings ascribed thereto in this First Amendment. Terms and phrases
which are not delineated by initial capital letters shall have the meanings
commonly ascribed thereto.
2. EXPANSION EFFECTIVE DATE. The "Expansion Effective Date" shall be
the date which is thirty (30) days after the date hereof.
3. DELIVERY OF EXPANSION AREA. The Expansion Area shall be delivered by
Landlord to Tenant on the Expansion Effective Date in accordance with the
provisions of Section 2.03(a) of the Lease, and, on such date, except as
otherwise provided herein, (i) the terms and provisions of the Lease shall
automatically apply and become applicable to the Expansion Area, and (ii) the
Expansion Area shall automatically and without the necessity of further
documentation, become and be deemed to be a part of the Premises for all
purposes, including, without limitation, the determination of the "Excess" (as
defined in the Lease).
4. MONTHLY BASE RENT. The base rental rate per annum for the Expansion
Area shall be as follows:
LEASE YEARS RATE/SF OF RENTABLE AREA
1 - 2 $ 0.00
3 - 11 $15.00
The Commencement Date of the Term of the Lease regarding the Expansion Area
shall be determined in accordance with the definition of "Commencement Date" in
Section 1.03 of the Lease, provided, however, in no event shall Tenant's free
rent period regarding the Expansion Area extend beyond December 31, 1998. The
Base Rent for the Expansion Area is subject to adjustment from time to time as
provided in the Lease, including, without limitation, any Rent Adjustment and
adjustment resulting from any Allowance Increase in connection with the
Expansion Area. Tenant's obligation to pay the Rent Adjustment for the Expansion
Area shall commence on the second anniversary date of the Term Commencement
Date.
5. ALLOWANCE. Landlord shall provide the Allowance for completion of
the Tenant Improvements in the Expansion Area in accordance with the Workletter
attached as EXHIBIT "C" to the Lease, including, without limitation, payment of
the Allowance in accordance with Paragraph 5 of the Workletter.
6. CONCIERGE DESK. Landlord will permit Tenant to have a concierge desk
on the 58th Floor of the Building in accordance with the provisions of Paragraph
6 of the Expansion Option attached as EXHIBIT "H" to the Lease.
7. SIGNAGE. Tenant shall have the right to install an identification
sign on the 59th Floor in accordance with the provisions of the Signage exhibit
attached as EXHIBIT "F" to the Lease.
8. PARKING. Tenant shall not be entitled to use any additional parking
spaces in the Building Garage as a result of this expansion, provided, however,
Tenant shall have the right to use eighteen (18) additional unreserved parking
spaces in the 1400 Louisiana Garage. Parking rights accorded Tenant in
connection with its expansion of the Premises are set forth in EXHIBIT "E" to
the Lease, provided, however, parking fees for such 18 spaces shall be
conditionally waived during the first two (2) Lease Years of the Term of the
Lease regarding the Expansion Area, subject to the provisions of Section
11.01(f) and EXHIBIT "I". Furthermore, Paragraph 4 of EXHIBIT "E" to the Lease
is hereby amended so as to reduce the "Minimum Area" from "47,217" to "19,359"
square feet of Rentable Area.
9. EFFECT OF FIRST AMENDMENT. Except as expressly amended by the
provisions hereof, the terms and provisions contained in the Lease shall
continue to govern the rights and obligations of the parties; and all provisions
and covenants in the Lease shall remain in full force and effect as stated
therein, except to the extent specifically modified by the provisions of this
First Amendment. This First Amendment and the Lease shall be construed as one
instrument.
FIRST AMENDMENT TO OFFICE LEASE - Page 1
IN WITNESS WHEREOF, Landlord and Tenant have executed this First
Amendment in multiple counterparts as of the last day and year written below.
LANDLORD:
METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
By:_________________________________
David G. Rogers
Assistant Vice-President
Date:_______________________________
METROPOLITAN TOWER REALTY COMPANY, INC.,
a Delaware corporation
By:________________________________
David G. Rogers, Vice-President
TENANT:
NGC CORPORATION,
a Delaware corporation
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
FIRST AMENDMENT TO OFFICE LEASE - Page 2
EXHIBIT "A"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
LEGAL DESCRIPTION
Being a tract or parcel containing 62,472 square feet of land situated in Harris
County, Texas, being all of Block 144, City of Houston, South Side Buffalo Bayou
(S.S.B.B.), being more particularly described as follows:
COMMENCING at City of Houston Monument 5457,0109-B same being City Rod 27,
located at the intersection of the centerlines of McKinney Avenue (80 feet wide)
and Louisiana Street (80 feet wide);
THENCE, North 55(degree)00'00" West, 40.00 feet along the centerline of said
McKinney Avenue;
THENCE, departing said centerline at a right angle, South 35(degree)00'00" West
along a line that is parallel with and 40.00 feet west of the centerline of said
Louisiana Street, 40.00 feet to the northeast corner of said Block 144 and the
POINT OF BEGINNING;
THENCE, continuing along the westerly right-of-way line of said Louisiana
Street, South 35(degree)00'00" West, 249.89 feet to the southeast corner of said
Block 144;
THENCE, North 55(degree)00'00" West, 250.00 feet along the northerly
right-of-way line of Lamar Avenue (80 feet wide) to the southwest corner of said
Block 144;
THENCE, North 35(degree)00'00" East, 249.89 feet along the easterly right-of-way
line of Smith Street (80 feet wide) to the northwest corner of said Block 144;
THENCE, South 55(degree)00'00" East, 250.00 feet along the southerly
right-of-way line of said McKinney Avenue to the POINT OF BEGINNING, containing
a computed area of 62,472 square feet of land.
EXHIBIT "A" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "B"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
PLAN OF PREMISES
[TO BE ATTACHED]
EXHIBIT "B" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "C"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
WORKLETTER
This Workletter ("Workletter") describes and specifies the rights
and obligations of Landlord and Tenant with respect to certain allowances
granted to Tenant hereunder and the rights and responsibilities of Landlord and
Tenant with respect to the design, construction and payment for the completion
of the Tenant Improvements within the Premises and space leased pursuant to the
Expansion Option.
1. DEFINITIONS. Terms which are defined in the Lease shall have the
same meaning in this Workletter, however, the term "Premises" as used herein
shall also include space leased by Tenant pursuant to the Expansion Option.
Additionally, as used in this Workletter, the following terms (when delineated
with initial capital letters) shall have the respective meaning indicated for
each as follows:
(a) "ALLOWANCE" is defined in Section 1.03 of the Lease.
(b) "BASIC CONSTRUCTION OF THE BUILDING" shall mean the
structure of the Building as built on the date of this Workletter, the Shell
Improvements, and all other improvements, fixtures and facilities constituting a
part of the Building, as these exist on the date of this Workletter.
(c) "BUILDING STANDARD" is defined in Section 1.03 of the
Lease.
(d) "CONTRACTOR" shall mean W.S. Bellows Construction Co., or
such other contractor approved by Landlord (which approval shall not be
unreasonably withheld), to perform the Tenant Improvements for Tenant pursuant
to the Construction Contract. Landlord has also approved I.A. Naman to be
Tenant's MEP contractor. Landlord has also approved the following other
contractors: LTB Interior Constructors, Inc.; Maxwell Company; CHP & Associates;
Burns, DeLatte & McCoy, Inc.; and Wylie & Associates, Inc.
(e) "CONSTRUCTION CONTRACT" shall mean the contract for
construction of the Tenant Improvements to be negotiated by Tenant and to be
executed by Tenant and Contractor.
(f) "LANDLORD'S ARCHITECT" shall mean the architect, if any,
designated by Landlord as its architect, from time to time, to perform the
functions of Landlord's Architect hereunder.
(g) "PLANS AND SPECIFICATIONS" shall mean collectively, the
plans, specifications and other information prepared or to be prepared by
Tenant's Architect, engineers and other consultants which shall detail the
Tenant Improvements.
(h) "TENANT'S ARCHITECT" shall mean Gensler & Associates,
which Tenant represents is an architectural firm licensed to practice
architecture in the State of Texas.
(i) "TENANT IMPROVEMENTS" shall mean, with respect to the
Initial Premises or with respect to any space later included in the Premises,
the improvements and fixtures, additions, alterations, and other improvements to
such portion of the Premises (other than the personal property of Tenant) to be
installed by Tenant prior to its initial occupancy of such portion of the
Premises for its ordinary business purposes including, without limitation, all
HVAC, electrical, plumbing, mechanical, life safety and structural aspects.
(j) "WORK" shall mean all materials and labor to be added to
the Basic Construction of the Building in order to complete the installation of
the Tenant Improvements within the Premises for Tenant in accordance with the
Plans and Specifications.
(k) "WORKING DAYS" shall mean all days of the week other than
Saturday, Sunday and National Holidays.
2. PROCEDURE AND SCHEDULES FOR THE COMPLETION OF PLANS AND
SPECIFICATIONS. The Plans and Specifications shall be completed in accordance
with the following procedure and time schedules:
(a) DESIGN DRAWINGS. (1) Prior to commencing construction,
Tenant shall submit to Landlord five (5) sets of prints of the Plans and
Specifications (or a portion thereof) specifying the intended design, character
and finishing of the Tenant Improvements within the Premises. The Plans and
Specifications shall set forth the requirements of Tenant with respect to the
installation by Tenant of the Tenant Improvements within the Premises, and such
drawings shall include, without limiting their scope, a Tenant approved space
plan, architectural design of the space, plans, specifications indicating
materials, color selections and finishes and plans for upgrade of the electrical
systems for the Premises. In order to assure the compatibility of Tenant's
electrical, mechanical, plumbing, life safety and structural systems and the
compatibility of Tenant's other requirements with the Building and in order to
expedite the preparation of Tenant's electrical, mechanical, plumbing, life
safety and structural drawings, the Plans and Specifications provided by Tenant
to Landlord for approval shall include a detailed plan setting forth any and all
electrical, mechanical, plumbing, life safety and structural requirements.
Tenant shall retain, at Tenant's expense, electrical, mechanical and structural
engineers, approved by Landlord (which approval shall not be unreasonably
withheld), to prepare all necessary electrical, mechanical, plumbing, life
safety and structural construction drawings. Tenant shall have the right
EXHIBIT "C" TO OFFICE LEASE AGREEMENT - Page i
to deliver the Plans and Specifications for review by Landlord in stages as
various aspects and components of the Plans and Specifications are developed.
With respect to any portion of the Plans and Specifications delivered to
Landlord for its review, Tenant shall use reasonable effort to cause such
portion to reflect a discreet aspect or element of the Plans and Specifications
so as to facilitate Landlord's review.
(2) In accordance with the schedule set forth in
Paragraph 2(a)(3) below, Landlord shall return to Tenant one set of prints of
such portion of the Plans and Specifications with Landlord's approval or stating
the specific item(s) thereof which Landlord disapproves and the reason(s)
therefor. If Landlord disapproves any aspect of the Plans and Specifications,
Tenant shall ensure that revisions are made to the applicable documentation to
correct Landlord's objection and shall deliver such revised documentation to
Landlord together with a written narrative response to each of Landlord's
objections. The process of revision and approval of each set of Plans and
Specifications set forth herein shall continue until Landlord has fully approved
same. The fully approved Plans and Specifications are collectively referred to
herein as the "Working Drawings".
(3) Landlord shall, upon receipt of the Plans and
Specifications (or a portion thereof) from Tenant, or upon receipt from Tenant
of revised Plans and Specifications (or portions thereof) after an earlier
review by Landlord, respond within the following deadline, as applicable, or be
deemed to have approved the Plans and Specifications (or portion thereof)
submitted by Tenant:
Number of Working Working Days to Review Plans
Days to Review Plans and Specifications for Cafeteria
and Specifications for Facilities, Computer Facilities
office floors and Lobby Areas
Landlord's first review 7 10
Landlord's second review 3 4
Landlord's subsequent reviews 1 2
Delivery and responses described herein shall be due by 5:00 p.m. on
the date specified therefor. Any such delivery or response received after 5:00
p.m. on any day shall be deemed to be received on the next day. The day of
receipt by Landlord of Plans and Specifications shall not count against the
number set forth above if received after 9:00 a.m. Each plan submittal shall be
accompanied by a transmittal document indicating the purpose of the submittal,
an enumeration of the drawings included in the submittal and the review status
of each submittal, i.e. first review, second review, etc.
(b) COMPLETION OF PLANS AND SPECIFICATIONS. All Plans and
Specifications shall be prepared by or on behalf of Tenant in compliance with
all applicable Building Standard and lighting requirements set forth in the
Lease and this Workletter. Landlord's approval, however, of the Plans and
Specifications, shall not be construed in any manner to constitute a
representation or warranty of any kind from Landlord that the Tenant
Improvements, once completed in accordance with the Plans and Specifications,
shall in any manner be functional or fit for their intended purpose. Tenant
shall have the sole responsibility for compliance of the Plans and
Specifications with all Laws and shall cause the Plans and Specifications, the
Work, and the Tenant Improvements performed by Tenant and Tenant's Contractor to
comply with all Laws. The approval of the Plans and Specifications or
calculations included therein by Landlord or the inspection of the Work shall
not constitute an indication, representation or certification by Landlord that
such Plans and Specifications, calculations or Work are in compliance with all
Laws. In instances where several sets of requirements must be met, the
requirements of Landlord's insurance underwriter or the strictest applicable
requirements shall apply where not prohibited by applicable codes. Landlord
shall have no responsibility for Tenant's failure to meet all applicable Laws.
(c) CHANGES. If Tenant makes any change to the aspects of the
Plans and Specifications subject to the approval of Landlord after Landlord's
approval(or constructs the Tenant Improvements deviating from the approved Plans
and Specifications), then Tenant shall, if requested by Landlord in writing,
correct such Work at its sole cost and expense.
3. PAYMENT OF PROFESSIONAL FEES. All fees and expenses of Tenant's
Architect, consultants and engineers retained by or on behalf of Tenant or
Tenant's Architect (including, without limitation, the electrical, mechanical
and structural engineers required to be retained under this Workletter) shall be
paid by Tenant.
4. PERFORMANCE OF THE WORK AND DELAYS. In addition to the other
requirements of this Workletter applicable to the Tenant Improvements, Tenant
shall cause the Contractor to perform the Work in accordance with the Plans and
Specifications as to the aspects of the Plans and Specifications which were
subject to the review and approval of Landlord. Subject to Section 17.02 of the
Lease, Landlord reserves the right (at its sole cost, expense, and risk) to
either itself or through a representative designated by Landlord (without
incurring any liability therefor) to review and inspect, from time to time, the
progress of the Contractor and the quality of the Tenant Improvements and their
compliance with those aspects of the Plans and Specifications which were subject
to the review and approval of Landlord; provided, however, in connection with
the foregoing, no such review or inspection shall be construed as any type of
approval or warranty by Landlord that such construction is in compliance with
Plans and Specifications and/or Laws and/or that the Work is functional or fit
for its intended purpose. Tenant shall cause the Contractor to cooperate with
the Landlord's Representative and to correct any Work not in conformance with
the plans and specifications.
IF A DELAY SHALL OCCUR IN THE COMPLETION OF THE WORK BY TENANT AS THE
PROBABLE RESULT OF (i) ANY DELAY ON TENANT'S PART TO FURNISH TENANT'S DESIGN
DRAWINGS, TENANT'S ELECTRICAL, MECHANICAL AND/OR STRUCTURAL REQUIREMENTS,
TENANT'S PLANS AND SPECIFICATIONS OR ANY REVISION TO SUCH ASPECTS, (ii) ANY
CHANGE BY TENANT IN ANY OF THE PLANS AND SPECIFICATIONS, (iii) THE FACT THAT
MATERIALS TO BE INCORPORATED INTO THE WORK WHICH ARE NON- BUILDING STANDARD
REQUIRE A LEAD TIME TO OBTAIN OR CONSTRUCTION TIME TO PERFORM, OR (iv) ANY OTHER
ACT OR OMISSION OF TENANT, ITS AGENTS OR EMPLOYEES, INCLUDING ANY VIOLATION OF
THE PROVISIONS OF THE LEASE OR ANY DELAY OF TENANT
EXHIBIT "C" TO OFFICE LEASE AGREEMENT - Page ii
IN GIVING AUTHORIZATIONS OR APPROVALS PURSUANT TO THIS WORKLETTER, THEN ANY SUCH
DELAY OF TENANT, SUBJECT TO EXCUSABLE COMMENCEMENT DELAY, SHALL NOT JUSTIFY ANY
EXTENSION OF THE COMMENCEMENT DATE OF THE LEASE.
In connection with the construction of the Tenant Improvements by
Tenant the additional following provisions shall apply:
a. Subject to Landlord Delay and Excusable Delay, (i) Tenant
shall bear the sole responsibility for the failure of the Contractor (and any
subcontractor approved by Landlord) to complete the Work in accordance with
Tenant's time schedule, and (ii) the Base Rent shall be due and payable on the
Commencement Date, notwithstanding any delays, howsoever caused, in the
completion of the Work.
b. All Work shall be performed by contractors and
subcontractors approved by Landlord. A complete listing of each Contractor and
subcontractor shall be submitted to Landlord prior to commencement of
construction. The list shall be amended to list each new Contractor or
subcontractor prior to the commencement of work to be performed by such new
Contractor or subcontractor.
c. The entry into the Premises by Tenant and Contractor for
any purposes prior to the Commencement Date shall be subject to all of the terms
and conditions of the Lease (other than the payment of Rent) and to the
construction rules attached hereto as EXHIBIT "C-1" and made a part hereof for
all purposes ("Construction Rules").
d. Prior to commencement of any Work, Tenant shall obtain and
furnish to Landlord all permits necessary to conduct the Work in conformity with
and in the time required by all Laws, including, without limitation, ADA, TABA,
plus water and waste water permits for the Cafeteria Facilities.
e. During the period of construction of Tenant Improvements
with respect to the Initial Premises, Tenant shall have the exclusive right to
use one (1) freight elevator (the "Exclusive Elevator") and two (2) dock bays at
all times without charge, but Tenant shall be responsible to repair any damage.
The second dock bay is to be used for a dumpster. Landlord shall designate prior
to commencement of construction which freight elevator shall be the Exclusive
Elevator and which dock bay shall be used by Tenant. Tenant shall not be
entitled to use any freight elevators except the Exclusive Elevator.
f. Tenant shall, prior to the commencement of the Work, cause
the Contractor to obtain and maintain public liability, builders' risk
insurance, property damage and workers' compensation insurance in accordance
with EXHIBIT "C-1", to fully protect Landlord, as well as Tenant, from and
against all liability or death of or injury to person or damage to property
caused in or about the Premises or by reason of the construction of the Work and
as required by the Construction Contract. Prior to commencement of construction,
Tenant shall provide Landlord with certificates of such insurance from an
insurance company acceptable to Landlord naming Landlord as an additional
insured and containing other provisions satisfactory to Landlord.
g. Tenant's Contractor shall be responsible for coordinating
and scheduling of the Work with Landlord and arranging with Landlord for any
utility or elevator service required in connection with the Work (and Tenant's
Contractor shall not be required to pay Landlord any fee in connection with such
service), but will be responsible for the repair, replacement or clean-up of any
damage done by such Contractor to the Premises or any part of the Building. All
Work shall be subject to all reasonable rules and regulations imposed by
Landlord in connection therewith.
h. All materials, supplies, tools and equipment shall be
stored by Tenant or Tenant's Contractor at Tenant's sole risk. Landlord shall
have no liability of any kind with respect to such materials, supplies, tools or
equipment, nor shall Landlord be under any duty to secure or safeguard same.
During the period of construction of Tenant Improvements with respect to the
Initial Premises, Tenant may use the "slab" space on the 46th Floor of the
Building as a staging area for storing construction materials.
i. Tenant shall be responsible for obtaining a certificate of
occupancy from the City of Houston promptly upon completion of the Tenant Work.
j. Upon completion of the Work, as between Landlord and
Tenant, Tenant shall accept the construction thereof "AS IS, WITH ALL FAULTS, IF
ANY, WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED."
k. Upon completion of the Work, Tenant shall deliver to
Landlord an "as built" set of Plans and Specifications for the Premises,
together with computer diskettes of "as built" information prepared on Autocadd
Release 12 and in accordance with Landlord's layering requirements. The cost of
providing "as built" Plans and Specifications, but not Landlord's cost to place
such information onto Landlord's database, shall be borne solely by Tenant.
l. The parties recognize the advisability of identifying one
or more persons as the point persons for construction coordination for dealing
with the other. Landlord hereby designates Guy Zelias as the "Landlord's
Representative" for such purpose but none other. Tenant hereby designates Rich
Niermeyer as the "Tenant's Representative" for such purpose. Either party, by
notice to the other, shall have the right to change such designations from time
to time.
m. Landlord shall furnish, at no charge to Tenant, a
reasonable amount of electricity and water (not to exceed Building Standard) at
all times during such construction, and Building Standard HVAC during Normal
Business Hours.
5. PAYMENT.
a. ALLOWANCE.
EXHIBIT "C" TO OFFICE LEASE AGREEMENT - Page iii
(1) On or before the 24th day of each month, but not
more often than once a month, Tenant shall submit to Landlord a draw request for
payment for Work completed, which must be accompanied by (i) a Certificate of
Payment substantially in the form described in Paragraph 5(b) below; and (ii)
lien waivers and releases in the form attached hereto as EXHIBIT "C-2" from the
Contractor, all subcontractors and materialmen. Landlord shall pay the amount of
such draw request from the Allowance within thirty (30) days following
satisfactory receipt of all of the aforementioned submissions.
(2) Tenant may use that portion of the Allowance up
to $3.00 per square foot of the Rentable Area of the Initial Premises for the
payment, collectively, of Tenant's architectural, engineering and moving fees
and expenses. Pursuant thereto, upon written request from Tenant in each
instance, Landlord will advance $1.00 per square foot of the Rentable Area after
thirty (30) days following execution of the Lease and $1.00 per square foot of
Rentable Area after sixty (60) days following execution of the Lease.
b. CERTIFICATE OF PAYMENT. Each Certificate of Payment shall
contain the certification of Tenant that:
(1) all outstanding claims for labor, materials and
fixtures for the Work have been paid or otherwise
satisfactorily bonded around;
(2) there are no outstanding liens against the
Premises or any of the Tenant Improvements or otherwise
satisfactorily bonded around; and
(3) all change orders requiring the approval of
Landlord have been approved in writing by Landlord.
c. Tenant shall be obligated to pay for the cost of all Work
in excess of the Allowance.
6. CHANGE ORDERS. All changes and modifications in the Work from that
contemplated in the Plans and Specifications must be evidenced by a written
change order executed by both Landlord and Tenant. Tenant shall submit to
Landlord such information as Landlord shall reasonably require with respect to
any change order. After receipt of the requested change order, together with
such information as Landlord shall require with respect thereto, Landlord shall
return within three (3) Working Days to Tenant either the executed change order,
which will evidence Landlord's approval thereof, or the Plans and Specifications
with respect thereto with Landlord's required modification.
7. WHOLE AGREEMENT; NO ORAL MODIFICATION. This Workletter embodies all
representations, warranties and agreements of Landlord and Tenant with respect
to the matters described herein, and this Workletter may not be altered or
modified except by an agreement in writing signed by the parties.
8. PARAGRAPH HEADINGS. The paragraph headings contained in this
Workletter are for convenient reference only and shall not in any way affect the
meaning or interpretation of such paragraphs.
9. NOTICES. All notices required or contemplated hereunder shall be
given to the parties in the manner specified for giving notices under the Lease.
10. BINDING EFFECT. This Workletter shall be construed under the laws
of the State of Texas and shall be binding upon and shall inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
11. CONFLICT. In the event of conflict between this Workletter, the
Lease, and any other exhibits or addenda to this Lease, the Lease shall prevail.
12. INDEMNIFICATION. TENANT SHALL BE LIABLE TO LANDLORD FOR, AND SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS THE INDEMNITEES, OTHER TENANTS AND
LANDLORD'S CONTRACTORS FROM AND AGAINST, ANY AND ALL CLAIMS, LOSSES, COSTS,
DAMAGES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, ATTORNEYS' FEES AND COSTS
OF COURT), RESULTING OR ARISING OR ALLEGED TO RESULT OR ARISE, DIRECTLY OR
INDIRECTLY, FROM THE PREPARATION AND CONTENTS OF THE PLANS AND SPECIFICATIONS,
THE COMPLIANCE THEREOF WITH ALL LAWS AND THE PERFORMANCE OF THE WORK BY OR ON
BEHALF OF TENANT OR WHICH MAY ARISE BY REASON OF ANY MATTER COLLATERAL THERETO,
AND FROM AND AGAINST ANY AND ALL CLAIMS ARISING FROM, OR CLAIMED TO ARISE FROM,
ANY NEGLIGENCE, ACT OR FAILURE TO ACT, OR ACCESS TO OR PRESENCE ON THE PROPERTY,
OF TENANT, TENANT'S CONTRACTOR, OR THEIR RESPECTIVE CONTRACTORS, SUBCONTRACTORS,
DECORATORS, MATERIALMEN, SUPPLIERS, SERVANTS, AGENTS, EMPLOYEES OR INVITEES.
LANDLORD SHALL NOT BE LIABLE IN ANY WAY FOR INJURY, LOSS OR DAMAGE WHICH MAY
OCCUR TO TENANT, ITS CONTRACTOR, SUBCONTRACTORS, DECORATORS, MATERIALMEN,
SUPPLIERS, SERVANTS, AGENTS, EMPLOYEES OR INVITEES, AND LANDLORD SHALL NOT BE
LIABLE IN ANY WAY FOR OR BECAUSE OF DEFECTIVE MATERIAL SUPPLIED BY TENANT OR ANY
OF SUCH PARTIES OR FOR THE TENANT IMPROVEMENTS, WHETHER PERFORMED BY TENANT OR
TENANT'S CONTRACTOR (OR ANY SUBCONTRACTOR), THE SAME BEING SOLELY AT TENANT'S
RISK.
EXHIBIT "C" TO OFFICE LEASE AGREEMENT - Page iv
EXHIBIT "C-1"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
CONSTRUCTION RULES
The following regulations establish the minimum criteria for all construction
activities on the property. The regulations are subject to change and
Contractors will be notified of changes that affect their work. Transwestern
Property Company (Management) requires strict compliance with these regulations.
1. Access
1.1 Security Badges
1.1.1 All construction personnel shall display Building
Construction identification badges at all times while
they are present on the property.
1.1.2 Contractor shall obtain badges for all construction
personnel from the security desk or Property
Management prior to commencement of each project and
badges shall be returned to Management office or
security desk at the conclusion of each project.
Contractor will be charged $25.00 for each badge that
is not returned.
1.2 Security Clearance Forms (See Document attached)
Security Clearance Forms may be obtained from Management and
shall be submitted to Management for the following:
- General Construction: Form may be submitted for
approval prior to commencement of each project.
- Adjacent Space: Form shall be submitted for approval
24 hrs. prior to any work that will require access to
adjacent lease spaces.
- Building Systems: Form shall be submitted for
approval 24 hrs. in advance of any work which shall
require the impairment or alteration of any building
system.
- Freight Elevator: Form shall be submitted for
approval 24 hrs. in advance of using the Exclusive
Elevator.
2. Personnel
2.1 Construction personnel shall use the Exclusive Elevator at all
times. Only Contractor's supervisory personnel may use the
passenger elevators.
2.2 Alcohol and drugs are not permitted on the property or within
the building. Construction Personnel found to be in the
possession of or under the influence of drugs or alcohol are
subject to immediate removal from the property and banned from
further work on the property.
2.3 AM/FM Radios, televisions, cassette players or other
electronic devices with external speakers are not permitted.
2.4 Contractor personnel are not permitted to use vending machines
inside the tenant spaces, or table, and chairs in common areas
provided for the use of the building tenants.
3. Subcontractors
3.1 Only those Mechanical, Electrical, Plumbing, Fire Sprinkler,
Security and Fire Alarm subcontractors which have been
approved by Management may perform work on the project.
4. Housekeeping
4.1 All common areas shall be kept clean at all times. These areas
include but are not limited to common corridors, restrooms,
stairwells, lobbies, elevators, loading dock, and the grounds.
4.2 Construction debris and trash shall be removed from the
jobsite as soon as practicable. Management reserves the right
to require trash removal on demand.
4.3 Construction debris and trash shall not be stored for any
period of time in mechanical rooms, freight lobbies, adjacent
spaces or any other location outside of the jobsite.
4.4 All non-construction trash removal shall be scheduled for
weekends, or Monday through Friday between the hours of 6:00
p.m. and 7:00 a.m.
EXHIBIT "C-1" TO OFFICE LEASE AGREEMENT - Page i
4.5 Contractor shall provide walk off mats at each exit from the
jobsite. Mats shall be maintained or replaced as necessary to
prevent construction dust from being tracked throughout the
Building.
4.6 Mechanical and Electrical rooms shall be broom cleaned daily.
Panel covers shall be replaced on all active electrical panels
daily.
5. Building Systems/Facilities
5.1 Fire Sprinkler Systems
5.1.1 Contractor shall notify Management 24 hours in
advance of any work affecting the sprinkler system.
5.1.2 Contractor shall check in at the Loading Dock or
Management Office immediately prior to commencement
of the sprinkler work.
5.1.3 Management personnel shall accompany Contractor and
tag impaired devices.
5.1.4 Sprinkler system drain down and refill are the
responsibility of the Contractor.
5.1.5 When notified by the Contractor, impaired device tags
shall be removed by Management after the work is
complete and the system is operational.
5.1.6 The Contractor shall remain on site at all times when
the sprinkler system is impaired and shall not leave
until the system is refilled and all alarm or trouble
conditions related to the work are cleared.
5.1.7 Sprinkler Standpipes or risers may not be drained or
remain empty between the hours of 7:30 a.m. and 6:00
p.m.
5.1.8 Sprinkler feed mains, cross mains and branch lines
shall be drained after 7:30 a.m. on regular business
days only and must be refilled by 5:00 p.m. each day.
Exceptions, require approval of Management. The
Contractor may incur additional cost for Management
personnel when these steps are not followed.
5.2 Fire Alarm
5.2.1 Contractor shall not conduct any activities that will
activate the building fire alarm system prior to the
implementation of precautionary measures to prevent
false alarms.
5.2.2 Contractor shall be charged $250.00 per occurrence in
the event of false fire alarms caused by smoke
detectors that have not been taken out of service
prior to the work in accordance with the following
procedures:
- Contractor shall notify Management Security
in advance of any activities that will
require impairment of any smoke detectors.
- Smoke detectors will be taken out of service
by Management Security. Contractor's
personnel shall not disable smoke detectors
for any reason.
- Contractor personnel must be present at all
times on each floor or specific work area
where the smoke detectors are disabled.
- Contractor shall notify Management Security
when the work is finished and shall not
leave the project until all smoke detectors
are back in service.
5.3 Building Facilities
Restrooms, toilets, maids closet, wash bowls and other
apparatus shall not be used for any purpose other than that
for which they were designed. Any expenses for repair of
damage to the above shall be borne by the Contractor.
5.4 Thermostats
Existing thermostats shall be protected during demolition and
construction to prevent malfunction of the HVAC operating
systems.
6. The Work
6.1 The work shall not begin prior to authorization by Management.
6.2 NESHAPS: Each project that requires demolition and renovation
work shall be inspected per the NESHAP regulation promulgated
by the EPA. Demolition shall not begin prior to such
inspection and approval of management.
6.3 Noisy Work: Noisy work shall be performed between 6:00 p.m.
and 7:00 a.m. or on weekends regardless of the location in the
building. Noisy work includes but is not limited to drilling,
grinding, shooting stud track or ceiling hanger wires, and the
use of power saws.
EXHIBIT "C-1" TO OFFICE LEASE AGREEMENT - Page ii
6.4 Welding: All welding shall be performed between 6:00 p.m. and
7:00 a.m. and procedures for venting fumes shall be approved
by Management twenty-four (24) hours prior to commencement of
the work. Contractor is to have an adequate fire extinguisher
available at all times.
6.5 Noxious fumes: All work that will produce noxious fumes shall
be performed after 6:00 p.m. and shall be finished with ample
time to clear the air of the fumes prior to 7:00 a.m.
6.6 Management reserves the right to stop any work that is
disruptive to the tenants in the building.
6.7 Contractor shall work in harmony with other Contractors and
Subcontractors performing work in the building on behalf of
Management or other tenants.
6.8 Contractor shall maintain an active and current safety
training and record keeping program and require his
Subcontractors to do likewise.
6.9 Contractor shall notify Management twenty-four (24) hours in
advance of ceiling cover so that Management will have the
opportunity to inspect the work.
6.10 Signs or logos will not be permitted without prior approval of
Management.
6.11 Demolished materials are property of Manager unless noted
otherwise.
7. Material
7.1 Materials shall be hoisted via the Exclusive Elevator.
Passenger elevators shall not be used for material
transportation.
7.2 No materials shall be hoisted outside the Exclusive Elevator
cab without prior notification and approval of Management. All
costs associated with material hoisting shall be borne by the
Contractor. The elevator hatch may be opened between 7:00 AM.
through 8:00 AM and 5:00 PM. through 5:30 PM. weekdays, at no
extra charge to permit the transport of oversize materials.
Twenty-four (24) hours prior notice is required.
7.3 Materials shall be stored in the freight elevator lobbies,
mechanical rooms or any other common space within the
building. Materials shall not be stored in adjacent vacant
space without prior consent of management.
7.4 Dollies, carts and other moving or loading apparatus shall
have rubber tires. The expense of any damage caused to
floors/wall, etc., by moving materials shall be borne by the
Contractor causing the damage. It is advised that all public
areas be sufficiently protected in advance by the Contractor
to avoid such damage.
7.5 Tenant shall not use any freight elevators except the
Exclusive Elevator, as referenced in Paragraph 4(e) of the
Workletter.
7.6 Management reserves the right to inspect all tool boxes,
storage bins, trash bins, or other conveyances prior to
removal from the property.
7.7 The Contractor shall comply with all Federal, State, and Local
regulations pertaining to the use of hazardous materials or
potentially hazardous materials. No hazardous materials may be
used on the property without prior written approval of
Management.
7.8 All doors, hardware, door frames, light fixtures, HVAC units,
air boots, slot diffuses, millwork and appliances to be
removed from demolished leases are the property of the
building and may be required to be relocated elsewhere in the
building. Please contact the Management office for direction.
8. Insurance
8.1 Contractors and their subcontractors shall provide insurance
coverage in accordance with the requirements of Paragraph 4(f)
of the Workletter.
8.2 A Certificate of Insurance evidencing the required coverage
shall be submitted by the Contractor to Management
(Transwestern Property Company as certificate holder) prior to
the commencement of the work. The Certificate shall name the
following as additional insured:
METROPOLITAN LIFE INSURANCE COMPANY
METROPOLITAN TOWER REALTY COMPANY, INC.
TRANSWESTERN PROPERTY COMPANY
LINCOLN PROPERTY COMPANY
LINCOLN PLAZA MANAGEMENT COMPANY, INC.
9. Hazardous Materials Spills or Releases
9.1 IF THE MATERIALS CAN NOT BE IDENTIFIED, ASSUME THEY ARE
HAZARDOUS.
If a hazardous material is released or spilled, there are a
few basic responses that must be followed. The following
minimum response procedures should be followed regardless of
the nature of the incident.
EXHIBIT "C-1" TO OFFICE LEASE AGREEMENT - Page iii
9.2 Notify Building Management of the incident immediately. State
the location of the accident, the type of material released
and any actions taken.
9.3 Evacuate everyone in the vicinity immediately. This includes
tenants, contractors, and building personnel. If the release
of a dangerous vapor or gas occurs, a larger area of
evacuation may be necessary.
9.4 Once you know the area is cleared, you may take safe and
reasonable steps to identify the released materials. If you
can identify the materials, small spills of liquids may be
limited with sand bags or adsorbents. Isolated fumes or gases
may be limited by closing doors or shutting down air handler
units in the area.
9.5 If the material has not been identified, the Property Manager
or Chief Engineer will attempt to use Material Safety Data
Sheets to classify the material according to it's hazardous
properties. If the spill or release is deemed to be a threat
to a wide spread area of the property and its occupants, call
911 and ask for the Fire Department HAZMAT Response Unit.
EXHIBIT "C-1" TO OFFICE LEASE AGREEMENT - Page iv
EXHIBIT "C-2"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
RELEASE OF LIEN
THE STATE OF TEXAS ss.
ss.
COUNTY OF ___________ ss.
That for and in consideration of the sum of $________, the receipt and
sufficiency of which is hereby acknowledged and confessed, the undersigned being
duly sworn, hereby:
(i) releases, acquits, and forever discharges and by these presents
does for himself, his heirs, representatives, successors, and assigns, release,
acquit, and forever discharge ________________________________ from and against
any and all claims, debts, demands or causes of action that the undersigned has
or may ever have as a result of furnishing labor and materials for improvements
except for $________________ being withheld as retainage which the undersigned
now has or may have on account of work performed in connection with or for the
construction and erection of the improvements situated on said Premises
described below:
First Interstate Bank Plaza, 1000 Louisiana, Houston, Texas 77002;
(ii) specifically recites that all sums owed by the undersigned to any
laborer, materialman or subcontractor employed by the undersigned in connection
with work at said premises have been fully paid for all work performed and labor
or materials furnished prior to and through the date hereof;
(iii) expressly agrees to indemnify and hold harmless Metropolitan Life
Insurance Company and Metropolitan Tower Realty Company, Inc. of and from the
claims of any laborer, materialman and/or subcontractor employed by or
contracting with the undersigned; and
(iv) represents and warrants to Metropolitan Life Insurance Company and
Metropolitan Tower Realty Company, Inc. that the undersigned has the authority
to bind the corporation, partnership or other entity, if any, on whose behalf
this release is executed.
And the undersigned executes this instrument recognizing that but for
the making of this release and representation, the payment receipted for would
not have been made, and that Metropolitan Life Insurance Company and
Metropolitan Tower Realty Company, Inc. have relied hereon in making said
payment.
SIGNED and DATED this ______ day of _____________________, 199___.
___________________________________
Company Name
___________________________________
Signature
___________________________________
Title
SUBSCRIBED AND SWORN TO BEFORE ME, the undersigned authority, by
___________________, _____________________ of ________________________ on the
_____ day of _________________, 199___, to certify which witness my official
hand and seal of office.
___________________________________
Notary Public in and for the State of Texas
[Individual Acknowledgment]
THE STATE OF TEXAS ss.
ss.
COUNTY OF ___________ ss.
This instrument was acknowledged before me on the _____ day of
_________________, 199___, by ___________________________________ .
EXHIBIT "C-2" TO OFFICE LEASE AGREEMENT - Page i
___________________________________
Notary Public in and for the State of Texas
EXHIBIT "C-2" TO OFFICE LEASE AGREEMENT - Page ii
[Corporate/Partnership Acknowledgment]
THE STATE OF TEXAS ss.
ss.
COUNTY OF ___________ ss.
This instrument was acknowledged before me on the _____ day of
________________, 199___, by _______________________ of ______________________,
a ________________ on behalf of said __________________.
___________________________________
Notary Public in and for the State of Texas
EXHIBIT "C-2" TO OFFICE LEASE AGREEMENT - Page iii
EXHIBIT "D"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
RULES AND REGULATIONS
1. The sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways of the Building shall not be obstructed by any of the
tenants or used by them for any purpose other than for ingress to and egress
from their respective premises. The halls, passages, exits, entrances,
elevators, escalators and stairways are not for the use of the general public,
and Landlord shall in all cases retain the right to control and prevent access
thereto of all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation and interests of the Building
and its tenants, provided that nothing herein contained shall be construed to
prevent such access to persons with whom any tenant normally deals in the
ordinary course of its business, unless such persons are engaged in illegal
activities. No tenants and no employee, agent or invitee of any tenant shall go
upon the roof of the Building. The two (2) emergency stairwells located on each
floor of the Building shall not be obstructed by tenants or used by tenants or
tenant's agents, servants, employees, invitees or contractors or the public in
general for any reason or purpose except as an escape route in the event of an
emergency.
2. No sign, placard, picture, name, advertisement or notice, visible
from the exterior of any tenant's premises shall be inscribed, painted, affixed
or otherwise displayed by any tenant on any part of the Building without the
prior written consent of Landlord, and Landlord shall have the right to remove
any such sign, placard, picture, name, advertisement or notice at the expense of
the tenant responsible for same and without notice to such tenant. If Landlord
shall have given such consent at anytime, such consent shall be deemed to relate
only to the particular sign, placard, picture, name, advertisement or notice so
consented to by Landlord and shall not be construed as dispensing with the
necessity of obtaining the specific written consent of Landlord with respect to
each and every other sign, placard, picture, name, advertisement or notice.
Landlord will adopt and furnish to Tenant uniform rules and regulations relating
to signs on the office floors which shall be applicable to all tenants occupying
space on the office floors of the Building and Tenant agrees to conform to such
rules and regulations. All approved signs or lettering on doors of Tenant's
Premises shall be printed, painted, affixed or inscribed at the expense of
Tenant by a person approved by Landlord.
3. The Premises shall not be used for the storage of merchandise or
files, except as approved by Landlord in writing, or for lodging. No cooking,
other than for warming purposes, shall be done or permitted by any tenant in the
Building, except that the preparation of coffee, tea, hot chocolate and similar
items for tenants and their employees shall be permitted.
4. No tenant shall employ any person or persons other than the janitor
of Landlord for the purpose of cleaning the premises, unless otherwise agreed to
by Landlord in writing. Except with the written consent of Landlord, no person
or persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the same. No tenant shall cause any
unnecessary labor by reason of such tenant's carelessness or indifference in the
preservation of good order and cleanliness. Landlord shall in no way be
responsible to any tenant for any loss of property on the premises, however
occurring, or for any damage done to the furniture or other effects of any
tenant by the janitor or any other employee or any other person. Janitor service
shall include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include shampooing of carpets or rugs or moving of furniture or
other special services unless as agreed in writing by Landlord. Such special
services shall be provided at Tenant's sole cost and expense. Janitor services
will not be furnished on nights when rooms are occupied after 9:30 p.m.
5. No animals, or birds, or bicycles shall be allowed in the offices,
halls, corridors, elevators or elsewhere in the Building, except for seeing eye
dogs or other service animals for disabled persons.
6. Landlord will furnish each tenant with two (2) keys free of charge.
Landlord will make a reasonable charge for any additional keys. No tenant shall
have any keys made except by Landlord. No tenant shall alter any lock or install
a new or additional lock or any bolt on any door of its premises without prior
written consent of Landlord. All such locks shall comply fully with the
prevailing life safety and security codes and ordinances. If Landlord shall give
its consent, the tenant shall in each case furnish Landlord with a key for any
such lock. Each tenant upon the termination of its tenancy, shall deliver to
Landlord all keys to doors in the Building which shall have been furnished to
tenant.
7. No safes, electronic equipment or other objects larger or heavier
than that which the freight elevators of the Building are limited to carry shall
be brought into or installed on any premises without Landlord's prior written
approval. The moving of such equipment shall occur only between such hours as
may be designated by, and only upon previous notice to, the manager of the
Building. No freight, furniture or bulky matter of any description shall be
received into the Building or carried into the elevators, except during hours
and in a manner approved by Landlord. Landlord shall have the right to prescribe
the weight, size and position of all safes and other heavy equipment brought
into the Building. Safes or other heavy objects shall, if considered necessary
by Landlord, be installed only after proper reinforcing and/or bracing has been
added to the floor deck to properly support the weight. Landlord will not be
responsible for loss of or damage to any such safe or property from any cause,
and all damage done to the Building by moving or maintaining such safe or other
property shall be repaired at the expense of tenant.
EXHIBIT "D" TO OFFICE LEASE AGREEMENT - Page i
8. No tenant shall use or keep in, on or about the premises of the
Building any diesel, gasoline, flammable or combustible fluid or material, or
use any method of heating or air conditioning other than that supplied by
Landlord, except as approved in writing. No tenant shall use, keep or permit to
be used or kept any foul or noxious gas or substance in, on or about the
premises, or permit or suffer the premises to be occupied or used in a manner
offensive or objectionable to Landlord or other occupants of the Building by
reason of noise, odors and/or vibrations, or interfere in any way with other
tenants or those having business therein.
9. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and street address of the
Building.
10. Landlord reserves the right to exclude from the Building between
the hours of 7:00 p.m. and 7:00 a.m. and at all hours on Sundays, legal holidays
and after 1:00 p.m. on Saturdays all persons who do not have the appropriate
access card or clearance. Landlord will furnish access cards for use by
employees. Each tenant shall be responsible for all persons for whom it requests
passes and shall be liable to landlord for all acts to such person. Landlord
shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In the case of
invasion, mob, riot, public excitement, or other circumstances rendering such
action advisable in Landlord's opinion, Landlord reserves the right to prevent
access to the Building during the continuance of the same by such actions as
Landlord may deem appropriate, including closing and locking doors.
11. The directory of the Building will be provided for the display of
the name and location of tenants only, and Landlord reserves the right to
exclude any other names therefrom. Any additional name which Tenant shall desire
to place upon said directory over and above the allowance set forth in the Lease
must first be approved by Landlord.
12. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, hanging or decorations shall be attached to, hung or placed in, or
used in connection with any window of the Building without the prior written
consent of Landlord. In any event, with the prior written consent of Landlord,
said above items shall be installed inboard of Landlord's standard window
covering and shall in no way be visible from the exterior of the Building.
13. At any party where alcoholic beverages are to be consumed on the
First Interstate Bank Plaza premises, Tenant is required to have two (2)
off-duty policemen attend the party. One (1) policeman should remain in the
suite during the party, and one (1) should position himself near the proper
elevator bank.
14. Consumption of alcoholic beverages in the common areas of the
Building is expressly prohibited. Exceptions to this rule will only be permitted
by prior written approval of Landlord on a case by case basis.
15. Tenant shall see that the doors of its premises are closed and
securely locked and must observe strict care and caution that all water faucets,
water apparatus and utilities are shut off before Tenant or Tenant's employees
leave the Premises, so as to prevent waste or damage. Tenant shall be permitted
to install security systems, devices to limit access to the Premises after
normal business hours. Such devices shall be in compliance with paragraph 6 of
these rules and regulations. On multiple-tenancy floors, all tenants shall keep
the door or doors to the Building corridors closed at all times except for
ingress and egress.
16. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed. No foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees,
agents or invitees, shall have caused it.
17. Except with the prior written consent of Landlord, no tenant shall
sell, or permit the sale of newspapers, magazines, periodicals, theatre tickets
or any other goods of merchandise in or on the premises.
18. No tenant shall install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building,
except as permitted under the terms of a separate license agreement, which form
shall be amended from time to time.
19. No hand trucks or dollies, except those equipped with rubber tires
and side guards, shall be used in any space or in public halls of the Building
by any tenant. No other vehicles of any kind shall be brought into the Building
or kept in or about any premises by any tenant, their employees, agents or
invitees.
20. Each tenant shall store all its trash and garbage within its
premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the City of
Houston, without being in violation of any law or ordinance governing such
disposal. All garbage and refuse disposal shall be made only through entryways
and elevators provided for such purposes and at such times as Landlord shall
designate.
21. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
22. The requirements of the tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from Landlord.
23. Landlord may waive any one or more of these Rules and Regulations
for the benefit of any particular tenant or tenants, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations in favor
of any other tenant or tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all of the tenants of the
Building.
EXHIBIT "D" TO OFFICE LEASE AGREEMENT - Page ii
24. These Rules and Regulations are in addition to and shall not be
construed to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Building.
25. Landlord reserves the right to make such other and reasonable rules
and regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building, and for the preservation of good
order therein.
EXHIBIT "D" TO OFFICE LEASE AGREEMENT - Page iii
EXHIBIT "E"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
PARKING
This EXHIBIT "E" ("Parking Exhibit") describes and specifies Tenant's
right to use (i) sixty-five (65) parking spaces, of which up to nine (9) may be
reserved on a monthly basis, in the Building Garage, and (ii) one hundred
thirty-three (133) parking spaces, of which up to twenty-five (25) may be
reserved on a monthly basis, in the 1400 Louisiana Garage. The aforesaid parking
spaces are collectively referred to herein as the "Spaces", and are located on
such levels inside the parking garages set forth on Schedule 1 attached to this
Parking Exhibit and incorporated herein by reference. The parking garage beneath
the Building shall be referred to as the "Building Garage." The parking garage
located at 1400 Louisiana, which is presently owned by Landlord, shall be
referred to as the "1400 Louisiana Garage." The Building Garage and the 1400
Louisiana Garage may be hereinafter referred to individually and collectively as
the "Parking Garage."
1. DEFINITIONS. The terms which are defined in the Lease shall have the
same meaning in this Parking Exhibit.
2. GRANT AND RENTAL FEE.
(a) Provided no monetary event of default has occurred and is
continuing under the Lease, Tenant shall be permitted the exclusive use of the
reserved Spaces and the non-exclusive use of the unreserved Spaces during the
Term at such monthly rates (together with any applicable tax thereon) and
subject to such terms, conditions, and regulations as are, from time to time,
promulgated by Landlord or the manager of the Parking Garage, as applicable, and
charged or applicable to patrons of the Parking Garage for spaces similarly
situated therein, provided, however, the fixed parking fees for such original
Spaces during the Initial Lease Term are set forth on SCHEDULE 1 attached
hereto. Notwithstanding the aforesaid, parking fees for the Building Garage only
shall be conditionally waived during the first two (2) Lease Years of the Term,
subject to the provisions of Section 11.01(f) and EXHIBIT "I". Notwithstanding
the aforesaid, Landlord reserves the right to relocate Tenant's reserved Spaces
from time to time to other reserved Spaces on the same floor of the same Parking
Garage, in the event Landlord requires the temporary use of the reserved Spaces
to accomplish repair or construction work in the area of the Parking Garage in
which the reserved Spaces are located.
(b) Provided no monetary event of default has occurred and is
continuing under the Lease, Tenant shall be permitted the nonexclusive use of
175 unreserved parking spaces in the garage at 777 Clay, Houston, Texas ("777
Clay Garage"), for a term commencing on the Commencement Date and concluding on
the date which is the earlier of (i) December 31, 1997, or (ii) the date of the
termination (however such termination occurs) of that certain Parking Lease
Agreement between Block 298 Venture and Block 144 Joint Venture. The monthly
rate for each of such spaces in the 777 Clay Garage shall be $50.00 (plus
applicable taxes). The use by Tenant and its employees and designees of the 777
Clay Garage is subject to all of the terms, conditions and regulations which
are, from time to time, promulgated by the owner or manager of the 777 Clay
Garage (or Landlord). Parking fees shall be payable for the entire term of the
parking license on 777 Clay Garage and there shall be no conditional or other
waiver of such parking fees. In no event shall the 777 Clay Garage or the spaces
therein be considered part of the Parking Garage or the Spaces, nor accorded any
of the other rights or privileges attendant to the Spaces, The parking rights
created pursuant to this Section 2(c) shall not be part of the Critical
Services. However, the use of the spaces in the 777 Clay Garage used pursuant to
this Section 2(c) shall be, in any event, subject the provisions of Paragraph 5
and Paragraph 6 of this Parking Exhibit. In the event of the termination of
Landlord's rights under said Parking Lease Agreement with Block 298 Venture,
Landlord shall permit Tenant to have the non-exclusive use of one hundred
seventy-five (175) parking spaces in the 1400 Garage, at the same rate of $50.00
per space per month (plus taxes), until December 31, 1997.
3. TENANT'S FAILURE TO USE SPACES. In the event that Tenant (after the
Commencement Date and at any time during the Term) vacates all or any portion of
the Premises and fails to utilize all or any of the Spaces and fails to pay
Rent, Landlord shall have no further obligation to make available to Tenant the
Spaces not utilized. Notwithstanding the aforesaid, Tenant may also from time to
time during the Term, upon at least thirty (30) days prior written notice to
Landlord, discontinue the use of any Spaces which Tenant is then utilizing,
together with an equal number of parking entry cards, and the rent for any such
Spaces shall cease to accrue on the last day of the calendar month in which said
thirty (30) day period expires except in the instance of the Spaces in the 1400
Louisiana Garage for which use in no event may be discontinued during the first
two (2) Lease Years. Once Tenant has discontinued the use of any Spaces, as
provided in the preceding sentence, Landlord shall have no further obligation to
make available to Tenant such discontinued Spaces, except as further provided.
Tenant may further from time to time during the Term, upon at least thirty (30)
days prior written notice, advise Landlord of Tenant's desire to reinstate
Tenant's use of certain Spaces previously discontinued, as aforesaid, in which
event Landlord shall permit Tenant to resume using such Spaces, provided and to
the extent such Spaces are then available, and rent shall commence to accrue on
such Spaces, on the first (1st) day of the first full calendar month following
the expiration of said thirty (30) day period at the then current market rental
rate, subject to such rate being changed by Landlord from time to time
thereafter. The failure, for any reason, of Landlord to provide or make
available such Spaces to Tenant or the inability of Tenant to utilize all or any
portion of the Spaces shall under no circumstances be deemed a default by
Landlord under the Lease so as to permit Tenant to terminate the Lease, in whole
or in part.
EXHIBIT "E" TO OFFICE LEASE AGREEMENT - Page i
4. EXPANSION. In the event that Tenant elects to expand the Premises
pursuant to the Expansion Option in EXHIBIT "H" of the Lease or the Preferential
Lease Rights in EXHIBIT "J" of this Lease, Tenant agrees that as to the first
47,217 square feet ("Minimum Area") of either Expansion Area or Preferential
Space ("Additional Area") which Tenant elects to lease pursuant to the Expansion
Option or the Preferential Lease Rights, Tenant shall not be entitled to use any
more parking spaces in the Building Garage than the 65 Spaces specified in this
EXHIBIT "E", provided, however, Tenant shall be entitled to use one (1)
unreserved space in the 1400 Louisiana Garage per 1500 square feet of Rentable
Area of the Additional Area, and as to any Additional Area which Tenant elects
to lease pursuant to the Expansion Option or the Preferential Lease Rights in
excess of said Minimum Area, Tenant shall be entitled to use one (1) unreserved
space in the Building Garage per 3,875 square feet of Additional Area. In any
event, Tenant shall be responsible to pay parking fees for any such additional
parking spaces in accordance with this EXHIBIT "E".
5. RISK. All motor vehicles (including all contents thereof) shall be
parked in the Spaces at the sole risk of Tenant, its employees, agents, invitees
and licensees, it being expressly agreed and understood that Landlord has no
duty to insure any of said motor vehicles (including the contents thereof), and
that Landlord is not responsible for the protection and security of such
vehicles. Landlord shall have no liability whatsoever for any property damage
and/or personal injury which might occur as a result of or in connection with
the parking of said motor vehicles in any of the Spaces, and TENANT HEREBY
AGREES TO INDEMNIFY AND HOLD LANDLORD HARMLESS FROM AND AGAINST ANY AND ALL
COSTS, CLAIMS, EXPENSES, AND/OR CAUSES OF ACTION WHICH LANDLORD MAY INCUR IN
CONNECTION WITH OR ARISING OUT OF TENANT'S USE OF THE SPACES PURSUANT TO THIS
AGREEMENT.
6. NO BAILMENT. It is further agreed that this Parking Exhibit shall
not be deemed to create a bailment between the parties hereto, it being
expressly agreed and understood that the only relationship created between
Landlord and Tenant hereby is that of licensor and licensee, respectively.
7. RULES AND REGULATIONS. In its use of the Spaces, Tenant shall follow
all of the Rules and Regulations of the Building (attached to the Lease as
EXHIBIT "D") applicable thereto, any rules and regulations promulgated by
Landlord or the manager of the Parking Garage, as applicable, as the same may be
amended from time to time. Upon the occurrence of any breach of such rules,
failure to make parking rental payments due hereunder or monetary default by
Tenant under the Lease following the notice and cure periods set forth in
Section 11.01(a)(i) of the Lease, Landlord shall be entitled to terminate this
Parking Exhibit, in which event Tenant's right to utilize the Spaces shall
thereupon automatically cease. Notwithstanding the foregoing, the requirement of
giving notice and allowing Tenant the cure period set forth in the Lease shall
not prevent (and Landlord is specifically authorized to) tow or fine or take
other appropriate action regarding any vehicles improperly parked in the Parking
Garage.
8. ACCESS.
(a) Landlord shall be entitled to utilize whatever access
device Landlord deems necessary (including but not limited to the issuance of
parking stickers or access cards), to assure that only those persons who have
contracted to use spaces in the Parking Garage are using the parking spaces
therein. Landlord currently limits access to the Parking Garage through the use
of a parking entry card system, the cards for which shall be provided by
Landlord. These cards are different from and do not, without a specific request
from Tenant, entitle the holder thereof to an after-hours entry card to the
Building (pursuant to the terms of Section 6.01(g). Landlord agrees to provide
to Tenant one hundred ninety-eight (198) parking entry cards. Tenant further
agrees to surrender all parking entry cards in its possession upon the
expiration or earlier termination of this Lease. Landlord shall be entitled to
cancel any lost or stolen cards of which it becomes aware. Tenant shall promptly
notify Landlord of any lost or stolen cards. Tenant shall pay Landlord for each
additional card(s) or for each replacement card(s) for any card(s) lost by or
stolen from Tenant, in such amount as Landlord shall, from time to time
determine, the present charge for such lost or stolen cards being $10.00 per
card. Tenant acknowledges that the parking entry card may also be the same as
the master entry card used for access to the Building during other than normal
business hours, and to the extent the cards are the same, agrees that the
provisions of Section 6.01(g) of the Lease shall also be applicable and in the
event of a conflict with the provisions of this Parking Exhibit, the provisions
of Section 6.01(g) shall control. In the event Tenant, its agents or employees
wrongfully park in any of the Parking Garage's spaces, Landlord shall be
entitled and is hereby authorized to have any such vehicle towed away, at
Tenant's sole risk and expense, and Landlord is further authorized to impose
upon Tenant a penalty of $25.00 for each such occurrence. Tenant hereby agrees
to pay all amounts falling due hereunder upon demand therefor, and the failure
to pay any such amount shall additionally be deemed an Event of Default
hereunder and under the Lease, entitling Landlord to all of its rights and
remedies hereunder and thereunder.
(b) Upon Tenant's request, Landlord hereby grants to Tenant
the revocable license to use up to 100 additional entry cards for the Building
Garage and up to 100 additional entry cards for the 1400 Louisiana Garage (but
none for the 777 Clay Garage), at a charge of $10.00 each, which can be used for
parking at times other than during Normal Business Hours; such parking to be
unreserved, on an availability (first come, first served) basis and subject to
all of the other provisions of the Parking Exhibit. Landlord may revoke this
license at any time upon thirty (30) days prior written notice to Tenant.
9. TEMPORARY PARKING. From the date hereof until the Commencement Date,
Tenant shall be permitted the nonexclusive use of up to ten (10) unreserved
parking spaces in the 1400 Louisiana Garage for executives and supervisory
personnel of Contractor involved in the construction of the Tenant Improvements.
The use of these temporary spaces shall be at no charge to Tenant or the
individuals parking in such spaces. The rights of Tenant and its designees to
use these spaces is expressly subject to the provisions of the Lease including,
without limitation, Paragraph 5 and Paragraph 6 of this Parking Exhibit.
EXHIBIT "E" TO OFFICE LEASE AGREEMENT - Page ii
SCHEDULE 1
TO
EXHIBIT "E"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
BUILDING GARAGE
RESERVED SPACES
MONTHLY
LEVEL NO. OF SPACES PRICE PER SPACE
P-1 9 $250.00 (plus tax)
TOTAL RESERVED SPACES 9
=======
UNRESERVED SPACES
TOTAL NO. MONTHLY
OF SPACES PRICE PER SPACE
56 $175.00 (plus tx)
1400 LOUISIANA GARAGE
RESERVED SPACES
MONTHLY
LEVEL NO. OF SPACES PRICE PER SPACE
- 25 $90.00 (plus tax)
TOTAL RESERVED SPACES 25
======
UNRESERVED SPACES
TOTAL NO. MONTHLY
OF SPACES PRICE PER SPACE
108 $50.00 (plus tax)
SCHEDULE 1 TO EXHIBIT "E" TO OFFICE LEASE AGREEMENT - Page i
[DIAGRAMS TO BE ATTACHED DEPICTING LOCATIONS OF SPACES]
SCHEDULE 1 TO EXHIBIT "E" TO OFFICE LEASE AGREEMENT - Page ii
EXHIBIT "F"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
SIGNAGE
Tenant shall have the right, at Tenant's sole cost, expense and risk,
to construct and/or install (as the applicable case may be) (i) two (2) exterior
monument signs, each having maximum dimensions of 10' (height) X 2' (width) X 2'
(depth), with the understanding that Landlord's further written approval must be
obtained if Tenant desires to install a monument sign having larger dimensions,
and (ii) interior signage, as more specifically set forth on SCHEDULE 1 attached
hereto. Furthermore, in the event that Tenant elects to lease the space on the
entire 58th floor of the Building pursuant to other provisions of this Lease,
then Tenant shall have the right, at Tenant's sole cost, expense and risk, to
install certain signage on the 59th Floor, as more specifically set forth on
SCHEDULE 2 attached hereto, all in accordance with the provisions of this
exhibit. Furthermore, in the event that Tenant elects to lease the space on the
entire 59th Floor of the Building pursuant to other provisions of this Lease,
then Tenant shall have the right, at Tenant's sole cost, expense and risk, to
install certain signage on the 58th Floor, as more specifically set forth on
SCHEDULE 3 attached hereto, all in accordance with the provisions of this
exhibit. (All of the signage referenced in the previous three (3) sentences
shall be referenced herein collectively as the "Signage.") All work of Tenant in
constructing and/or installing the Signage shall be done in a good and
workmanlike manner without unreasonable interference with the conduct of
business at the Building. With respect to the Signage, Landlord and Tenant both
agree as follows:
1. For the purposes of this Exhibit, all terms defined in the Lease
will be utilized herein without further definition. Terms specifically
applicable to this Exhibit shall have the meanings specified in this Exhibit and
shall be delineated by initial capitals.
2. The plans and specifications for the Signage, including
specifically, the design, size dimensions, color, materials, lighting,
fabrication, and other features thereof shall be subject to Landlord's prior
written approval which shall not be unreasonably withheld. The Signage (and
graphics) identified on SCHEDULE 1 hereto is specifically approved by Landlord.
The Signage shall conform with all applicable codes, shall be appropriate for a
Class A high-rise building in the Central Business District of Houston, Texas
and shall be compatible with the look, size, and materials of Landlord's and the
Building's surrounding signage. Tenant acknowledges that, due to City codes, the
Louisiana Sign may be limited to a plaque attached to the existing retaining
wall.
3. The Signage shall be erected as part of the Tenant Improvements in
accordance with the Workletter. Tenant may use a portion of the Allowance, for
the Signage, not to exceed $.50 per square foot of Rentable Area of the
Premises.
4. The location of the Signage shall be subject to Landlord's prior
written approval.
5. Tenant's right to erect the Signage is and shall be subject to
Tenant obtaining all necessary building permits from and approvals of all
governments, quasi-governmental authorities and Tenant's compliance with all
Laws.
6. Tenant agrees to insure, repair, maintain and keep the Signage in
good working order at all times at Tenant's sole cost, expense and risk, and to
pay any and all fees associated with obtaining local government permits and
licenses.
7. Subject to the rights of third parties pursuant to existing
agreements, as the same may be amended from time to time, including, without
limitation, the rights of First Interstate Bank, Landlord agrees that it will
not cause the Building to be renamed any name of a company or entity which
leases less space in the Building than Tenant at the time in question. The
restriction in the aforesaid sentence shall not apply to a company or entity
which (a) leases more space in the Building at the time in question than Tenant
leases and occupies, or (b) becomes the owner of the Building.
8. Landlord hereby reserves the right, at Landlord's expense, to add
other tenants' names and/or logos to the interior signage and to allow other
exterior signage.
9. The rights of Tenant under this Exhibit are subject to all of the
terms and provisions of the Lease, including without limitation, the obligations
of Tenant with respect to indemnification, maintenance of insurance and
alterations. Within ninety (90) days after the expiration or other termination
of the Lease or upon a termination of Tenant's right to the Signage, Tenant, at
its sole cost and expense, shall remove the Signage and restore, at Tenant's
expense, the property under and about the Signage to its original condition.
EXHIBIT "F" TO OFFICE LEASE AGREEMENT - Page Solo
SCHEDULE 1
TO
EXHIBIT "F"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
CURRENT APPROVED SIGNAGE
(TO BE COMPLETED)
SCHEDULE 1 TO EXHIBIT "F" TO OFFICE LEASE AGREEMENT - Page Solo
SCHEDULE 2
TO
EXHIBIT "F"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
SIGNAGE ON THE 59TH FLOOR
(TO BE COMPLETED)
SCHEDULE 2 TO EXHIBIT "F" TO OFFICE LEASE AGREEMENT - Page Solo
SCHEDULE 3
TO
EXHIBIT "F"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
SIGNAGE ON 58TH FLOOR
(TO BE COMPLETED)
SCHEDULE 3 TO EXHIBIT "F" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "G"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT RESULTS IN
YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY
THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
THIS AGREEMENT is entered into by and among Tenant, Landlord, and
Beneficiary and affects the Property described in Schedule "G-1" attached
hereto. The terms "Tenant", "Landlord", "Beneficiary", "Premises", "Lease",
"Property", "Loan", "Note", and "Mortgage" are defined in the Schedule of
Definitions attached hereto as Schedule "G-2". This Agreement is entered into
with reference to the following facts:
A. Landlord and Tenant have entered into the Lease covering the
Premises in the Property.
B. Beneficiary has agreed to make the Loan to Landlord to be
evidenced by the Note, which Note is to be secured by the
Mortgage covering the Property, provided that the Lease is
subordinate to the lien of the Mortgage.
C. For the purposes of completing the Loan, the parties hereto
desire expressly to acknowledge the subordination of the Lease
to the lien of the Mortgage, it being a condition precedent to
Beneficiary's obligation to consummate the Loan that the lien
of the Mortgage be unconditionally and at all times prior and
superior to the leasehold interests and estates created by the
Lease.
D. Tenant has requested that Beneficiary agree not to disturb
Tenant's possessory rights in the Premises in the event
Beneficiary should foreclose the Mortgage; provided that an
Event of Default (as defined in the Lease) is not then
existing and, provided further, that Tenant attorns to
Beneficiary or the purchaser at any foreclosure or trustee's
sale of the Property.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. SUBORDINATION. Notwithstanding anything to the contrary set forth in
the Lease, Tenant hereby acknowledges that the Lease and the leasehold estate
created thereby and all of Tenant's rights thereunder are and shall be and shall
at all times remain subject, subordinate and inferior to the Mortgage and the
lien thereof, and all rights of Beneficiary thereunder and to any and all
renewals, modifications, consolidations, replacements and extensions thereof.
2. ACKNOWLEDGMENT AND AGREEMENT BY TENANT. Tenant acknowledges that:
(a) Beneficiary would not make the Loan without this
Agreement;
(b) It acknowledges the Mortgage and the agreements evidencing
and securing the Loan; and
(c) Beneficiary, in making any disbursements to Landlord, is
under no obligation or duty to oversee or direct the application of the
proceeds of such disbursements, and such proceeds may be used by
Landlord for purposes other than improvement of the Property.
(d) From and after the date hereof, in the event of any act or
omission by Landlord which would give Tenant the right, either
immediately or after the lapse of time, to terminate the Lease or to
claim a partial or total eviction, Tenant will not exercise any such
right:
(i) until is has given written notice of such act or
omission to Beneficiary; and
(ii) until the same period of time as is given to
Landlord under the Lease to cure such act or omission shall
have elapsed following such giving of notice to Beneficiary
and following the time when Beneficiary shall have become
entitled under the Mortgage to remedy the same.
(e) It has notice that the Lease and the rent and all other
sums due thereunder have been assigned or are to be assigned to
Beneficiary as security for the Loan secured by the Mortgage. In the
event that Beneficiary notifies Tenant of a default under the Mortgage
and demands that Tenant pay its rent and all other sums due under the
Lease to Beneficiary, Tenant shall honor such demand and pay its rent
and all other sums due under the Lease directly to Beneficiary or as
otherwise required pursuant to such notice.
(f) It shall send a copy of any notice or statement under the
Lease to Beneficiary at the same time such notice or statement is sent
to Landlord.
(g) It has no right or option of any nature whatsoever,
whether pursuant to the Lease or otherwise, to purchase the Premises or
the Property, or any portion thereof or any interest therein, and
EXHIBIT "G" TO OFFICE LEASE AGREEMENT - Page i
to the extent that Tenant has had, or hereafter acquires, any such
right or option, the same is hereby acknowledged to be subject and
subordinate to the Mortgage and is hereby waived and released as
against Beneficiary.
(h) This Agreement satisfies any condition or requirements in
the Lease relating to the granting of a non-disturbance agreement.
3. FORECLOSURE AND SALE. In the event of foreclosure of the Mortgage,
or upon a sale of the Property pursuant to the trustee's power of sale contained
therein, or upon a transfer of the Property by conveyance in lieu of
foreclosure, then:
(a) Non-Disturbance. So long as an Event of Default is not
then existing, the Lease shall continue in full force and effect as a
direct lease between the succeeding owner of the Property and Tenant,
upon and subject to all of the terms, covenants and conditions of the
Lease, for the balance of the term of the Lease. Tenant hereby agrees
to adhere to and accept any such successor owner as landlord under the
Lease, and to be bound by and perform all of the obligations imposed by
the Lease, and Beneficiary, or any such successor owner of the
Property, will not disturb the possession of Tenant, and will be bound
by all of the obligations imposed on the Landlord by the Lease,
provided, however, that Beneficiary, or any purchaser at a trustee's or
sheriff's sale or any successor owner of the Property shall not be:
(i) liable for any act or omission of a prior
landlord (including Landlord); or
(ii) subject to any offsets or defenses which Tenant
might have against any prior landlord (including Landlord); or
(iii) bound by any rent or additional rent which
Tenant might have paid in advance to any prior landlord
(including Landlord) for a period in excess of one month or by
any security deposit, cleaning deposit or other prepaid charge
which Tenant might have paid more than one (1) month in
advance to any prior landlord (including Landlord); or
(iv) bound by any agreement or modification of the
Lease made without the written consent of Beneficiary.
(b) New Lease. Upon the written request of either Beneficiary
or Tenant to the other given at the time of any foreclosure, trustee's
sale or conveyance in lieu thereof, the parties agree to execute a
lease of the Premises upon the same terms and conditions as the Lease
between Landlord and Tenant, which lease shall cover any unexpired term
of the Lease existing prior to such foreclosure, trustee's sale or
conveyance in lieu of foreclosure.
(c) Beneficiary shall have no liability to Tenant or any other
party for any conflict between the provisions of the Lease and the
provisions of any other lease affecting the Property, including, but
not limited to, any provisions relating to renewal options and options
to expand, and in the event of such a conflict, Tenant shall have no
right to cancel the Lease or take any other remedial action against
Beneficiary or action against any other party for which Beneficiary
would be liable.
4. ACKNOWLEDGMENT AND AGREEMENT BY LANDLORD. Landlord, as landlord
under the Lease and mortgagor or trustor under the Mortgage, acknowledges and
agrees for itself and its heirs, successors and assigns, that:
(a) This Agreement does not:
(i) constitute a waiver by Beneficiary of any of its
rights under the Mortgage; and/or
(ii) in any way release Landlord from its obligations
to comply with the terms, provisions, conditions, covenants,
agreements and clauses of the Mortgage;
(b) The provisions of the Mortgage remain in full force and
effect and must be complied with by Landlord; and
(c) In the event of a default under the Mortgage, Tenant may
pay all rent and all other sums due under the Lease to Beneficiary as
provided in the Agreement.
5. NO OBLIGATION OF BENEFICIARY. Beneficiary shall have no obligation
or incur any liability with respect to the erection or completion of the
improvements in which the Premises are located or for completion of the Premises
or any improvements for Tenant's use and occupancy, either at the commencement
of the term of the Lease or upon any renewal or extension thereof or upon the
addition of additional space, pursuant to any expansion rights contained in the
Lease.
6. NOTICE. All notices hereunder to Beneficiary shall be deemed to have
been duly given if mailed under United States registered or certified mail, with
return receipt requested, postage prepaid to Beneficiary at its address set
forth in Exhibit "G-2" attached hereto (or at such other address as shall be
given in writing by Beneficiary to Tenant) and shall be deemed complete upon any
such mailing.
7. MISCELLANEOUS.
(a) This Agreement supersedes any inconsistent provision of
the Lease.
(b) Nothing contained in this Agreement shall be construed to
derogate from or in any way impair or affect the lien and charge or
provisions of the Mortgage.
EXHIBIT "G" TO OFFICE LEASE AGREEMENT - Page ii
(c) Beneficiary shall have no obligations nor incur any
liability with respect to any warranties of any nature whatsoever,
whether pursuant to the Lease or otherwise, including, without
limitation, any warranties respecting use, compliance with zoning,
Landlord's title, Landlord's authority, habitability, fitness for
purpose or possession.
(d) In the event that Beneficiary shall acquire title to the
Premises or the Property, Beneficiary shall have no obligation, nor
incur liability, beyond Beneficiary's then equity interest, if any, in
the Premises, and Tenant shall look exclusively to such equity interest
of Beneficiary, if any, in the Premises for the payment and discharge
of any obligations imposed upon Beneficiary hereunder or under the
Lease, and Beneficiary is hereby released and relieved of any other
obligations hereunder and under the Lease.
(e) This Agreement shall inure to the benefit of the parties
hereto, their respective successors and permitted sublessees and
assigns; provided, however, that in the event of the assignment or
transfer of the interest of Beneficiary, all obligations and
liabilities of Beneficiary under this Agreement shall terminate, and
thereupon all such obligations and liabilities shall be the
responsibility of the party to whom Beneficiary's interest is assigned
or transferred; and provided further that the interest of Tenant under
this Agreement may not be assigned or transferred without the prior
written consent of Beneficiary.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the state in which the Property is located.
IN WITNESS WHEREOF, the parties have executed this Subordination,
Non-Disturbance, and Attornment Agreement as of the ____ day of
________________, 19__.
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT, THE PARTIES CONSULT WITH THEIR
ATTORNEYS WITH RESPECT THERETO.
BENEFICIARY:
- -----------------------------------
a _________________________________
By: ______________________________
------------------------------,
Its __________________________
TENANT:
- -----------------------------------
a _________________________________
By: ______________________________
------------------------------,
Its __________________________
LANDLORD:
- -----------------------------------,
a _________________________________
By: _______________________________
_______________________________
_______________________________
By: _______________________________
Name: _________________________
Title: ________________________
EXHIBIT "G" TO OFFICE LEASE AGREEMENT - Page iii
SCHEDULE "G-1"
TO
SUBORDINATION, NON-DISTURBANCE,
AND ATTORNMENT AGREEMENT
LEGAL DESCRIPTION
[TO BE ATTACHED]
SCHEDULE "G-1" EXHIBIT "G" TO OFFICE LEASE AGREEMENT - Page Solo
SCHEDULE "G-2"
TO
SUBORDINATION, NON-DISTURBANCE,
AND ATTORNMENT AGREEMENT
SCHEDULE OF DEFINITIONS
"Beneficiary" shall mean ______________________________, a ________
corporation. All notices to Beneficiary shall be mailed to:
- ----------------------------------
- ----------------------------------
- ----------------------------------
Attention: ______________________,
----------------------
with copy to:
- ----------------------------------
- ----------------------------------
- ----------------------------------
Attention: ______________________,
----------------------
and a copy to:
- ----------------------------------
- ----------------------------------
- ----------------------------------
Attention: ______________________,
----------------------
1. "MORTGAGE" shall mean a first lien Mortgage or Deed of Trust and
Security Agreement with Assignment of Rents dated as ____________, ____,
encumbering the Property, executed by Landlord, as Mortgagor or Trustor, to
______________, as Trustee, in favor of Beneficiary, securing repayment of the
Loan evidenced by the Note, to be recorded in the records of the county in which
the Property is located.
2. "LANDLORD" shall mean _________________________________, a
_________________________, having an office at ____________
_____________________________, ______, _____ __________.
3. "LEASE" shall mean a certain lease entered into by and among
Landlord and Tenant dated as of ____ __, ____, covering the Premises.
4. "LOAN" shall mean a first mortgage loan in an amount up to
$______________ from Beneficiary to Landlord.
5. "NOTE" shall mean that certain Installment Note executed by Landlord
in favor of ____________________________________, a ________ corporation, dated
as of ____________, 19__, in the amount of $--------------.
6. "PREMISES" shall mean the space in the Improvements located in and
upon the Property described in the Lease.
7. "PROPERTY" shall mean the real property described in Exhibit "A"
attached hereto together with the improvements thereon.
8. "TENANT" shall mean _____________________________, a __________
corporation, having an office located at Suite ____, _________________,
__________, _______________.
SCHEDULE "G-2" TO EXHIBIT "G" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "H"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
EXPANSION OPTION
This EXHIBIT "H" ("Expansion Exhibit") describes and specifies the
rights and obligations of Tenant to lease and to take additional space within
the Building.
1. DEFINED TERMS. For purposes of this Expansion Exhibit, all terms
defined in the Lease will be utilized herein without further definition. In
addition, when delineated with initial capital letters, the following terms
shall have the following respective definitions and meanings:
(a) "Expansion Area" shall mean up to approximately 79,220 square
feet of Rentable Area located on the following floors in the
Building:
FLOOR AREA (APPROX.)
52 25,681 sq. ft.
55 25,681 sq. ft.
58 17,791 sq. ft.
71 10,067 sq. ft.
Tenant may expand into only an entire floor or floors
constituting the Expansion Area; provided, however, if Tenant
shall elect it may expand on Floor 55 by more than fifty
percent (50%) but less than one hundred percent (100%) of the
Rentable Area on such Floor provided:
(i) Tenant shall bear the cost and expense of converting
the 55th Floor to a "Multi-Tenant Floor" (including,
without limitation, all costs and expenses required
to cause the Common Areas [including the restrooms]
on the 55th Floor to fully comply with the ADA and
the TABA) in the event that Tenant exercises its
option to lease less than one hundred percent (100%)
of the 55th Floor;
(ii) The remaining space on the 55th Floor not leased by
Tenant pursuant to this Expansion Option shall be, in
Landlord's reasonable judgment, re-leasable taking
into consideration without limitation access to and
from, and the location, size, window configuration,
bay depth and layout of, such space and such other
factors as Landlord shall deem relevant.
The rights of Tenant to expand the Premises to include any
portion of Floor 55 are additionally subject and subordinate
to the preferential lease rights of an existing tenant in the
Building which require, among other things, that: (a) Landlord
shall notify such other tenant before the space becomes
available, and (b) such tenant shall have ten (10) working
days following such notice within which to elect to include
the space within its lease. No part of Floor 55 shall be
deemed a part of the Expansion Area or otherwise subject to
the terms of this Expansion Exhibit until such existing tenant
declines to elect to exercise its preferential lease rights
with respect to Floor 55.
In addition, the approximately 5,164 square feet of Floor 55
depicted on SCHEDULE 1 attached hereto is currently leased by
a tenant in the Building which is obligated to relocate its
space within one hundred twenty (120) days following notice
from Landlord. These approximately 5,164 square feet of
Rentable Area are not deemed a part of the Expansion Area or
otherwise subject to the terms of this Expansion Exhibit
unless and until such existing tenant relocates its entire
leasehold on these 5,164 square feet to another space in the
Building.
The rights of Tenant to expand the Premises to include Floor
52 are, in any event, subject and subordinate to:
(i) the preferential lease rights of an existing tenant
in the Building which require, among other things,
that: (a) Landlord notify such other tenant when
space becomes available for lease, (b) the tenant
shall have ten (10) days within which to elect to
include the space within its lease, (c) if such
tenant declines to lease such space, the space may be
leased to a third party within ninety (90) days or it
will again be subject to such tenant's preferential
lease rights;
(ii) the expansion rights of an existing tenant in the
Building which grant to such tenant the right to
expand by approximately 5,000 square feet on Floor 52
until September 2, 1996.
EXHIBIT "H" TO OFFICE LEASE AGREEMENT - Page i
Floor 52 shall not be deemed a part of the Expansion Area or
otherwise subject to the terms of this Expansion Exhibit until
such existing tenant declines to elect to exercise its
preferential lease rights and its expansion rights with
respect to Floor 52.
(b) "Expansion Effective Date" shall mean the date on which the
Expansion Area is delivered by Landlord to Tenant.
2. TENANT'S ELECTION. Provided there is not then existing an Event of
Default, Tenant may at its option elect from time to time to expand the Premises
to include all or part of the Expansion Area upon the terms and conditions
provided herein upon written notice of such election delivered by Tenant to
Landlord at any time prior to July 1, 1997.
3. BASE RENT. The Base Rent per square foot of Rentable Area for
Expansion Area during the Primary Term shall be $15.00 per square foot,
provided, however, the free rent period for the Expansion Area shall be limited
to the period from the Expansion Effective Date until December 31, 1998. The
Base Rent for the Expansion Area is subject to adjustment from time to time as
provided in the Lease, including, without limitation, any Rent Adjustment and
adjustment resulting from any Allowance Increase in connection with the
Expansion Area.
4. PROCEDURE AND EFFECT OF DELIVERY. Landlord and Tenant shall
promptly, following receipt of Tenant's notice, enter into a written amendment
to the Lease modifying and supplementing this Lease by adding the Expansion Area
and containing such other reasonable terms and provisions as Landlord may deem
appropriate and consistent with this Expansion Exhibit. Except as may be
specifically modified in such amendment, and except with respect to the parking
rights, as herein specified, the terms and provisions of the Lease shall, on the
Expansion Effective Date, automatically apply and become applicable to the
Expansion Area; and the Expansion Area, as of the Expansion Effective Date,
shall automatically and without the necessity of further documentation, become
and be deemed to be a part of the Premises for all purposes, including, without
limitation, the determination of the "Excess" (as defined in the Lease). The
Base Rent with respect to the Expansion Area shall be as specified in Paragraph
3 hereof, which Base Rent with respect to the Expansion Area shall thereafter be
adjusted as provided in the Lease.
5. DELIVERY OF EXPANSION AREA. Any Expansion Area shall be delivered to
Tenant within thirty (30) days after Landlord receives Tenant's notice of
election to exercise this option, subject to Excusable Delays, vacant and
unoccupied and "as is." In addition, Landlord shall provide the Allowance for
completion of the Tenant Improvements in the Expansion Area in accordance with
the Workletter attached as EXHIBIT "C" to this Lease, which Workletter is
incorporated in this Expansion Exhibit by reference for all purposes. Landlord
shall use reasonable diligence to deliver the Expansion Area on the date
specified by Landlord, but in no event shall Landlord have any liability for the
failure to deliver the Expansion Area to Tenant on such date, nor shall any such
failure impair the validity of the Lease, extend the Term, or impair any
obligations of Tenant under the Lease, it being understood that the Rent
applicable to the Expansion Area shall be abated until possession is delivered
to Tenant in full settlement of all claims that Tenant might otherwise have
against Landlord by reason of the failure to deliver possession of the Expansion
Area to Tenant.
6. CONCIERGE DESK. Subject to full compliance with the following
conditions and requirements, Landlord will permit Tenant, at Tenant's sole cost
and expense, to build and staff a Tenant reception area (the "Concierge Desk")
on the 58th Floor of the Building in the sky lobby adjacent to the primary
entrance to Tenant's Premises on the 58th Floor, in a location and with a
configuration reasonably acceptable to Landlord in its sole discretion:
(a) There shall not be then existing an Event of Default under the
Lease.
(b) Tenant shall have leased and be in occupancy of the entirety
of the Rentable Area of the 58th Floor.
(c) The Concierge Desk shall be staffed during Tenant's normal
business hours Monday through Friday and such other hours as
Tenant may deem necessary.
(d) The appearance, dress, communication skills and conduct of
personnel selected by Tenant to staff the Concierge Desk must
be consistent with personnel serving in such positions in
other buildings similar to the Building located in the Central
Business District of Houston, Texas.
(e) Tenant will be fully responsible, obligated and liable with
respect to the Concierge Desk, as fully and as if such
reception/information area were included as a part of the
Premises.
(f) No sales shall be made from the Concierge Desk, no
refreshments shall be served at such locations, no candles
shall be burned at such locations and there shall not be any
advertising, campaigning or other activity at such locations
other than reception and direction of visitors in a manner
consistent with other buildings similar to the Building
located in the Central Business District of Houston, Texas.
(g) Tenant may, on ten (10) days' prior written notice to
Landlord, cease to staff the Concierge Desk in the manner
required by this Paragraph 6, in which case Tenant's rights
and duties under this Paragraph 6 shall terminate, except that
Tenant shall continue to be responsible, obligated and liable
for all of its responsibilities, obligations and liabilities
which arise or which are accrued or incurred under this
Paragraph 6 prior to the termination of Tenant's rights
hereunder.
(h) Provided Landlord has provided directory information to
Tenant, Tenant's personnel staffing the Concierge Desk will in
a polite and cooperative fashion direct visitors to the
Building who enter the sky lobby on the 58th Floor to their
destination within the Building.
EXHIBIT "H" TO OFFICE LEASE AGREEMENT - Page ii
7. PARKING. Parking rights accorded Tenant in connection with its
expansion of the Premises pursuant to this Expansion Exhibit are set forth in
EXHIBIT "E" to this Lease.
8. NULLIFICATION OF EXPANSION RIGHTS. Notwithstanding any other
provisions of this EXHIBIT "H" seemingly to the contrary, if Tenant (and/or
Tenant's Affiliates) fail to personally lease and occupy the greater of (i)
175,000 square feet of Rentable Area of the Premises, or (ii) an area of the
Premises equal to 66% of the maximum total square footage of Rentable Area ever
leased by Tenant at any time under this Lease, then, on the date Tenant fails to
meet such occupancy requirement, any and all of Tenant's expansion rights
pursuant to this EXHIBIT "H" either (a) not yet exercised by Tenant, or (b) if
exercised by Tenant, but not yet finalized by execution and delivery of an
amendment effectuating such expansion rights, shall immediately become null and
void and of no further effect. For purposes of this paragraph, the term
"personally lease and occupy" shall mean that Tenant (and/or Tenant's
Affiliates) do in fact personally lease and occupy such space, and that such
space shall not be affected by or subject to any sublease, assignment, license,
concession or other arrangement under which a third party has any right to
occupy and/or use such space.
9. TERMINATION OF EXPANSION RIGHTS. The right of Tenant to add the
Expansion Area shall automatically terminate upon (a) the termination of the
Term, whether by Landlord upon the occurrence of an Event of Default or
otherwise, or (b) the failure of Tenant to exercise the option to expand as and
within the time period specified in Paragraph 3 above.
EXHIBIT "H" TO OFFICE LEASE AGREEMENT - Page iii
SCHEDULE 1
TO
EXHIBIT "H"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
TEXSTAR SPACE - FLOOR 55 (APPROXIMATELY 5,164 SQUARE FEET)
SCHEDULE 1 TO EXHIBIT "H" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "I"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
CONTRACTION OPTION
This EXHIBIT "I" ("Contraction Option Exhibit") describes and specifies the
rights of the Tenant to reduce and return ("Contraction Option"), in accordance
with the terms hereof but not otherwise, certain portions of the Premises
described below:
1. DEFINED TERM. For purposes of this Contraction Option Exhibit, all
terms defined in the Lease will be utilized herein without further definition.
In addition, when delineated with initial capital letters, the following terms
shall have the following respective definitions and meanings:
(a) "Applicable Balance" shall mean the then unamortized balance, at
the Return Effective Date, of the Applicable Leasehold Costs.
(b) "Applicable Leasehold Costs" shall mean the total of (i) the
difference between the average monthly Base Rent payable by Tenant over the
entire Term and the average monthly Base Rent payable by Tenant from the
Commencement Date to the Return Effective Date multiplied by the number of
months from the Commencement Date through the Return Effective Date; (ii) an
amount equal to that portion of the Rent Adjustment waived for the calendar year
1998 attributable to the Contraction Space, (iii) an amount equal to that
portion of the parking fees which were waived during the first two (2) Lease
Years of the Term attributable to the parking spaces given back with the
Contraction Space, and (iv) that portion attributable to the Contraction Space
of the aggregate dollar amount which has been paid and/or is payable by Landlord
to or on behalf of Tenant under the Lease, including, without limitation, (x)
any brokerage commissions, (y) any Allowances (for leasehold improvements or
otherwise) and (z) any expenses incurred in relocating or terminating the
leasehold rights of existing tenants in order to accommodate Tenant for this
Lease. Applicable Leasehold Costs shall be deemed to be amortized by Tenant on a
pro rata basis for each calendar month during that part of the Term for which
Tenant has paid rent [and is not otherwise in default hereunder], commencing
with the third full Lease Year. No amortization shall occur with respect to any
month for which Tenant has not paid rent or in which Tenant is otherwise in
default hereunder. Unamortized Applicable Leasehold Costs shall accrue interest
at the rate of ten percent (10%) per annum, compounded monthly, during the Term.
(c) "Contraction Fee" shall mean an amount equal to the number of
square feet of Rentable Area contained within the Contraction Space multiplied
by $7.50.
(d) "Contraction Space" shall mean up to 53,000 square feet of Rentable
Area within the Premises which Tenant elects to contract from the Premises.
Provided, however, Tenant may not elect to contract less than the entire space
Tenant leases on a given floor, in which event Tenant must return, pursuant to
this Contraction Option Exhibit, the entirety of such space.
(e) "Return Effective Date" shall mean the date specified by Tenant in
its notice delivered pursuant to Paragraph 2 on which the Contraction Space is
to be returned by Tenant to Landlord.
2. TENANT'S ELECTION. Provided that there is no event of Default under
the Lease, Tenant may, at its option, one time and one time only, elect to
return to Landlord the Contraction Space at any time during the sixth (6th)
Lease Year but not before or thereafter by delivering to Landlord at least
twelve (12) months prior written notice thereof. Such notice, once delivered,
shall be irrevocable by Tenant. In the event that Tenant fails to timely
exercise such option, such option shall automatically expire and be of no
further force or effect.
3. REPAYMENT OF UNAMORTIZED COSTS & CONTRACTION FEE. Notwithstanding
any provisions in the Lease seemingly to the contrary, in connection with the
exercise by the Tenant of the Contraction Option and as a condition to the
effectiveness of such Contraction Option, Tenant shall pay to Landlord the
Contraction Fee and the Applicable Balance on or before the Return iEffective
Date.
4. PROCEDURE AND EFFECT OF RETURN. Landlord and Tenant shall, prior to
the Return Effective Date, enter into a written amendment to the Lease modifying
this Lease to account for the return of the Contraction Space. Tenant's
obligations with respect to the return of the Contraction Space shall be
governed by the same terms of the Lease that govern a return of the Premises at
the expiration or other termination of the Term.
5. NULLIFICATION OF OTHER RIGHTS. Notwithstanding any other provisions
of this EXHIBIT "I" seemingly to the contrary, in the event Tenant exercises
this Contraction Option with the result that Tenant (and/or Tenant's Affiliates)
fail to personally lease and occupy the greater of (i) 175,000 square feet of
Rentable Area of the Premises, or (ii) an area of the Premises equal to 66% of
the maximum total square footage of Rentable Area ever leased by Tenant at any
time under this Lease, then, on the date Tenant fails to meet such occupancy
requirement, any and all of Tenant's expansion rights pursuant to EXHIBIT "H",
Tenant's preferential rights pursuant to EXHIBIT "J" and Tenant's renewal rights
pursuant to EXHIBIT "K" of the Lease either (a) not yet exercised by Tenant, or
(b) if exercised by Tenant, but not yet finalized by execution and delivery of
an amendment effectuating such expansion and/or preferential rights, shall
immediately become null and void and of no further effect. For purposes of this
paragraph, the term "personally lease and occupy" shall mean that Tenant (and/or
Tenant's Affiliates) do in fact personally lease and occupy such space, and that
such space shall not be affected by or subject to any sublease, assignment,
license, concession or other arrangement under which a third party has any
EXHIBIT "I" TO OFFICE LEASE AGREEMENT - Page i
right to occupy and/or use such space. Furthermore, Tenant shall return to
Landlord the number of parking spaces in the Building Garage equal to the ratio
of one (1) parking space per 3,875 square feet of Rentable Area of Contraction
Space and in the 1400 Louisiana Garage equal to the ratio of one (1) parking
space per 1,500 square feet of Rentable Area of Contraction Space; a partial
parking space shall be rounded up to a full parking space to be returned.
6. TERMINATION OF CONTRACTION OPTIONS. The right of Tenant to return
the Contraction Space shall automatically terminate upon the earlier to occur of
(a) the termination of the Term, whether by Landlord upon the occurrence of an
Event of Default or otherwise, or (b) the failure of Tenant to exercise the
Contraction Option with respect to the Contraction Space, as and within the time
periods specified in Paragraph 2 above, or (c) the failure of Tenant to pay to
Landlord the Contraction Fee and the Applicable Balance on or before the Return
Effective Date.
EXHIBIT "I" TO OFFICE LEASE AGREEMENT - Page ii
EXHIBIT "J"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
PREFERENTIAL EXPANSION RIGHTS
This EXHIBIT "J" ("Preferential Expansion Rights Exhibit") describes
and specifies the rights and obligations of Landlord and Tenant regarding the
rights of Tenant to lease certain space in the Building on a preferential basis.
1. DEFINED TERMS. For purposes of this Preferential Expansion Rights
Exhibit, all terms defined elsewhere in the Lease will be utilized in this
Preferential Expansion Rights Exhibit without further definition. In addition,
when delineated with initial capital letters, the following terms shall have the
following respective definitions and meanings when used in the Lease (except for
those definitions which by their terms only apply to this Preferential Expansion
Rights Exhibit):
(a) "Available Refusal Space" shall mean the space within the
Building which, at the applicable time involved is "vacant and available", but
shall in any event exclude: (i) space for lease (whether as storage space,
office space or otherwise) on the basement, street or lobby levels of the
Building; (ii) any space for lease in the Building which is subject to Other
Tenant Rights, and whether or not such right or option is exercised in
conformity with an existing lease provision or otherwise; (iii) any Third Party
Tenant Space which Landlord is entitled to recapture pursuant to any sublease
recapture rights in any Third Party Tenant Lease; (iv) any Space Under
Negotiation; (v) any Third Party Tenant Space that Landlord is entitled to
repossess on account of any default by such Third Party Tenant of any
obligations of such Third Party Tenant under any Third Party Tenant Lease
irrespective of whether or not Landlord elects to repossess such Third Party
Tenant Space; and (vi) any vacant and available space of 5,000 square feet of
Rentable Area or less on either a floor no portion of which is then leased by
Tenant or its Affiliates or a floor that is not adjacent to a floor leased by
Tenant or its Affiliates. For the purposes of this Exhibit the term "vacant and
available" shall mean any space within the Building which Landlord determines,
in its sole discretion, as of the date of a Notice of Availability, is vacant
and available. In no event shall vacant and available space include any space
which is the then subject of any court proceedings or other proceedings with
respect to occupancy of the space, irrespective of the rights of Landlord to
recover possession of the space involved.
(b) "Bona Fide Offer" shall mean a bona fide written offer
from any person or entity that Landlord is ready, willing and able to accept
with respect to Available Refusal Space.
(c) "Multi-Tenant Floor" shall in this Exhibit mean any floor
that is then leased by one or more tenants other than or in addition to Tenant
or its Affiliates and is configured for multi-tenant occupancy.
(d) "Notice of Availability" shall mean each written notice
which is required to be delivered by Landlord to Tenant pursuant to Paragraph
3.A.
(e) "Other Tenant Rights" shall mean any preferential right,
hold option, first offer, right of first refusal, or other expansion and/or
renewal and/or extension option either (A) heretofore granted by Landlord in
favor of any Third Party Tenant; or (B) hereafter granted to a Third Party
Tenant without regard to whether the Third Party Tenant has any then existing
rights with respect to the space in question, it being specifically acknowledged
and agreed that Landlord may at any time grant Other Tenant Rights to any tenant
now or hereafter occupying any space within the Building.
(f) "Preferential Lease Effective Date" shall mean, for
specific Preferential Space, the earlier of (i) the date Tenant commences doing
business in such space, or (ii) ninety (90) days following the date that the
Landlord tenders to Tenant such Preferential Space.
(g) "Preferential Lease Rights" shall mean the rights of
Tenant to lease Preferential Space and Secondary Preferential Space pursuant to
this Preferential Expansion Rights Exhibit.
(h) "Preferential Rights Notice" shall mean the written notice
Landlord shall give Tenant within five (5) days of the date Landlord receives a
Bona Fide Offer for Available Refusal Space.
(i) "Preferential Rights Terms" shall mean the lease terms
applicable to Preferential Space and Secondary Preferential Space and shall be
as follows; (i) except as provided below, the Base Rent rate applicable to the
Preferential Space shall equal one hundred percent (100%) of the then Prevailing
Market Rental Rate (determined at the time of Tenant's election to lease
Preferential Space and not at any other time), in the same manner as the
Prevailing Market Rental Rate may be determined for the Premises (but for a
lease term co- terminous with the remainder of the Term) in connection with the
exercise, if any, of the Renewal Options granted to Tenant pursuant to the
provisions of EXHIBIT "K" to the Lease; (ii) all other Rent obligations of
Tenant shall likewise apply to the Preferential Space; (iii) the Preferential
Space shall be tendered by Landlord to Tenant on an "AS IS, WITH ALL FAULTS"
basis in a vacuumed and broom-clean condition without regard to improvement
allowances and without any improvements to be made by Landlord; (iv) the payment
of Rent applicable to the Preferential Space shall commence upon the
Preferential Lease Effective Date; (v) the lease term of the Preferential Space
shall be co-terminous with the remainder of the Term; (vi) all other costs of
whatever kind or nature associated, directly or indirectly, with the completion
or remodeling of the Preferential Space shall be paid for by Tenant unless as
part of the determination of Prevailing Market Rental Rate Landlord elects, in
its sole discretion, to provide to
EXHIBIT "J" TO OFFICE LEASE AGREEMENT - Page i
Tenant a build-out allowance (of whatever amount Landlord may in its sole
discretion designate) in Landlord's Rent Proposal applicable to the Preferential
Space; and (vii) the work to be performed by Tenant in connection with the
build-out of the Preferential Space shall, in all other respects, comply with
the terms and provisions of the Workletter. (References in this sub-paragraph
(i) and sub-paragraph (k) to "Preferential Space" shall also mean "Secondary
Preferential space" when applicable).
(j) "Preferential Space" shall mean the Available Refusal
Space for which Tenant elects to exercise its Preferential Lease Rights, which
space shall be on Floors 47 through 71, inclusive, of the Building.
(k) "Space Limitations" shall mean the Preferential Space
elected by Tenant where the following limitations shall apply:
If Space Is Located On: Preferential Space shall mean and be:
1. A Single Tenant Floor which is Not less than 5,000 square feet of
contiguous to a floor occupied by the Rentable Area of such floor (and
Tenant. if more than 75% of the Rentable Area
of such floor shall be the entirety
of such floor.)
2. A Single Tenant Floor which is The entirety of such floor.
not contiguous to a floor occupied
by Tenant.
3. A Multi-Tenant Floor which is If Available Refusal Space (not
contiguous to a floor occupied by adjacent to other Available Refusal
Tenant or a Multi-Tenant Floor Space) on such floor is less than
which is not contiguous but on 5,000 square feet of Rentable Area,
which Tenant already occupies the entirety of such space. If
space. Available Refusal Space on such floor
is more than 5,000 square feet of
Rentable Area, Tenant must elect at
least 5,000 square feet of Rentable
Area as Preferential Space (however,
if as a result of Tenant's election
the remaining Available Refusal Space
is less than 5,000 square feet of the
Rentable Area of such floor Tenant
shall elect the entirety of such
floor).
4. A Multi-Tenant Floor which is not Not less than 5,000 square feet of
contiguous to a floor occupied by Rentable Area and if as a result of
Tenant, and no portion of which is Tenant's election of Preferential
occupied by Tenant. Space, the remaining Available
Refusal Space on such floor is less
than 5,000 square feet of Rentable
Area, Tenant shall elect all the
Available Refusal Space on such floor
as Preferential Space).
As to Preferential Space designated by Tenant on a Multi-Tenant Floor a portion
of which is leased by Tenant or its Affiliates, such Preferential Space shall be
contiguous to any space on such Multi-Tenant Floor leased to Tenant or its
Affiliates to the extent the Available Refusal Space on such floor is contiguous
to space leased by Tenant or its Affiliate. Notwithstanding any other provision
of this Preferential Expansion Rights Exhibit, Tenant shall bear the cost and
expense of converting any Single Tenant Floor to a Multi-Tenant Floor on which
Tenant exercises its Preferential Lease Rights and thereby leases less than the
entirety of such Single-Tenant Floor. Further notwithstanding any other
provision of this Preferential Expansion Rights Exhibit, any Available Refusal
Space not leased by Tenant on a floor a portion of which Tenant leases pursuant
to its Preferential Lease Rights shall be in Landlord's reasonable judgment
re-leasable taking into consideration without limitation access, to and from,
and the location, size, window configuration, bay depth, and layout of, such
space and such other factors as Landlord shall reasonably deem relevant. Tenant
shall not be permitted to elect to lease Preferential Space pursuant to a
Tenant's Response to a Notice given in the last twelve (12) months of the
Initial Lease Term or any Renewal Term unless it has then timely exercised its
Renewal Option for the next Renewal Term and in connection therewith, no Notice
of Availability, or Preferential Rights Notice will be required to be delivered
during such period, but if Tenant properly and timely exercises its Renewal
Option for the next Renewal Term, then Landlord's obligation to provide Notices
of Availability and Preferential Rights Notices shall be reinstated during the
remainder of the Initial Lease Term or such Renewal Term (as appropriate) and,
subject to the other provisions hereof, Tenant shall have the Preferential Lease
Rights provided in this Preferential Expansion Rights Exhibit.
(l) "Secondary Preferential Space" shall mean up to 100,000
square feet of Rentable Area of the Available Refusal Space on a cumulative
basis, on Floors 2-46 inclusive of the Building, subject to the Space
Limitations.
(m) "Single-Tenant Floor" as used in this Preferential
Expansion Rights Exhibit shall mean a Floor in the Building which is not a
Multi-Tenant Floor.
(n) "Space Under Negotiation" shall mean any space in the
Building with respect to which Landlord is under Active Negotiations.
(o) "Space Variance" shall mean with respect to the size of
the premises under a lease to a Third Party Tenant or Available Refusal Space
for which Landlord gets a Bona Fide Offer and Tenant does not elect to lease
such space, a variance factor, either upward or downward (as the case may be) of
(i) twenty percent (20%) of such premises, if such premises contain or are
proposed to contain less than 5,000 square feet of Rentable Area; and (ii) ten
percent (10%) of such premises, if such premises contain or are proposed to
contain 5,000 square feet or more of Rentable Area.
EXHIBIT "J" TO OFFICE LEASE AGREEMENT - Page ii
(p) "Tenant's Response to Notice" shall mean the written
response from Tenant to Landlord (made in response to a Notice of Availability
or a Preferential Rights Notice) by which Tenant shall elect to lease
Preferential Space, if any.
(q) "Third Party Tenant" shall mean the tenant of any Third
Party Tenant Space. References herein to a Third Party Tenant or to a tenant
shall mean and include any successor-in-interest thereto.
(r) "Third Party Prospect" shall mean a Third Party Tenant or
prospective tenant who makes a Bona Fide Offer to lease all or any portion of
the Available Refusal Space. References herein to a Third Party Prospect shall
mean and include any successor-in-interest thereto.
(s) "Third Party Tenant Space" shall mean any space that is
the subject of a Third Party Tenant Lease, leased, at the applicable time
involved, to any Third Party Tenant.
(t) "Third Party Tenant Lease" shall mean a lease between
Landlord and a tenant in the Building other than Tenant or its Affiliates.
2. GRANT OF PREFERENTIAL LEASE RIGHTS. Landlord hereby grants to Tenant
the Preferential Lease Rights with respect to any Available Refusal Space during
the Term. Notwithstanding the foregoing, the Preferential Lease Rights shall not
be applicable to nor exercisable by Tenant during any time when there is an
existing Event of Default under the Lease. Time shall be of the essence with
respect to the exercise by the Tenant of its Preferential Lease Rights
hereunder.
3. A. NOTICE OF AVAILABILITY. Tenant may, at any time the Preferential
Lease Rights are applicable, ask Landlord if particular space on Floors 47-71,
inclusive of the Building, is Available Refusal Space. In response to such
inquiry, Landlord shall deliver to Tenant a Notice of Availability which shall
advise Tenant if the space identified by Tenant is Available Refusal Space.
Notwithstanding any other provision of this Preferential Expansion Rights
Exhibit, in no event shall Landlord have any liability for any error or omission
with respect to the information contained in or omitted from the Notice of
Availability and Landlord disclaims any representation or warranty with respect
to the accuracy thereof.
3.B. BONA FIDE OFFER. In addition to its requirement to deliver a
Notice of Availability as provided above, if Landlord receives a Bona Fide Offer
for Available Refusal Space or Space Under Negotiation from any Third Party
Prospect at any time during which Tenant is entitled to the benefit of the
Preferential Lease Rights, Landlord shall provide Tenant with a Preferential
Rights Notice. Tenant shall have the first right to lease the space which is the
subject of such Bona Fide Offer on the Preferential Lease Terms by exercising
its right as provided in Paragraph 4 below.
4. EXERCISE OF PREFERENTIAL LEASE RIGHTS.
(a) Upon receipt by Tenant from Landlord of a Notice of
Availability, Tenant shall have a period of fifteen (15) days to deliver to
Landlord Tenant's Response to Notice. Upon receipt by Tenant from Landlord of a
Preferential Rights Notice, Tenant shall have a period of ten (10) days to
deliver to Landlord Tenant's Response to Notice. As to any Available Refusal
Space properly and timely elected by Tenant as Preferential Space in Tenant's
Response to Notice, Tenant shall have the obligation to lease the space
specified in its Tenant's Response to Notice on the Preferential Rights Terms.
If Tenant elects to lease Available Refusal Space which is the subject of a
Notice of Availability or Preferential Rights Notice, then, in such event,
Landlord and Tenant shall, within ten (10) days after Tenant delivers to
Landlord written notice of Tenant's election, enter into a written amendment
modifying and supplementing the Lease and containing the Preferential Rights
Terms with respect to such Preferential Space. Tenant shall be deemed to have
waived its Preferential Lease Rights with respect to the Available Refusal Space
set forth in a Preferential Rights Notice if Tenant fails to timely deliver
Tenant's Response to Notice and Landlord shall be free to lease or attempt to
lease such space to the Third Party Prospect which submitted the Bona Fide Offer
and the space leased to the Third Party Prospect may include a Space Variance.
(b) In the event that Tenant has exercised all of its
Preferential Lease Rights as to the Available Refusal Space on Floors 47-71,
inclusive of the Building, and at the time of Tenant's election there is no
Available Refusal Space on Floors 47-71, inclusive of the Building, then Tenant
shall have the right to elect to lease Secondary Preferential Space which is
Available Refusal Space. Tenant may, at any time the Preferential Lease Rights
are applicable, if there is no Available Refusal Space on Floors 47-71,
inclusive of the Building, ask Landlord if particular space on Floors 2-46 of
the Building is Available Refusal Space. In response to such inquiry, Landlord
shall deliver to Tenant a Notice of Availability which shall advise Tenant if
the space identified by Tenant is Available Refusal Space. If Tenant elects to
lease Secondary Preferential Space, then, in such event, Landlord and Tenant
shall, within ten (10) days after Tenant delivers to Landlord written notice of
Tenant's election, enter into a written amendment modifying and supplementing
the Lease and containing the Preferential Rights Terms with respect to such
Secondary Preferential Space. (References in Paragraphs 5 and 6 to "Preferential
Space" shall also mean "Secondary Preferential Space" when applicable.) In no
event will Landlord be required to offer Tenant a first right to lease Secondary
Preferential Space if Landlord receives a Bona Fide Offer for Secondary
Preferential Space. Notwithstanding the foregoing, in the event Tenant wishes to
lease one or more floors of Preferential Space and there is not sufficient
Available Refusal Space on Floors 47-71 to accommodate such plan, Tenant may
lease an entire floor or floors of Secondary Preferential Space if there is
sufficient Secondary Preferential Space which is Available Refusal Space.
5. DELIVERY OF PREFERENTIAL SPACE. Landlord shall use reasonable
diligence to deliver the Preferential Space on the date specified in Landlord's
Notice of Availability or Preferential Rights Notice, as applicable, but in no
event shall Landlord have any liability for the failure to deliver the
Preferential Space to Tenant on such date, nor shall any such failure impair the
validity of the Lease, extend the Term, or impair any obligations of Tenant
under the Lease, it being understood that the Base Rent applicable to the
Preferential Space shall be abated until possession is delivered to Tenant in
full settlement of all claims that Tenant might otherwise have against Landlord
by reason of the failure to timely deliver possession of the Preferential Space
EXHIBIT "J" TO OFFICE LEASE AGREEMENT - Page iii
<PAGE>
to Tenant. Notwithstanding the foregoing, if Landlord does not deliver a parcel
of Preferential Space within ninety (90) days after the date specified in
Landlord's Notice of Availability, Tenant may revoke its designation of such
space as Preferential Space by providing Landlord with notice at any time after
such ninety (90) day period and before Landlord has delivered such space,
whereupon Tenant shall have no obligation or duty to Landlord with respect to
such Preferential Space.
6. COMMENCEMENT OF TERM. The Preferential Space shall be deemed to be
part of the Premises effective as of the date such Preferential Space is
tendered to Tenant by Landlord. Tenant shall have the right of access to the
Preferential Space in accordance with the terms of the Workletter from and after
the date it is tendered to Tenant by Landlord. Any parcel of space Tenant elects
to Lease shall be deemed automatically part of the Premises on the Preferential
Rights Terms and the parties shall proceed as follows:
A. Landlord shall initiate the process of determining the
Prevailing Market Rental Rate for such Preferential Space in accordance with the
provisions of Exhibit "K" by delivery of Landlord's Rent Proposal within thirty
(30) days after receipt of Tenant's election. The parties shall proceed in
accordance with the terms of Paragraph 3 of Exhibit "K" and wherever therein it
shall refer to Tenant's Renewal Option it shall be deemed to refer to Tenant's
exercise of its Preferential Lease Rights with respect to the parcel of
Preferential Space. Provided, however, in no event will the Tenant's election to
lease space pursuant to this Exhibit be revocable except in the instance of
Landlord's failure to deliver Preferential Space as provided in paragraph 5
above, and only with respect to the specific space not delivered.
B. If the Preferential Lease Effective Date shall have
occurred with respect to any parcel of Preferential Space prior to the
determination of the Prevailing Market Rental Rate with respect thereto, then
the Base Rent payable by Tenant with respect to such space commencing on the
relevant Preferential Lease Effective Date shall be the average of the amounts
stated in Landlord's Rent Proposal and Tenant's Rent Proposal. Upon the
subsequent determination of the Prevailing Market Rental Rate, the parties shall
make such adjustment by payment of (or at Tenant's election, offset against Base
Rent hereunder) any amount necessary to adjust the Base Rent previously paid to
Prevailing Market Rental Rate.
7. CONCIERGE DESK. Subject to full compliance with the following
conditions and requirements, in the event Tenant exercises a preferential right
to lease the entire 59th Floor, Landlord will permit Tenant, at Tenant's sole
cost and expense, to build and staff a Tenant reception area (the "Concierge
Desk") on the 59th Floor of the Building in the sky lobby adjacent to the
primary entrance to Tenant's Premises on the 59th Floor, in a location and with
a configuration reasonably acceptable to Landlord in its sole discretion:
(a) There shall not be then existing an Event of Default under the
Lease.
(b) Tenant shall have leased and be in occupancy of the entirety
of the Rentable Area of the 59th Floor.
(c) The Concierge Desk shall be staffed during Tenant's normal
business hours Monday through Friday and such other hours as
Tenant may deem necessary.
(d) The appearance, dress, communication skills and conduct of
personnel selected by Tenant to staff the Concierge Desk must
be consistent with personnel serving in such positions in
other buildings similar to the Building located in the Central
Business District of Houston, Texas.
(e) Tenant will be fully responsible, obligated and liable with
respect to the Concierge Desk, as fully and as if such
reception/information area were included as a part of the
Premises.
(f) No sales shall be made from the Concierge Desk, no
refreshments shall be served at such locations, no candles
shall be burned at such locations and there shall not be any
advertising, campaigning or other activity at such locations
other than reception and direction of visitors in a manner
consistent with other buildings similar to the Building
located in the Central Business District of Houston, Texas.
(g) Tenant may, on ten (10) days' prior written notice to
Landlord, cease to staff the Concierge Desk in the manner
required by this Paragraph 7, in which case Tenant's rights
and duties under this Paragraph 7 shall terminate, except that
Tenant shall continue to be responsible, obligated and liable
for all of its responsibilities, obligations and liabilities
which arise or which are accrued or incurred under this
Paragraph 7 prior to the termination of Tenant's rights
hereunder.
(h) Provided Landlord has provided directory information to
Tenant, Tenant's personnel staffing the Concierge Desk will in
a polite and cooperative fashion direct visitors to the
Building who enter the sky lobby on the 59th Floor to their
destination within the Building.
8. NULLIFICATION OF PREFERENTIAL LEASE RIGHTS. Notwithstanding any
other provisions of this EXHIBIT "J" seemingly to the contrary, if Tenant
(and/or Tenant's Affiliates) fail to personally lease and occupy the greater of
(i) 175,000 square feet of Rentable Area of the Premises, or (ii) an area of the
Premises equal to 66% of the maximum total square footage of Rentable Area ever
leased by Tenant at any time under this Lease, then, on the date Tenant fails to
meet such occupancy requirement, any and all of Tenant's Preferential Lease
Rights pursuant to this EXHIBIT "J" either (a) not yet exercised by Tenant, or
(b) if exercised by Tenant, but not yet finalized by execution and delivery of
an amendment effectuating such Preferential Lease Rights, shall immediately
become null and void and of no further effect. For purposes of this paragraph,
the term "personally lease and occupy" shall mean that Tenant (and/or Tenant's
Affiliates) do in fact personally lease and occupy such space, and that such
space shall not be affected by or subject to any sublease, assignment, license,
concession or other arrangement under which a third party has any right to
occupy and/or use such space.
9. TERMINATION OF PREFERENTIAL LEASE RIGHTS. The Preferential Lease
Rights shall automatically terminate upon the earlier to occur of (a) the
beginning of the last Lease Year of the Initial Lease Term in the
EXHIBIT "J" TO OFFICE LEASE AGREEMENT - Page iv
event that Tenant fails to properly exercise its Renewal Option for the initial
Renewal Term, or twelve (12) months prior to the stated expiration of the then
applicable Renewal Term if a Renewal Option has been properly exercised but no
further Renewal Options have then been properly exercised by Tenant or (b) the
early termination of the Term, whether by Landlord upon the occurrence of a
Default or otherwise.
EXHIBIT "J" TO OFFICE LEASE AGREEMENT - Page v
EXHIBIT "K"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
RENEWAL OPTIONS
This EXHIBIT "K" ("Renewal Exhibit") describes and specifies the
obligations of Landlord and Tenant regarding the options, granted by Landlord to
Tenant to further extend and renew this Lease. If at the time of exercise and at
the time of the effective date of the Applicable Renewal Term, the Lease is then
in full force and effect and there is then no event of Default under the Lease,
Tenant shall have the following options ("Renewal Option") to renew the lease in
accordance with the following provisions:
1. DEFINED TERMS. For purposes of this Renewal Exhibit, all terms
defined in the Lease will be utilized herein without further definition. Terms
specifically applicable to this Renewal Exhibit and shall be delineated by
initial capitals.
2. EXERCISE OF OPTIONS.
(a) Subject to the terms hereof, Tenant may renew this Lease
for a maximum of four (4) additional consecutive terms of five (5) years each or
for a maximum of two (2) additional consecutive terms of ten (10) years each, or
any combination thereof so long as the additional term(s) of the Lease, in the
aggregate, do not exceed twenty (20) years (the "Aggregate Option Period") and
so long as each additional consecutive term is in increments of at least five
(5) years each (each a "Renewal Term"). The Renewal Option for the first renewal
term ("First Renewal Term") shall, at the Tenant's election be for either a five
(5) or ten (10) year Renewal Term.
(b) The First Renewal Term shall be exercised, if at all, by
Tenant notifying Landlord of its election in writing not less than twelve (12)
months nor more than fifteen (15) months prior to the end of the Initial Lease
Term. The date Landlord receives notice of Tenant's election to exercise any
Renewal Option shall be referred to herein as the "Exercise Date" as to each
such respective Renewal Option. If the Renewal Option for the First Renewal Term
is properly exercised as hereinabove provided, then the Renewal Option for the
immediately subsequent Renewal Term ("Second Renewal Term") shall be exercised,
if at all, by Tenant notifying Landlord of its election in writing not less than
twelve (12) months nor more than fifteen (15) months prior to the end of the
First Renewal Term. The Renewal Option for the Second Renewal Term shall
similarly be for a period of either five (5) or ten (10) years, as designated in
Tenant's written notice to Landlord. All subsequent Renewal Terms shall also be
exercised, if at all, by Tenant notifying Landlord of its election in writing
not less than twelve (12) months nor more than fifteen (15) months prior to the
end of the then Renewal Term. Tenant agrees that once Tenant has exercised the
applicable Renewal Option for the applicable Renewal Term, Tenant may not,
except as provided for in Paragraph 3(b) below, but not otherwise, withdraw the
same and agrees to proceed to renew the Lease in accordance with the terms
hereof. Each renewal of the Lease will be upon the same terms, covenants and
conditions applicable during the Initial lease Term, as provided in the lease,
except that (a) the Base Rent for any Renewal Terms properly exercised by Tenant
during the twenty (20) year Aggregate Option Period shall be an amount equal to
the Prevailing Market Rental Rate (as such term is defined in Paragraph 3 below)
determined as of the date of exercise of the Renewal Option for each said
respective period. Notwithstanding the foregoing, the Renewal Option (as to each
and every Renewal Term) shall not be exercisable during any time when there is
an existing Event of Default under the Lease. Landlord shall not be obligated to
provide any allowances or rent concessions or have any construction obligations
with respect to the Premises as to any of the Renewal Terms, unless it elects to
do so in its sole and absolute discretion, which allowances or concessions (or
lack thereof) shall be considered in determining the Prevailing Market Rate.
3. PREVAILING MARKET RENTAL RATE.
a. CERTAIN DEFINITIONS. The following terms, when used in this
Lease, shall have the respective meaning set forth below.
(1) The term "Prevailing Market Rental Rate" for a
Renewal Term shall mean, as either agreed upon by Landlord and Tenant or
determined by arbitration as hereinafter provided, the annual dollar and cents
amount of rent per square foot of Rentable Area for the Premises that a tenant
of similar financial standing as Tenant (determined at the time of the
determination of the Prevailing Market Rental Rate) would be willing to pay and
a landlord would be willing to accept for the applicable Renewal Term determined
as of the date of notice of exercising the Renewal Option for such Renewal Term
and determined on the basis of the following: (i) the Expense Stop being
recalculated for Operating Costs for the calendar year in which such Renewal
Term commences, and (ii) the terms and conditions of the lease applicable during
the Renewal Term (other than Base Rent), being the same as those contained in
the Lease.
(2) The term "Relevant Buildings" shall mean the
Building in which the Premises are situated, and such other high-rise office
buildings in the Houston Central Business District as are comparable office
buildings to the Building taking into consideration age, date of last building
refurbishment, location of the Building, location of the Premises within the
Building, quality of the building, extent of services provided to tenants in
each such building, and other similar factors existing at the time in question.
(3) The term "Landlord's Rent Proposal" shall mean
the final amount of the Market Rental Rate proposed by Landlord prior to the end
of the Negotiation Period.
EXHIBIT "K" TO OFFICE LEASE AGREEMENT - Page i
(4) The term "Relevant Time Period" shall mean a
period of time commencing twenty-four (24) months prior to the Exercise Date and
ending at the end of the Negotiation Period.
(5) The term "Rent Proposal" shall mean either
Tenant's Rent Proposal or Landlord's Rent Proposal, as the case may be.
(6) The term "Tenant's Rent Proposal" shall mean the
final amount of the Market Rental Rate proposed by Tenant prior to the end of
the Negotiation Period.
b. RENT PROPOSALS. Upon Landlord's receipt from Tenant of
notice of Tenant's exercise of the applicable Renewal Option pursuant to the
provisions of Paragraph 2 hereof, the parties shall have a period of thirty (30)
days (the "Negotiation Period") from the Exercise Date to negotiate an agreement
as to the amount of the Prevailing Market Rental Rate. If the parties agree on
such figure, they shall execute an amendment to this Lease to such effect, and
the figure so agreed upon shall constitute the Prevailing Market Rental Rate. If
the parties have not agreed upon a number which shall constitute the market
Rental Rate within said Negotiation Period, then Landlord's Rent Proposal and
Tenant's Rent Proposal, respectively, shall each be considered final and not
subject to further change, and such matter shall be determined by arbitration,
as hereinafter provided.
c. APPOINTMENT OF ARBITRATORS. To invoke such arbitration
process either Tenant or Landlord shall submit a request to the Houston area
office of the American Arbitration Association ("AAA"), or if such office is no
longer in operation, to the nearest office of the AAA, requesting that an
arbitrator be appointed after the expiration of the thirty (30) day Negotiation
Period described above. Landlord and Tenant shall each pay one-half (1/2) of the
administrative fee then required by the AAA and furnish any other materials then
required by the AAA to initiate an arbitration procedure. Landlord and Tenant
may also furnish market information and rent comparables pertaining to the
Relevant Time Period; such rent comparables of the most recent dates shall be
given greater weight. The AAA shall select an arbitrator in accordance with its
then customary procedure and the provisions hereof, and shall set the matter for
hearing as soon as practicable thereafter. The parties acknowledge that the
AAA's customary procedure as of the execution date of this Lease is to submit a
list of potentially qualified arbitrators to both parties, requesting the
preferences of each party, together with a calendar indicating available hearing
dates; based upon the submissions of each party, the AAA then selects an
arbitrator and a hearing date. Such arbitrator shall be an attorney with a
minimum of ten (10) years experience in the commercial leasing of office space
in the Houston Central Business District, representing both landlords and
tenants.
d. ARBITRATION PROCEDURE. The issue to be determined by the
arbitrator shall be whether Landlord's Rent Proposal or Tenant's Rent Proposal
most nearly states the Prevailing Market Rental Rate, as determined by the
arbitrator (i.e. "baseball" style arbitration). If the arbitrator determines
that Landlord's Rent Proposal most nearly states the Prevailing Market Rental
Rate, then Landlord's Rent Proposal shall constitute the Prevailing Market
Rental Rate. If the arbitrator determines that Tenant's Rent Proposal most
nearly states the Prevailing Market Rental Rate, then Tenant's Rent Proposal
shall constitute the Prevailing Market Rental Rate. Neither Landlord nor Tenant
shall have any right to revise such party's respective final Rent Proposal. The
parties shall not be accorded "discovery" and each party hereby waives same, in
order to accommodate the objective of expediting these proceedings to the
greatest extent reasonably possible. After the hearing, the arbitrator shall
render his or her decision within the then most expedited timetable available
under AAA procedures. The costs of the arbitration proceeding shall be divided
equally between the parties. The decision of the arbitrator shall be final,
binding and non-appealable. Upon receipt of notice of the arbitrator's decision
as to the amount of the Prevailing Market Rental Rate, Landlord and Tenant shall
thereupon enter into a written amendment to the Lease accordingly. The Texas
General Arbitration Act shall govern all arbitration provisions under this
Lease, and the Rules of the American Arbitrations Association shall apply except
that the qualifications and appointment of the arbitrators shall be as set forth
herein.
(e) RENTAL RATE FACTORS. In determining the Prevailing Market
Rental Rate the arbitrators shall consider other comparable leases in Relevant
Buildings, and in reviewing comparable leases shall take into consideration the
following: the leasehold improvements being furnished by the lessor (with an
appropriate credit to Landlord for then existing leasehold improvements); the
leasehold improvement allowances furnished by the lessor; the free rent or other
rent abatement provisions; the definition of rentable area; lease take-overs and
assumptions of liability by the lessor; moving expenses and other expenses of
the lessee reimbursed or paid by the lessor; allowances paid by the lessor for
space planning or other matters; the base year or "expense stop" dollar amount
to be taken into account for operating cost escalation purposes; credit standing
and financial status of the tenants under such leases; whether or not parking
charges are included within the stated rent; the use, location, size and/or
floor levels of the space in question, including view, elevator lobby exposure,
etc.; abatements (including with respect to base rental, operating costs and
real estate taxes, and parking charges); refurbishment and repainting
allowances; club memberships; and other concessions or inducements; extent of
services provided or to be provided (including overtime cooling and heating,
plus hourly charges therefor); distinction between "gross" and "net" lease; term
or length of lease; the payment of leasing commission and/or fee/bonus in lieu
thereof, whether to lessor, any person or entity affiliated with lessor or
otherwise; the then present value (using a then current market discount rate) of
any periodic increases in rent under such lease; and other factors which affect
or determine the net outlay by the lessee for such space and the net receipt by
lessor for the use of such space. Except for the rights expressly granted in,
and set forth in, this Lease, Landlord shall have no duty to offer any of the
foregoing to Tenant with respect to any Renewal Term.
(f) TENTATIVE BASE RENT. If the Rent Commencement Date with
respect to the first day of the applicable Renewal Term for which Tenant shall
have exercised the Renewal Option shall have occurred prior to the date upon
which the Prevailing Market Rental Rate applicable with respect to such Renewal
Term shall have been determined under the provisions of this Renewal Option
Exhibit, then, in such event, the Base Rent to be payable by tenant with respect
to such Renewal Term commencing on the Relevant Rent Commencement Date shall be
the average of the amount stated in Landlord's Rent Proposal and Tenant's Rent
Proposal; then, upon the subsequent determination of the Prevailing Market
Rental Rate in accordance with the provisions hereof, the parties shall make
such adjustment as may be appropriate, by Landlord refunding to Tenant any
overpayment, or by Tenant paying to
EXHIBIT "K" TO OFFICE LEASE AGREEMENT - Page ii
Landlord any deficiency, in the amount previously so paid by Tenant, together
with interest thereon at the rate of six percent (6%) per annum.
(g) CONFIDENTIALITY. Each party (Landlord and Tenant)
covenants and agrees to maintain in confidence the data furnished by the other
party and not to disclose such information to anyone other than to the
employees, representatives, accountants and attorneys of such party who are
required to have such information in the performance of their respective duties
or in connection with arbitration proceedings or court proceedings brought to
establish the Prevailing Market Rental Rate. Further, Landlord and Tenant each
covenants and agrees to require the arbitrator appointed by such party (if such
appointment is made) to sign a memorandum agreeing to the confidentiality
provisions of this Subparagraph 3(g), and each party further agrees to use
reasonable efforts to require the third arbitrator to sign such a
confidentiality agreement.
4. TERMINATION OF OPTION. The failure of Tenant to exercise the Renewal
Option herein granted with respect to the First Renewal Term in strict
accordance with the provisions hereof and within the time period set forth
herein (time being of the essence) shall constitute a waiver and termination of
such Renewal Option with respect to the first Renewal Term and all subsequent
Renewal Terms. Similarly, if the Renewal Option is properly exercised for the
First Renewal Term, or any subsequent Renewal Term, then any failure of Tenant
to exercise any subsequent Renewal Option with respect to any subsequent Renewal
Term granted in accordance with the provisions hereof and within the time period
set forth herein (time being of the essence with respect to the exercise of each
and every renewal Option), shall constitute a waiver and termination of such
Renewal Option with respect to such Renewal Term and each remaining Renewal
Term. In addition, any termination of the Lease during the Term, shall terminate
the Renewal Option contained in this Renewal Exhibit. Notwithstanding any other
provisions of this EXHIBIT "K" seemingly to the contrary, if Tenant (and/or
Tenant's Affiliates) fail to personally lease and occupy the greater of (i)
175,000 square feet of Rentable Area of the Premises, or (ii) an area of the
Premises equal to 66% of the maximum total square footage of Rentable Area ever
leased by Tenant at any time under this Lease, then, on the date Tenant fails to
meet such occupancy requirement, any and all of Tenant's renewal rights pursuant
to this EXHIBIT "K" either (a) not yet exercised by Tenant, or (b) if exercised
by Tenant, but not yet finalized by execution and delivery of an amendment
effectuating such renewal rights, shall immediately become null and void and of
no further effect. For purposes of this paragraph, the term "personally lease
and occupy" shall mean that Tenant (and/or Tenant's Affiliates) do in fact
personally lease and occupy such space, and that such space shall not be
affected by or subject to any sublease, assignment, license, concession or other
arrangement under which a third party has any right to occupy and/or use such
space.
EXHIBIT "K" TO OFFICE LEASE AGREEMENT - Page iii
EXHIBIT "L"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
JANITORIAL CLEANING SPECIFICATIONS
I. NIGHTLY CLEANING
A. Entire Complex
1. Sweep or dust mop all hard-surface floors, including
tenant spaces, entrance foyers and vestibules, and
all public areas, including building corridors; sweep
all stone, ceramic tile, marble, terrazzo, asphalt
tile, linoleum, rubber, vinyl, and other types of
flooring to insure dust-free floors, with special
attention given to hard-to-reach areas.
2. Clean ceramic tile, marble, terrazzo, or all
hard-surface flooring at the entrance foyers of the
Building.
3. Vacuum all carpeted areas and rugs, moving light
furniture other than desks, file cabinets, etc.
4. Sweep private stairways and wash as necessary; vacuum
carpeted stairways; and dust hand rails, balustrades
and stringers.
5. If carpeted, vacuum carpets of public corridors.
6. Spray-buff lobbies, corridors and hallways.
7. Scour and wash clean all water fountains and coolers,
emptying waste water as needed.
8. Empty and clean wastepaper baskets and disposal
receptacles, and wash ashtrays, sanitary cans, paper
towel waste cans, and any other receptacles (damp
dusting as necessary); install liners where required.
9. Clean any cigarette urns and replace sand in
ashtrays.
10. Collect and remove wastepaper, cardboard boxes and
waste materials.
11. Dust and wipe clean furniture, fixtures, shelving,
desk equipment, telephones, cabinets, and map boards,
and clean glass tables and desk tops. Computers and
similar equipment are excluded from this requirement.
12. Move and dust under desk equipment, ashtrays,
telephones, and other similar equipment, dusting and
replacing said equipment.
13. Wash and remove finger marks, smudges, scuff marks,
ink stains, gum or foreign matter from glass desk
tops, glass table tops, glass table cabinets, glass
entrances, private entrances to offices and elevator
doors, glass directory boards, metal partitions, and
other marks on walls, window sills, and other similar
surfaces.
14. Wipe clean and polish, brass, stainless steel and
other bright work including exterior metal.
15. Wipe clean metal doorknobs, kick plates, directional
signs, door saddle, and metals.
16. Police stairwells throughout the entire Building
daily and keep in clean condition.
B. LAVATORIES AND REST ROOMS
1. Sweep, rinse, scrub and/or wash and dry flooring.
2. Wash and polish mirrors, powder shelves, bright work,
and enamel surfaces, including flushometers, piping,
toilet seat hinges, and metal.
3. Scour, wash and disinfect basins, bowls and urinals
including tile walls near urinals. Remove stains and
clean underside of rims of urinals and bowls.
4. Wash both sides of toilet seats.
5. Inspect partitions, enamel surfaces, tile walls,
dispensers, and doors nightly. Disinfect, damp-wipe,
or wash as required.
6. Scour, wash and disinfect private basins.
EXHIBIT "L" TO OFFICE LEASE AGREEMENT - Page i
7. Empty and clean paper towel and sanitary napkin
disposal receptacles.
8. Remove wastepaper and refuse, including soiled
sanitary napkins.
9. If applicable, wash and finish resilient tile floors
in toilet/powder rooms, or vacuum if carpeted.
10. Fill toilet tissue holders, soap dispensers, towel
dispensers, and sanitary napkin vending.
C. ENTRANCE LOBBIES AND PUBLIC REST ROOMS
1. Sweep and wash floors and vacuum carpeting, if
applicable.
2. Sweep, vacuum and spot clean rubber mats, shampooing
as needed.
3. Clean any cigarette urns and replace sand or remove
as necessary.
4. Pick up and put out foul weather mats as necessary.
5. Clean entrance door glass, including building
directory glass, inside and outside, excluding
commercial areas.
6. Clean public telephone areas thoroughly.
7. Dust walls and keep free from finger marks, smudges,
etc.
8. Dust and polish surfaces.
9. Clean and polish elevator lobbies, car thresholds and
saddles to remove stains, dirt, paper clips or other
similar debris.
10. Strip, finish and refinish floors from time to time
as required.
D. ELEVATORS
1. Clean and rub down elevator doors, walls, metal work
and saddles in elevator cabs; vacuum and polish
elevator door tracks and saddles.
2. Dust bulbs, fixtures and diffusers as required.
3. Maintain metal work throughout, including elevator
cabs, by cleaning and dusting as necessary.
4. Treat and polish wood and/or synthetic paneling in
the elevator cabs as necessary.
5. Maintain floors in elevator cabs as needed and clean
thoroughly.
II. WEEKEND CLEANING
A. SATURDAY CLEANING
1. Dust mop, and damp-mop as needed, the main lobbies
and freight lobbies, on the street and tunnel levels.
2. Spot clean the glass windows, doors and revolving
doors on the street and tunnel levels.
3. Police building exterior and clear debris; clean as
needed.
4. Police loading dock area and clear debris; clean as
needed.
B. SUNDAY CLEANING
1. Pressure wash the loading dock area.
2. Pressure wash the exterior walkways on the street
level.
3. Scrub the Sunken Plaza granite walkways.
4. Clean elevator cabs and tracks.
5. Dust mop, damp-mop as needed, and buff all six (6)
public lobbies.
6. Police restrooms and clear all debris; as needed.
7. Clean the six (6) escalators.
8. Clean the entrance glass flat and revolving doors on
the street level.
III. PERIODIC CLEANING
EXHIBIT "L" TO OFFICE LEASE AGREEMENT - Page ii
A. PREMISES
1. Wash, finish and/or spray buff weekly floors as
required.
2. Finish tenant resilient tile flooring not less than
every three (3) months.
3. All public lobby floors are to be stripped and
refinished as needed, and maintained in a manner
which will meet or exceed the standard set by a Class
A office building in downtown Houston, but not less
than once every six (6) months.
4. Wash and wipe clean baseboards during floor
maintenance operations.
5. Clean lights, globes, diffusers and fixtures as
required, but not less than once per quarter.
6. Sweep all building stairways and dust rails and fire
equipment, mop as required at least weekly.
7. Once per week, dust and wash ventilating louvers
within reach.
8. Dust and clean electric fixtures, baseboards, and any
other fixtures or fittings in public corridors, as
required, but not less than once each week.
9. Clean all interior glass partitions as needed, at
least weekly.
B. LAVATORIES AND REST ROOMS
1. Scrub, wash and polish all partitions, tile walls and
enamel surfaces from ceiling to floor as required,
but not less than once each week, using proper
disinfectant.
2. Wash all lighting fixtures as required. Do all high
dusting quarterly.
3. Damp-wipe all wall surfacing as required, but not
less than once each two months.
4. Clean and disinfect all equipment drains. No acids
permitted unless instructed by Owner.
5. Wash all ceilings, including washable acoustical
tile, as required.
6. Vacuum ceilings as required.
7. Clean urinals and bowls with scale-solvent as
required, but not less than once per week.
8. Machine scrub flooring as required with approved
germicidal detergent solution at lease once per
quarter.
C. HIGH DUSTING
High dusting is to be performed quarterly unless otherwise
specified. High dusting will include the following:
1. Vacuum and dust all pictures, frames, charts, graphs,
and similar wall hangings not reached in nightly
cleaning. Damp dust as required.
2. Vacuum and dust all vertical surfaces such as walls,
partitions, doors, bucks and ventilating louvers,
grilles, high moldings, and other surfaces not
reached in nightly cleaning.
3. Dust all below ceiling overhead pipes, sprinkler
heads, ventilating and air conditioning louvers,
ducts, high moldings and other high areas not reached
in nightly cleaning.
4. Dust all window blinds and window frames.
5. Dust exteriors of lighting fixtures.
IV. DAY SERVICES - PORTERS AND MATRONS
A. DUTIES OF DAY PORTERS
1. Police entire lobby areas and plaza.
2. Police and maintain escalators and elevator cabs,
including floors, as required. If carpeted, floors in
elevator cabs to be vacuumed and spots to be removed,
as required.
3. Police men's lavatories on all floors a minimum of
twice a day, morning and afternoon.
4. Check and fill, as necessary, toilet tissue, towel,
and soap dispensers.
5. Pick up and put out foul weather mats as necessary.
EXHIBIT "L" TO OFFICE LEASE AGREEMENT - Page iii
B. DUTIES OF DAY MATRONS
1. Police ladies' restrooms and lavatories on all
floors, keeping them in clean condition, as required,
but not less than three (3) times each day.
2. Matrons to fill toilet tissue, sanitary napkin and
towel dispensers in ladies' lavatories on all floors.
3. Collect coins from sanitary napkin dispensers in all
ladies' lavatories.
EXHIBIT "L" TO OFFICE LEASE AGREEMENT - Page iv
EXHIBIT "M"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
CERTIFICATE OF COMMENCEMENT DATE
_____________, 199_
In connection with the Office Lease Agreement (the "Lease") dated
_______________, 1996, by and between Metropolitan Life Insurance Company and
Metropolitan Tower Realty Company, Inc. ("Landlord") and the undersigned NGC
Corporation ("Tenant") covering space in First Interstate Bank Plaza, located at
1000 Louisiana, Houston, Harris County, Texas 77002, the undersigned hereby
certify and acknowledge the following, all as of the date hereof:
1. The Commencement Date (as defined in the Lease) for [IDENTIFY
SPECIFIC SPACE] occurred on _____________. [if applicable] The
Term Commencement Date (as defined in the Lease) occurred on
________________, accordingly the Initial Lease Term commenced
as of such date and will expire on _________________.
2. Tenant is in occupancy of the [space specified above] Premises
and acknowledges that it has accepted the same, subject to the
terms of the Lease.
3. To the best of Tenant's knowledge and belief, the Landlord is
not in default and Tenant has no claim for offsets under the
Lease.
4. The Lease has not been amended except as may be set forth at
the end of this letter.
Capitalized terms not defined herein shall have the meaning given to such terms
in the Lease.
The undersigned hereby agree that this certificate may be relied upon by
Landlord and its leaders, as well as their respective successors and assigns.
The undersigned hereby agree that this certificate may be relied upon by Tenant
and its successors as well as its permitted subtenants and assignees.
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY NGC CORPORATION
By: By:
David G. Rogers
Assistant Vice-President Name:
Title:
Date: Date:
METROPOLITAN TOWER REALTY COMPANY, INC.
By:
David G. Rogers
Vice-President
Date:
EXHIBIT "M" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "N"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
RENT ADJUSTMENT
1. OPERATING COSTS. The Base Rent payable hereunder shall be adjusted
from time to time in accordance with the following provisions:
(a) ADJUSTMENT. Tenant's Base Rent is based, in part, upon the
estimate that annual Operating Costs (as hereinafter defined) will be
equal to the Expense Stop. During the Term, beginning on the second
anniversary date of the Term Commencement Date, Tenant shall pay in
addition to Base Rent hereunder for each calendar year during the Term
an amount (per each square foot of Rentable Area within the Premises)
equal to the excess ("Excess"), if any, of the Operating Costs for such
calendar year over the Expense Stop. Regarding any partial calendar
years, the Excess shall be pro-rated. Notwithstanding any provisions in
this Lease seemingly to the contrary, from and after the second
anniversary date of the Term Commencement Date, Tenant shall be
obligated to commence paying Rent Adjustment as to the entire Initial
Premises regardless of the actual Commencement Date of each respective
specific space comprising the Initial Premises. Landlord may collect
such Rent Adjustment in arrears after the end of the applicable
calendar year including accruals for taxes and insurance. In no event
will Tenant be entitled to a refund of or credit against Rent (whether
Base Rent or otherwise) if Operating Costs do not equal or exceed the
Expense Stop. Beginning with the calendar year 1999, Landlord shall
also have the option to make a good faith estimate of the Excess from
time to time for each upcoming calendar year (or remainder thereof, if
applicable) and Landlord may require, in addition to the monthly
payment of Base Rent, payment by Tenant of an amount equal to the
monthly amount of such estimate. Any amounts paid based on such an
estimate shall be subject to adjustment pursuant to Paragraph 2 below
when Operating Costs are available for such calendar year.
(b) DEFINITIONS. The following terms shall have the following
meanings as used in this Lease:
A. "Operating Costs" shall mean, for each calendar
year, all costs and expenses actually incurred by Landlord
during such calendar year in operating, maintaining,
repairing, managing and owning the Building and the Property
(other than the costs excluded in Paragraph 1(c)). All
Operating Costs shall be determined in accordance with
generally accepted accounting principles which shall be
consistently applied. Except to the extent excluded in
Paragraph 1(c) below, the term Operating Costs as used herein
shall include but not be limited to the following:
(1) Wages, salaries and reasonable and
customary incentive-based compensation of all on-site
personnel (including a partial allocation of
personnel involved but not assigned to the Building
on a full-time basis [but exclusive of Landlord's, or
its general partners and the property management
company's executive personnel above the level of
Building manager] and a partial allocation of a
general manager based on the percentage of time
involved with the Building) directly engaged in the
operation, maintenance, management, or security of
the Building, and all taxes, insurance and medical
and other reasonable benefits relating to such
employees; provided, however, that if any such
personnel are working on other projects, including
those being periodically developed, managed and/or
operated by Landlord or one or more of its general
partners or property managers in addition to the
Building, then such employees' wages, salaries and
other compensation and benefits shall be equitably
allocated among all such projects such that only that
portion of such expenses (in proportion to their time
spent in performing services for the Building) shall
be included herein;
(2) All supplies and materials directly used
in the management, operation, maintenance and
security of the Building, including without
limitation, any furnishings and equipment located in
the property management and/or leasing office in the
Building that are owned or leased by Landlord (or any
successor owner of the Building) and that are
intended to remain in the property management and/or
leasing office for the duration of their useful life;
(3) Costs of all utilities for the Building,
including water and power, heating, lighting, air
conditioning and ventilating for the Building's
operation, except as provided herein;
(4) Costs of all maintenance and service
agreements for the Building and the equipment used
therein, including, but not limited to, access
control systems, window cleaning, elevator
maintenance, janitorial service, security,
landscaping, traffic control, sweeping, removal of
trash and other refuse, maintenance of Property
identification signs and operation of the loading
dock;
(5) Costs of all insurance required under
this Lease (including endorsements or special
coverages) relating to the Building, including, but
not limited to, the cost of casualty and flood
insurance and liability insurance applicable to the
Building and Landlord's personal property used
directly in connection therewith;
EXHIBIT "N" TO OFFICE LEASE AGREEMENT - Page i
provided, however, (i) any portion of such insurance
premiums which constitutes an additional premium or
surcharge as a result of any use by any tenant
(including Tenant) of such tenant's premises other
than for general office purposes shall not be an
Operating Cost, but shall instead be billed to and
paid for by such tenant separately, and (ii) if such
insurance is provided in the form of master insurance
covering more than the Building and related
facilities, then only an equitable portion of the
premiums therefor as reasonably determined by
Landlord shall be included in Operating Cost;
(6) All Taxes. It is also agreed that Tenant
will be responsible for ad valorem taxes on its
personal property and on the value of leasehold
improvements to the extent the same exceed the
Allowance whether or not such assessment is
separately assessed and billed;
(7) Costs of repairs and general maintenance
for the Building, excluding any repairs or
maintenance actually paid by proceeds of insurance or
by third parties;
(8) The amortization (inclusive of financing
costs) of any capital improvements which are
primarily for the purpose of reducing Operating Costs
or required by governmental authorities;
(9) Rental for the management office for the
Building, but not to exceed 8,000 square feet of
Rentable Area at market rates.
(10) Cost (except for capital expenditures
therefor) of upgrades to security for the Building.
(11) Any other expense which is not excluded
per 1(b)B below and, under generally accepted
accounting principles, consistently applied, would be
considered to be a normal maintenance or operating
expense of the Property.
(12) Management fees equal to the lesser of:
(i) the management fees provided in the then
applicable management contract of Landlord (which for
purposes of this provision may be with a third party
manager, Landlord itself, or an Affiliate of
Landlord) if calculated using the Base Rent and Other
Rent due under this Lease for the period of
calculation, or (ii) three percent (3%) of the Base
Rent and Other Rent due under this Lease for the
period of calculation. Management fees for any
Renewal Term applicable to this Lease (for purposes
of this Exhibit only) shall be actual management fees
relating to management of the Building.
(13) Cost of Tenant promotion and activities
and seasonal decorations and events and related
costs.
B. "Actual Operating Costs" shall for any calendar
year mean the amount of Operating Costs (not adjusted pursuant
to Paragraph 4) per square foot of Rentable Area for which
Actual Operating Costs are to be ascertained.
(c) EXCLUSIONS. Without diminishing or otherwise affecting
Tenant's other obligations and liabilities under the Lease, Operating
Costs shall not include any cost or expense attributable to:
(1) Repairs or other work occasioned by
fire, windstorm or casualty of an insured nature or
by the exercise of the right of eminent domain, but
only to the extent Landlord actually recovers such
expenses;
(2) Leasing commissions, attorneys' fees,
costs, disbursements and other expenses incurred in
connection with negotiations or disputes with, or the
enforcement of rights or remedies against, tenants,
other occupants, or prospective tenants or other
occupants of the Building;
(3) Advertising and promotional expenditures
relating to the leasing of space in the Building,
leasing and marketing brochures and newspaper
announcements;
(4) Contributions to charitable
organizations;
(5) Renovating or decorating, painting or
redecorating space leased by tenants in the Building,
excepting, however, such renovations which may be for
the general benefit of other tenants in the Building
and also excepting the cost of certain utilities,
such as electricity, HVAC, and water, which Landlord
makes available to tenants during construction of
tenant improvements prior to their occupying their
particular space;
(6) Landlord's costs of separately metered
electricity and other services that are sold to
tenants and for which Landlord is entitled to be
reimbursed by tenants as an additional charge or
rental over and above the basic rent payable under
the lease with such tenant;
(7) Depreciation and amortization, except as
set forth above;
(8) Costs incurred due to violation by
Landlord or any tenant or other occupant of the terms
and conditions of any lease or agreement;
EXHIBIT "N" TO OFFICE LEASE AGREEMENT - Page ii
<PAGE>
(9) Overhead and profit increment paid to
any person or individual which is an Affiliate of
Landlord for services on or to the Premises or
Building to the extent that the costs of such
services exceed competitive costs of such services
were they not so rendered by a subsidiary or
affiliate;
(10) Interest on debt or amortization
payments on any deed of trust or deeds of trust,
mortgage or mortgages, and rental or other such
payments under any ground or underlying lease;
(11) Landlord's general overhead except as
it relates to the operation, management, maintenance
and repair of the Building;
(12) Any compensation paid to clerks,
attendants, or other persons in commercial
concessions operated by Landlord;
(13) Any fines or penalties incurred due to
violations by Landlord or any tenant or other
occupant of any governmental rule or authority;
(14) Acquisition costs for sculpture,
paintings or other art except (A) reasonable fees for
renting art for the Common Areas, (B) janitorial
expenses of cleaning such art, (C) insurance premiums
for insuring such art, (D) maintenance costs for
maintaining such art, and (E) the cost of
installation and removal of such art;
(15) Late payment charges resulting from the
failure to timely make any payment; and
(16) Subject to (7) above, expenses which
are reimbursed to Landlord in connection with
services or other benefits of a type which are not
provided to Tenant, but which are provided to another
tenant or occupant.
2. PROCEDURE. By March 1 of each calendar year during Tenant's
occupancy, or as soon thereafter as practical (but in no event later than May
1), Landlord shall furnish to Tenant a statement (the "Year End Statement")
setting forth in reasonable detail each element of and the total of each of the
Operating Costs, Expense Stop, and Excess for the previous calendar year. If for
any calendar year additional Rent was collected during the prior year as a
result of Landlord's estimate of the Excess for such calendar year, which is in
excess of the actual Excess due for such prior calendar year, then Landlord
shall refund to Tenant such overpayment within thirty (30) days thereafter (or
at Landlord's option, apply such amount against Base Rent or other Rent due or
to become due during such thirty (30) day period). Likewise, Tenant shall pay to
Landlord, within thirty (30) days after delivery of such statement, any
underpayment with respect to the prior calendar year, and shall not withhold
payment during the pendency of any audit. In no event shall Operating Costs be
deemed to be less than the Expense Stop, it being the intent of Landlord and
Tenant that Tenant shall at all times be responsible for the payment of, and
shall pay, not less than the amount of Base Rent for the applicable period
specified in Section 1.01 of the Lease.
3. AUDIT. The information set out in the Year End Statement for any
calendar year to Tenant relating to Operating Costs and specifying the amount of
Excess due as Rent Adjustment shall be deemed to be accepted by Tenant and be
conclusively binding upon Tenant and shall not be subject to amendment, attack
or change unless Tenant gives written notice to Landlord within nine (9) months
after the delivery of such Year End Statement. Upon notice given within nine (9)
months after delivery of a Year End Statement with respect to any calendar year,
Tenant (but not any subtenant) shall have the right to cause an audit to be made
of Landlord's calculations of Operating Costs and the amounts billed by Landlord
to Tenant under Paragraph 2 for such calendar year, subject to the following
limitations:
(1) Such audit shall be performed by any one of the
outside third-party nationally recognized major accounting
firms (or their respective successors) provided that such firm
is not then the principal auditor for either Landlord or
Tenant or if it is the principal auditor, then such auditor
shall be subject to the prior mutual written approval of both
Landlord and Tenant:
(2) Except as hereinafter expressly provided, the
cost of any such audit shall be borne solely by Tenant;
(3) The audit shall be accomplished within one
hundred twenty (120) days from the date written notice is
given to Landlord (extended to the extent of delays caused by
Landlord);
(4) In no event shall Tenant have the right to audit
the calculation of Operating Costs for any calendar year more
frequently than once per calendar year; and
(5) In the event that any such audit by Tenant shall
show that the amount of increases in Operating Costs for such
year which Tenant has theretofore paid is less than the amount
which Tenant was obligated to pay, the amount so underpaid
shall be paid, without interest, by Tenant to Landlord within
thirty (30) days after receiving the written results of such
audit; and
(6) In the event that any such audit by Tenant shall
show that the amount of increases in Operating Costs for such
year which Tenant has heretofore paid is greater than the
amount which Tenant was obligated to pay, then Landlord shall
have the option (exercisable at any time within six (6) months
after the written results of such audit is received by
Landlord) to conduct Landlord's own audit and calculation of
such Operating Costs for such year. In the event that
Landlord's audit discloses an overstatement of Operating Costs
for the calendar year involved of more than five percent (5%),
then, in addition to refunding such overpayment (or, at
EXHIBIT "N" TO OFFICE LEASE AGREEMENT - Page iii
Landlord's option, such amount can be credited against Base
Rent) Landlord shall promptly reimburse Tenant for the
reasonable cost incurred by Tenant in connection with Tenant's
audit. In the event that Landlord's audit discloses an
overstatement of Operating Costs for the calendar year
involved of less than five percent (5%), then, Landlord will
refund such overpayment (or, at Landlord's option, such amount
may be credited against Base Rent), however, Landlord shall
not reimburse Tenant for the cost incurred by Tenant in
connection with Tenant's audit.
4. GROSS-UP. Notwithstanding any language in the Lease or in this
EXHIBIT "N" seemingly to the contrary, if at any time during the Term hereof,
less than ninety-five (95%) of the Rentable Area of the Building is occupied,
Landlord may, at Landlord's sole election, determine and estimate Operating
Costs for any calendar year within the Term by increasing the variable
components of Operating Costs to the amount which Landlord reasonably projects
would have been incurred had the Building been occupied to the extent of
ninety-five percent (95%) of the Rentable Area therein during all of the
applicable calendar year. In such event, the term "Operating Costs," as used in
this EXHIBIT "N" and in the Lease, shall mean the sum of (i) the Actual
Operating Costs incurred during any portion of such calendar year in which the
Building is occupied to the extent of ninety-five percent (95%) or less of the
Rentable Area therein plus (ii) the additional or incremental Operating Costs
which would have been incurred had the Building been occupied to the extent of
ninety-five percent (95%) of the Rentable Area thereof during the portion of
that calendar year in which the actual occupancy of the Building is less than
ninety-five percent (95%) of the Rentable Area therein; and Landlord shall have
the option of making such estimate in advance for the upcoming calendar year.
5. PRORATION. In the event that the Term terminates on a day other than
December 31, the Excess for that part of the calendar year during the last
calendar year during the Term shall be determined as follows:
(1) The Expense Stop shall be prorated based upon the
number of months in such partial calendar year. With respect
to any partial calendar month occurring during such partial
calendar year, the Expense Stop shall also be prorated based
upon the number of days in that partial calendar month.
(2) The Excess, if any, for the applicable partial
calendar year shall then be the amount by which (A) Operating
Costs for such calendar year, prorated based upon the number
of months and days in the applicable partial calendar year,
exceed (B) the Expense Stop, as prorated pursuant to the
provisions of this Paragraph 5.
6. SURVIVAL. The provisions of this EXHIBIT "N" shall survive the
termination of the Term.
EXHIBIT "N" TO OFFICE LEASE AGREEMENT - Page iv
EXHIBIT "O"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
CAFETERIA RULES AND REGULATIONS
1. Tenant agrees that all of Tenant's obligations with respect to the
Premises under the Lease shall also be applicable to Tenant's use and operation
of the Cafeteria Facilities on the Premises, including, without limitation,
Tenant's obligation to care for the Premises, as set forth in Section 8.02 of
the Lease, Tenant's obligation to comply with all Laws, as set forth in Article
7 of the Lease, and Tenant's obligation to indemnify Landlord, as set forth in
Sections 7.01(d) and 17.02 of the Lease.
2. Tenant agrees that all of Tenant's obligations under the Workletter
shall also be applicable to and include, without limitation, Tenant's
construction and installation of the Cafeteria Facilities on the Premises,
including, without limitation, Tenant's obligation to obtain Landlord's prior
written approval of the Plans and Specifications therefore.
3. Without any limitation of the foregoing, Tenant agrees that Landlord
retains the right of prior approval regarding the design and installation of any
and all systems, equipment and fixtures to be used in connection with Tenant's
operation of the Cafeteria Facilities on the Premises with regard to Tenant's
compliance with Laws and with regard to the functionality thereof. Although
Tenant is solely responsible for properly operating and maintaining such
systems, equipment and fixtures, Landlord retains the continuous right of
reasonable approval of all such operating and maintenance procedures (to ensure
that as operated such systems, equipment and fixtures will not cause damage to
the Building, the Building's systems or the premises of any other tenant),
including, without limitation, the systems, equipment and fixtures related to
the following:
(a) Grease traps and garbage disposals;
(b) Venting, filters, scrubbers and grease removal;
(c) Aesthetics, location and installation of the external
vents;
(d) Restriction on the release of noxious odors and food
smells;
(e) Plumbing, drains and floor drains;
(f) Trash removal, including wet trash and sewage, at
times approved by Landlord all in accordance with the
Waste Management Requirements; and
(g) Pest and vector control.
Tenant shall have the right at its sole cost and expense, to vent
exhaust from the top of the Building, but the relevant Plans and Specifications
shall be subject to Landlord's prior written approval. Tenant shall reimburse
Landlord for any actual costs incurred by Landlord in repairing any damage done
to the roof of the Building.
4. Tenant shall be solely responsible for obtaining and maintaining any
and all permits, licenses and approvals as may be required to comply with all
Laws that are necessary for the operation of a cafeteria on the Premises, and
for the payment of any and all fees, costs and expenses in connection therewith.
5. Tenant's Cafeteria Facilities may only be used by Tenant's
employees, visitors, and business invitees, and Tenant may not operate the
Cafeteria Facilities for use, primarily or incidentally, by the general public.
6. Tenant shall remove wet trash daily from the Cafeteria Facilities in
the manner and at hours Landlord may reasonably designate. No trash shall be
placed outside of the Cafeteria Facilities except in accordance with Landlord's
Waste Management Requirements. To the extent that, pursuant to Laws, Tenant is
obligated to obtain special equipment (refrigeration or otherwise) for the
storage and/or removal of trash (wet or dry), Tenant shall do so, and maintain
such equipment, at Tenant's sole cost and expense.
7. For cleaning and maintenance of the Cafeteria Facilities, Tenant
must use either (a) its own employees or (b) cleaning contractors approved by
Landlord, all at no cost or expense to Landlord.
8. Tenant shall abide by the (a) hours established by Landlord during
which service and deliveries will be allowed to the Cafeteria Facilities so long
as they are reasonable, and (b) reasonable delivery routes established by
Landlord for deliveries to and from the Cafeteria Facilities.
9. Tenant shall be required to remove all equipment, etc. and to
restore the Premises to the condition prior to the Commencement of the Lease (as
it pertains to the Cafeteria); provided, however, if the Cafeteria is located on
Floor 71 Tenant shall not be obligated to restore Floor 71 to its condition
prior to the Commencement Date, but shall have the duty to leave the space in a
broom clean, vacuumed condition, free of all of Tenant's equipment, personal
property and fixtures.
EXHIBIT "O" TO OFFICE LEASE AGREEMENT - Page i
EXHIBIT "P"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
MEMORANDUM OF LEASE
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
Notice is hereby given that METROPOLITAN LIFE INSURANCE COMPANY, a New
York corporation, and METROPOLITAN TOWER REALTY COMPANY, INC., a Delaware
corporation (collectively, "Landlord") and NGC CORPORATION, a Delaware
corporation ("Tenant") have entered into an Office Lease Agreement ("Lease")
dated June 12, 1996, pursuant to which Landlord has leased to Tenant certain
space, including, without limitation, the 60th through 67th floors, in the
building known as First Interstate Bank Plaza and has granted certain parking
rights with respect to the parking garages known as the Building Garage and the
1400 Louisiana Garage, which building and parking garages are located on the
property described on EXHIBIT "A" hereto. All capitalized terms used in this
Memorandum and not otherwise defined herein shall have the meanings ascribed to
such terms in the Lease.
Specific reference is hereby made to the following terms, provisions
and conditions of the Lease (and such references are not intended to be complete
statements of such terms of the Lease applicable to the following):
1. TERM. The Initial Term of the Lease shall commence on the
Commencement Date and continue for approximately 132 months (plus the partial
calendar month in which the Commencement Date occurs).
2. RENEWAL OPTIONS. In addition to certain limited rights to occupy the
Premises and to perform certain activities after the end of the term, Tenant has
the option to extend the term of the Lease beyond the Initial Term for a maximum
of four (4) additional consecutive terms of five (5) years each or for a maximum
of two (2) additional terms of ten (10) years each, or any combination thereof
so long as the additional term(s) of the Lease in the aggregate do not exceed
twenty (20) years, and each additional term is at least five (5) years in
length, subject to and in accordance with the terms and conditions of the Lease.
3. EXPANSION OPTIONS. Tenant has options, refusal rights, and
preferential rights to lease additional space in the Building, subject to and in
accordance with the terms and conditions of the Lease.
4. NO MODIFICATION. This Memorandum of Lease is executed for the
purpose of recordation in the Office of the County Clerk of Harris County,
Texas, in order to give notice of the terms, provisions, and conditions of the
Lease (and all terms, provisions, and conditions of the Lease are hereby
incorporated in this Memorandum of Lease by this reference). This Memorandum is
not intended, and shall not be construed, to define, limit, expand or modify the
terms, provisions and conditions of the Lease.
5. TERMINATION. Upon the expiration of the term of the Lease, as the
same may be renewed, if ever, or upon the earlier termination of said Lease, for
whatever reason, Tenant shall thereupon execute and deliver to Landlord a
document acknowledging the expiration or termination of said Lease and of all of
Tenant's rights and interests therein, so as to have the effect of giving public
notice of the termination of the Lease, provided, however, if Tenant shall fail
to execute and deliver to Landlord such a document, in form and content
reasonably satisfactory to Landlord within thirty (30) days after request
therefor by Landlord, Tenant hereby grants and conveys to Landlord a limited
power of attorney, which power shall be deemed coupled with an interest and
hereby irrevocably appoints Landlord as Tenant's attorney-in-fact, to execute
such document on behalf of Tenant and record the same for public record in the
Office of the County Clerk of Harris County, Texas.
6. SUCCESSORS AND ASSIGNS. This Memorandum of Lease shall be binding on
the successors and assigns of the parties executing this Memorandum of Lease.
EXECUTED this ______ day of __________, 1996.
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY NGC CORPORATION
By: ________________________ By: __________________
David G. Rogers C.L. Watson
Assistant Vice-President Chairman & Chief Executive
Officer
Date: _________________
Date: ________________
METROPOLITAN TOWER REALTY COMPANY, INC.
By: ____________________
David G. Rogers
Vice-President
Date: ____________________
EXHIBIT "P" TO OFFICE LEASE AGREEMENT - Page i
State of Texas ss.
ss.
County of _______ ss.
This instrument was acknowledged before me on ____________, 1996, by
DAVID G. ROGERS, Assistant Vice President of METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation, on behalf said corporation.
__________________________________________
Notary Public in and for the State of TEXAS
My commission expires:_______________
State of Texas ss.
ss.
County of ______ ss.
This instrument was acknowledged before me on ______________, 1996, by
DAVID G. ROGERS, Assistant Vice President of METROPOLITAN TOWER REALTY COMPANY,
INC., a Delaware corporation, on behalf of said corporation.
__________________________________________
Notary Public in and for
Harris County, TEXAS
My commission expires:_______________
State of Texas ss.
ss.
County of ______ ss.
This instrument was acknowledged before me on _________, 1996, by C.L.
Watson, Chairman and Chief Executive Officer of NGC CORPORATION, a Delaware
corporation, on behalf of said corporation.
__________________________________________
Notary Public in and for
Harris County, TEXAS
My commission expires:_______________
EXHIBIT "P" TO OFFICE LEASE AGREEMENT - Page ii
EXHIBIT "Q"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
INTENTIONALLY DELETED
EXHIBIT "Q" TO OFFICE LEASE AGREEMENT - Page i
EXHIBIT "R"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
MG CORPORATION PROPERTY FOR REMOVAL
1. Glass "M."
2. Glass office fronts.
3. Glass clerestory.
4. Glass entry doors.
5. Files and file fronts, including planter above.
6. Reception desks on Level 65 and 66.
7. Appliances (3 refrigerators, counter top ice maker, under counter ice
makers, dishwashers).
8. Pendent lights in lunchroom.
9. Incandescent down lights.
10. Dry marker boards.
11. Built-in credenza with stone top.
12. Electric projection screens.
13. Raised computer floor.
14. Computer equipment.
15. All blue pearl counter tops.
16. Wood entry portal, doors and hardware.
17. Glass and wood wall at lunchroom.
18. Full height mirror in lunchroom.
19. Track lighting in computer room.
20. Glass panels in computer room.
21. Built-in millwork including architectural grade wood and plastic
laminate including appliances and plumbing fixtures.
22. Lighting controls.
23. Fabric panels.
24. Blue pearl stone thresholds.
25. Television monitors.
26. Clocks.
27. Mecho shades.
28. Rear screen projector and glass.
EXHIBIT "R" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT "S"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
CURRENT BUILDING STANDARD
BUILDING STANDARDS DESIGN INFORMATION
A. FIRST INTERSTATE BANK PLAZA:
1. TENANT BUILDING STANDARDS:
PARTITIONS (A) Office - 5/8" sheetrock each side
of 2 1/2" metal studs to ceiling.
(B) Demising - 5/8" sheetrock each side
of 2 1/2" metal studs to structure
with interior batt insulation.
DOORS 3' x 9'(FULL HEIGHT) - 1 3/4" (nominal)
solid core wood prefinished, premium grade
plain sliced walnut veneer with Gardall
finish.
DOOR FRAMES AACI or approved equal, Series #AF600
#F30810.5-335-1.5, Cased opening - #63872,
Mullion - #63877, Altura - R Series.
HARDWARE
Latchset (interior): Schlage D105, Sparta
625.
Lockset (interior): Schlage D53PD, Sparta
625, (Less Cylinder).
Wallstop: Quality, W302-TB, US26 finish, 2
1/2 inch concave rubber stop.
Floorstop: Quality, or equivalent.
Closer: Norton #8283 Series.
Manager has an in-house lockshop which will
furnish cylinders and keying for all
construction projects. Building Standard
door handle also to include a lever type
handle produced by a major manufacturer so
long as such handle is in compliance with
the provisions of the Americans with
Disabilities Act.
CEILING Armstrong - Cortega pattern #745,
12"x12"x5/8" beveled edge, non directional
fissured.
CARPET Manufacturer: Design Weave - Series:
Firestorm.
FLOOR TILE VCT Armstrong Imperial Texture Excelon Tile
(1/8") 12"x12". Meets Federal Specifications
SS-T-31213(1), Type IV, Comp. 1.
BASE Roppe, 2 1/2" straight, or coved. Shall
conform to requirements of Federal
Specifications SS-W-40a, Type 1.
WINDOW TREATMENT Bali Classic Mini-blind, Color: Bronze
LIGHT FIXTURE Existing - Columbia - 2'x2' parabolic
fixtures, #45436-43-222 lay in mounting with
(2) 34 watt F40WW-U-6-EWII lamps, 277 volts.
Energy efficient tubes and 9 cell parabolic
lens.
Note: Existing fixtures requiring new lamps
or ballasts shall be retrofitted with (2) 32
watt FB31T8/TL 730/6 lamps with a low
harmonic electronic ballast.
New - Same as existing or equal except with
(2) 32 watt FB31T8/TL 730/6 lamps and a low
harmonic electronic ballast.
CORRIDOR FIXTURE Columbia - 1'x4' parabolic fixtures,
#F40WW-RS-EW-II, lay in mounting.
EGRESS LIGHTING Same as above.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page i
EXIT SIGN
Prescolite ER/ERT 120/277 or equal.
ELECTRICAL OUTLET Bryant CR20 or equal.
LIGHT SWITCHES Low Voltage: Sierra 24 volt 1091 W.
Standard: Leviton 1221-120/277 volt or
equal.
MISCELLANEOUS
Building standard light switches and fire pull stations should
be centered 3'-6" from finish floor to top of device.
Building standard wall outlets are 20 amp., 120 volt white
duplex type.
Building standard telephone outlet is mounted 15" from the
finish floor.
A pull-string is provided for the telephone company to pull
cable down the wall. The telephone company shall provide cable
and coverplates.
Building standard sprinkler heads are partially concealed.
The Manager has established building standard finishes for all
public elevator lobbies and corridors. Tenants shall not
change these finishes without prior written approval of the
Manager.
With the exception of main entrance doors, all doors and
hardware leading into the Tenant space from the public
corridor will be Building Standard and are to be recessed if
the door swings out.
Main entrance to Tenant space may not exceed ten feet in
width. Design of Main Entrance must be submitted to the
Manager for approval prior to construction documents being
prepared.
The Manager has established a standard for Tenant entrance and
retail graphics in FIBP. Allow four to five weeks for delivery
of Building Standard graphics. Contact Manager to order
graphics. Expense of graphics and layout is Tenant's
responsibility.
All exit signs and egress lighting within the Tenant space is
required to be connected to the building's emergency power
system and must comply with City Codes and ADA regulations.
2. BASE BUILDING STANDARDS:
A. CORRIDOR FINISHES - NEW:
CARPET Manufacturer: Bently
Style: Barcelona
Color: Bottela
BASE Roppe, 2 1/2" straight, 93 Black-Brown.
WALLS Elevator Lobby: Polomyx No. 4043-BT
50/25421-2974
Corridor Wall Paint: Moor-Craft eggshell
latex M-3-8247 contractor grade.
Stairway: Devoe Paint Formula flat latex F-6
PY7, ZY8 W4Y8
CEILING Elevator Lobby Ceiling Paint: Muresco
Moor-Craft flat 275 (color 879) contractor
grade
Corridor Tile: Armstrong - Cortega pattern
#745, 12"x12"x5/8" beveled edge, non
directional fissured.U.S. Gypsum
DOORS Freight: Benjamin Moore 1473 Semi Gloss
Stairway: Benjamin Moore 1473 Semi Gloss
Tenant: Walnut
Janitor Closet: Benjamin Moore 1473 Semi
Gloss
Elevator: None
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page ii
DOOR FRAMES
Freight: Benjamin Moore 1473 Semi Gloss
Stairway: Benjamin Moore 1473 Semi Gloss
Tenant: Interior: Dark Bronze Aluminum.
Janitor Closet: Benjamin Moore 1473 Semi
Gloss - Grey
Elevator: Benjamin Moore 1473 Semi Gloss
LIGHTS Existing - Flourescents: Columbia - 2'x2'
parabolic fixtures, #45436-43-222 lay in
mounting with (2) 34 watt F40WW-U- 6-EWII
lamps, 277 volts. Energy efficient tubes and
9 cell parabolic lens.
Note: Existing fixtures requiring new lamps
or ballasts shall be retrofitted with (2) 32
watt FB31T8/TL 730/6 lamps with a low
harmonic electronic ballast.
New - Same as existing or equal except with
(2) 32 watt FB31T8/TL 730/6 lamps and a low
harmonic electronic ballast.
Down Lights: Screw type flourescents SLS-9,
SLS-11
EXIT SIGN
EMERGENCY-LITE: Prescolite
B. FREIGHT ELEVATOR LOBBY & JANITOR CLOSET FINISHES-NEW:
FLOOR VCT Armstrong Imperial Texture Excelon Tile
(1/8") 12"x12". Meets Federal Specifications
SS-T-31213(1), Type IV, Comp. 1.
BASE ROPPE 2 1/2" Coved, 93 Black-Brown
WALLS Benjamin Moore 1473 Eggshell.
ELEVATOR DOORS & FRAMES
Benjamin Moore 1473 Semi Gloss Gey
LIGHTS Columbia - 2'x2' parabolic fixtures,
#45436-43-222 lay in mounting with (2) 34
watt F40WW-U-6-EWII lamps, 277 volts. Energy
efficient tubes and 9 cell parabolic lens.
Note: Existing fixtures requiring new lamps
or ballasts shall be retrofitted with (2) 32
watt FB31T8/TL 730/6 lamps with a low
harmonic electronic ballast.
New - Same as existing or equal except with
(2) 32 watt FB31T8/TL 730/6 lamps and a low
harmonic electronic ballast.
LIGHT SWITCHES & ELECTRICAL OUTLETS
Low Voltage: 24 Volt Sierra 1091 W
Outlets: Bryant CR20 or equal
3. BASEBUILDING DESIGN INFORMATION:
A. STRUCTURAL INFORMATION:
We offer the following information on the structural
characteristics for the building in order that
adequate provisions may be made in the Tenant
construction design and detailing.
DESCRIPTION:
The structural system in the tower consists of a
composite metal deck slab and composite structural
steel floor beams supported by steel columns. The
steel beams and columns have spray on fireproofing
affording a Type I protection. Certain areas in the
basement and lower levels contain some concrete and
bar joist construction. Contact Manager for details.
DESIGN LOADS:
(BUILDING)
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page iii
(1) Open Areas - 50 PSF Live Load + 20 PSF for
Partitions.
(2) Core Areas - 100 PSF.
(3) Exit Corridor - 100 PSF.
B. MECHANICAL, ELECTRICAL AND PLUMBING INFORMATION:
(1) HEATING, VENTILATING AND AIR CONDITIONING:
(a) FIBP receives all chilled and hot
water from a central plant located
remotely which operates 24 hours
per day. Hot water is furnished
only during the winter months for
heating.
(b) The Basebuilding HVAC has been
designed in accordance with 1977
City of Houston Building Code. The
following items represent assumed
design loads for the building
standard HVAC requirements at that
time.
(c) INSIDE CONDITIONS:
Summer 75 degrees F. (within Ashrae
comfort zone)
Winter 72 degrees F.
(d) OUTDOORS CONDITIONS:
Summer 98 degrees F db,
80 degrees F. wb
Winter +20 degrees F.
(e) LIGHTING POWER BUDGET FOR
FLUORESCENT LIGHTING (TENANT
SPACE): 2.5 watts/sq. ft. of net
usable area outside the core (60%
of light heat to space).
(f) All vibrating equipment is to be
mounted on vibration isolation pads
or suspended from spring isolation
hangers in accordance with ASHRAE
standards.
(g) OCCUPANCY (TENANT SPACE): 1
person/150 sq. ft. of area.
(h) AIR HANDLING SYSTEMS:
Two Texas multi-zoned air handling
units on each floor with a total of
fifteen (15) zones each serving
perimeter and interior diffusers.
Each corner has a separate zone.
Each floor in the building has
approximately 36 tons/floor but
varies slightly from floor to
floor.
FIBP utilizes an outside air
connection at each typical floor.
Air will be supplied through
externally insulated low pressure
ductwork. Perimeter supply
diffusers for the exterior zones
are in lay-in slot type diffusers
at each window bay. Supply
diffusers for the interior zone are
light troffer type.
Air is returned to the ceiling
plenums through heat extract type
light fixtures.
(i) OFF-HOUR AIR CONDITIONING: After
hour air can be accessed by
telephone code call-up at their
cost. The Tenant should identify
special Tenant loads which require
off-hour or 24 hour air
conditioning.
(j) The Tenant should identify areas
which require inside conditions
which differ from those listed
herein. No winter humidification is
provided in the building. Any
reheat to dehumidify spaces will be
provided by electric heaters.
(k) The Basebuilding ductwork has been
designed to provide adequate
clearance for double light troffer
diffusers at any point in the
interior zones except in certain
areas immediately adjacent to the
air handling unit rooms and under
beams. Structural conditions at
these locations dictate reduced
clearance. Recessed Tenant items
such as incandescent and
fluorescent lighting fixtures and
any special ceiling treatments
should be clearly identified by the
Tenant and must be coordinated with
field conditions.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page iv
(l) The Basebuilding has no provisions
for Tenant kitchen or cooking
exhaust. No Tenant shafts are
provided for kitchen exhausts to
the outside. Tenant should submit
request with detail design for
review and approval.
(2) PLUMBING:
(a) Plumbing fixtures for a typical
floor, such as toilets and water
fountains, are detailed on the
Basebuilding Architectural
Drawings.
(b) Tenant fixtures may be added to the
typical floor. The Basebuilding MEP
Drawings indicate the location of
provisions for future
connections.Tenant Architect should
verify location of Tenant fixtures
with the Manager to ensure that
connection to the Basebuilding
systems have the following
provisions:
Plugged 4" sanitary waste and 4"
vent connection at a column at both
East and West ends of the core.
1-1/4" valved domestic cold water
connection at the core of each
level.
(c) DOMESTIC HOT WATER: Electric water
heaters serve floors throughout the
building. Domestic hot water
generated by these water heaters is
not intended for use at Tenant
lavatories, or sinks which are
remote from the building core.
(d) DOMESTIC COLD WATER: Electric
Basebuilding pumping system with
high pressure piping through the
Tower. Reducing valves are required
at approximately every 10 floors.
(e) All icemakers should be mounted on
a water tight sheet metal drain
pan.
(f) Disposals are not allowed in the
building.
(3) ELECTRICAL:
(a) Electrical service to the typical
floors will be provided from the
480 volt bus duct risers located in
the Mechanical rooms.
(b) 277/480 volt distribution panels
serve the fluorescent lighting.
Fluorescent fixtures are two lamp,
2' x 2', air handling heat extract
type. 24 volt local switching will
be utilized.
(c) Tenant lighting systems shall not
exceed a maximum of 2.5 watts per
square foot of useable space.
(d) Dry type transformers are located
on various floors indicated on the
Basebuilding electrical drawings.
Distribution panel boards
designated "L" are on each floor
and serve the 120/208 volt
incandescent lighting and
receptacle loads. Tenant low
voltage power shall be metered at
Tenant's expense.
(e) Emergency lighting fixtures and
exit lighting fixtures are required
throughout the Tenant space. Tenant
exit lighting fixtures shall be
identical to the Basebuilding
fixture and will be provided by the
Tenant. The Basebuilding emergency
power system will provide a
pro-rated amount of power equal to
1000 watts (VA) per floor of 277V
for Tenant emergency lighting use
and 600 watts (VA) per floor of
277V, for exit lighting fixtures.
An emergency lighting fixture is a
2 x 2 building standard light
fixture wired to the building
emergency circuit. The emergency
circuits shall be extended into the
Tenant's space from the emergency
lighting riser at the Tenant's
cost. The emergency lighting
fixtures and exit fixtures shall be
located by the Tenant Designer as
required to meeting the local code
requirements. Tenant is not to
connect any equipment to emergency
power supply without Manager
approval.
(f) An electric stairway door unlocking
system will be provided at every
fifth floor in the Basebuilding.
The system is actuated by any fire
alarm initiating device through the
Fire Command Center.
(4) TELEPHONE SYSTEM:
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page v
(a) The telephone equipment required by
the Tenant will be located within
the Tenant's space.
(b) All individual telephone wiring
shall be teflon coated type
approved by the City of Houston and
the local phone company for
installation in ceiling return air
plenums. Cost of wiring is the
responsibility of the Tenant.
(c) The Tenant should identify any
special air conditioning
requirements (temperature,
humidity, 24 hours, etc.), required
by the Tenant's telephone
equipment.
(5) FIRE SAFETY SYSTEMS:
FIRE PROTECTION:
The standpipe system design will be in
accordance with the requirements of NFPA 14.
A zoned system of fire protection standpipes
will be provided. A standpipe will be
provided in each stairwell. A 2-1/2" fire
hose valve will be located in each stairwell
at each floor for Fire Department use.
The building is fully sprinkled. The
automatic sprinkler system design is in
accordance with the requirements of NFPA 13
(Light Hazard). Sprinkler heads are flush
mount with polished cover in corridors, and
ascusion type with fusable link in tenant
areas. Sprinkler heads will be located and
coordinated by the Fire Protection
Subcontractor as necessary to comply with
code requirements and the Tenant
partitioning.
Special alignment and centering of sprinkler
heads will be Tenant extra cost items.
Occupancies other than Light Hazard may
require sprinkler coverage in excess of
building standard.
The Tenant should identify any areas where
water could damage equipment or other items
in the event of a sprinkler flow. Computer
rooms, etc., may require separate treatment
such as a preaction system. (No new Halon
systems will be allowed.)
If a non-required fire hose cabinet is to be
removed, the system should be capped off at
the standpipe rather than in the wall. If a
fire hose cabinet is to be removed which is
also used for fire extinguisher storage,
verify compliance with Section 13-19 of the
City of Houston Fire Code and NFPA Standard
No. 10.
(6) FIRE ALARM AND COMMUNICATIONS:
(a) Manual pull stations are provided
throughout the building located
within 5 feet of the entrance to
each stairway.
(b) Ionization type smoke detectors
will be mounted on the ceilings in
the Tenant area of single Tenant
floors, Mechanical rooms,
electrical closets, elevator
machine rooms, on all air handling
units and on the ceiling of the
public corridor of multi-tenant
floors. The minimum quantity of
Basebuilding smoke detectors is
indicated on the Basebuilding
electrical drawings. Tenant
occupancies may require additional
detectors due to the Tenant
partitioning or other requirements.
Additional detectors wiring and
connection to the fire alarm system
shall be at the Tenant's cost.
(c) Alarm signal and voice
communication horns are provided
throughout the building, in the
active elevator lobbies, in
stairways, in elevator cabs and at
the entrance to each stairway on
each floor as indicated on the
Basebuilding drawings. Tenant
occupancies requiring additional
horns and fireman's communication
speakers as required by local code
will be provided with these devices
at additional cost to the Tenant.
It should be noted that the test
for compliance will be witnessed by
the Fire Department and the voice
communication criterion is that
occupants must be able to hear the
audio voice communication from any
location in the Tenant's premises.
Manager will furnish exit strobes
in multi-tenant corridors and all
public restrooms. Tenant shall
furnish fire alarm exit strobes as
required by ADA and/or other
accessibility requirements.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page vi
(7) STAIR PRESSURIZATION:
The Basebuilding exit stairways are provided
with a mechanical pressurization system
which is automatically activated by the fire
alarm initiating devices.
(8) SMOKE EVACUATION:
No system for smoke evacuation.
(9) ADDITIONAL LIFE SAFETY FEATURES:
Tenants requiring special fire extinguishing
systems must have an alarm signal installed
at Tenant's expense in the Fire Command
Center to signal the activation of the
Tenant's system.
(10) SUITE ALARM
Individual tenant entrance access control is
available using either card reader or key
pad devices. Monthly monitoring fees are
charged by device. Tenant shall be
responsible for purchase of and installation
costs for monitoring and access control
devices.
ARCHITECTURAL GENERAL NOTES
1. Work specified in these documents shall proceed in accordance with the
Manager's Construction Standard Regulations. Reference as required.
2. All material furnished by the contractor shall be new unless noted
otherwise.
3. All work shall be erected plumb and true-to-line in accordance with
best practices of the trade and manufacturers' recommendations for the
particular item.
4. Comply with local building code and all other applicable ordinances.
5. Protect work under this contract and adjacent areas at all times and
repair damaged work to satisfaction of the Architect at no cost to the
Manager or Tenant.
6. Cooperate and coordinate job operations with the operations of others
doing adjacent work in order to prevent delay and conflict or damages
to either party's operations.
7. Gypsum board work shall conform to the standard specifications of the
American National Standards Institute.
8. Install door closers on the least public side of door. Coordinate type
of arm required for proper function.
9. Shop drawings: When required, submit 1 set sepias and 2 set prints to
Architect with copy of transmittal and 1 set prints to construction
manager. Submit one set of reviewed drawings to construction manager.
10. All work involving noxious and/or irritating fumes or odors, such as
paints, lacquers, thinners or solvents shall be performed after hours.
11. The general contractor shall be required to obtain National Safety Data
Information on all materials to be utilized on each project. Contractor
shall be responsible for initiating, maintaining and supervising all
safety precautions and programs in connection with the work.
12. No materials may be hoisted outside the confines of the elevator cabs
without an approved technician. Contractor is responsible for all
labor/material costs associated with the building's approved elevator
contractor providing operators or technician to perform work for this
project. Contact the building manager for the approved elevator
contractor.
13. The Manager requires all "noisy" work to be performed between 6:00 p.m.
and 7:00 a.m. or on weekends regardless of the location in the building
unless approved otherwise. "Noisy" work includes, but is not limited to
demolition, concrete coring or drilling, grinding, shooting stud track
or hangers and using power saws.
14. The contractor is responsible for furnishing and installing all
hardware except lockset cylinders and keying for locksets.
15. The General Contractor is required to notify the Manager 24 hours prior
to ceiling installation to allow for inspection, if desired, by the
Manager.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page vii
16. Concealed spline ceilings: Install one lift out access tile in every
sixteen square feet (16 s.q.) of one by one concealed spline ceiling.
Caulking of ceiling tile joints is not allowed. Where existing ceiling
is to remain: all ceiling tiles shall be uniform in each room or
contiguous ceiling. No visible patches shall be evident.
17. All mechanical rooms are to be kept clean at all times, and are not to
be used for storage.
MECHANICAL GENERAL NOTES
1. All mechanical work performed under this contract shall comply with the
latest applicable codes, and ADA (American Disability Act). Base
building tenant specifications shall prevail over all work and/or
equipment on these drawings unless otherwise noted. Any deviations
and/or questions regarding the tenant specifications vs. specifications
on the drawings shall be referred to the construction manager.
Standards and specifications are available upon request.
2. The mechanical contractor is responsible for visiting the site and
becoming thoroughly familiar with the existing building MEP and
structural systems prior to the bid date. The mechanical contractor is
responsible for coordinating with all other trades prior to the
construction of duct or installation of mechanical equipment and pipe.
3. The approximate locations of mechanical (HVAC) items, are indicated on
the plan(s). The plans are not intended to give complete and accurate
details in regard to location of air devices, equipment, etc. Exact
locations are to be determined by actual measurements at the building.
4. All work shall comply with all pertinent state, county, and local
ordinances and codes. The contractor shall obtain and pay for all
necessary permits and inspections.
5. Work shall be executed in a workmanlike manner and shall include all
labor and materials essential to provide complete functioning systems
as described in the contract documents. In cases of doubt as to the
work intended, or in the event of need for explanation, the contractor
shall request additional information from the Architect/Engineer. Work
shall not proceed without confirmation by the construction manager.
6. The drawings refer to work in areas that must require special
consideration and scheduling to minimize disturbance to tenants. Work
must be scheduled with tenants and building management as to
availability and access to space on an after-hours or weekend basis.
The bid price should reflect after-hours access to spaces.
7. The listing of product manufacturers, materials, and methods is
intended to establish a standard of quality. The Architect/Engineer
shall be the sole judge of quality and equivalence of equipment,
materials, and methods. Where substituted or alternative equipment is
proposed on the project before bidding, it shall be the contractor's
responsibility to verify that the equipment will fit the space
available, including all required code and maintenance clearances, and
to coordinate all equipment requirements, such as electrical and
plumbing characteristics with the other contractors.
8. The mechanical contractor may be required to provide submittals
covering piping material, insulation, air devices, and equipment to the
Architect/Engineer for their review. Verify the exact number of
submittal copies with the Architect.
9. The contractor shall warrant the entire HVAC installation of new
equipment, air devices and piping in proper repair and good working
order for a period of one year after its substantial completion.
10. All existing tenant equipment and air devices to be reused shall be
inspected and tested on the site to certify its working condition.
Replace all defective parts. Any existing base building equipment and
temperature controls that prove defective during the course of
construction or after completion shall be brought to the
Architect/Engineer and construction manager's attention immediately.
11. Duct dimensions shown on the drawings are net clear internal
dimensions. All new ductwork shall be low velocity, low pressure type
constructed of new lock forming galvanized sheet metal in accordance
with the latest SMACNA standards. Ductwork shall be hung as high as
possible from the building structure with hanger assemblies in
accordance with SMACNA requirements. The contractor shall provide
additional rises, drops, and offsets in ductwork as required. If after
installed, new ductwork is found to be in conflict with architectural,
structural, or MEP elements which are either existing or shown on the
contract documents, the ductwork shall be relocated without additional
cost.
12. All new rectangular supply and return air ductwork shall be externally
insulated with 2" thick duct wrap, 3/4 lb/cu.ft. insulation. Insulation
shall be finished with a factory applied foil-skrim-Kraft facing
consisting of 0.35 mil. aluminum foil reinforced with glass yarn mesh
and laminated to 40 pound chemical treated, fire resistant Kraft.
Return air boots shall be internally lined with 1" thick, 1-1/216./C.F.
Density malt face liner. The matt face surface shall face the air
stream and transverse joints shall be neatly butted and coated with
adhesive.
13. The contractor shall seal and insulate all inactive duct taps air
tight.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page viii
14. Round flexible duct shall have 1" thick, 1-1/2 lb/cu.ft. density
fiberglass insulation and vinyl vapor barrier. Minimum length 4'-0";
maximum length 8'-0". If extensions are required, use round sheet metal
duct that is externally insulated with 1" thick, 1-1/2 lb/cu.ft.
fiberglass insulation and foil-skrim-kraft vapor barrier. Secure
flexible duct to spin-in and air device neck with corrosion resistant
clamps and seal vapor barrier with 3" pressure sensitive aluminum foil
vapor barrier tape. Suspend flex duct from structure at duct connection
and every 4 feet; do not allow it to rest on ceiling tile or light
fixtures.
15. Provide a spin-in connector with locking quadrant butterfly damper for
all round flexible duct connections to rectangular sheet metal duct.
The spin-in shall be the same size as the air distribution device neck
diameter.
16. Coordinate the location of all air distribution devices with the
architectural reflected ceiling plan, including any existing air
devices, light fixtures and the safety devices. Existing troffer and
perimeter slot air devices are to be installed as indicated on the
floor plans, however, the contractor shall field verify the exact
quantity of existing air devices. Any new devices that may be required
shall match the base building standard and be furnished and installed
by the contractor. All flexible duct runouts to troffer devices shall
be new 6" diameter unless otherwise noted on the plans.
17. Round sheet metal duct extensions shall be the same size as the
flexible duct and air device neck.
18. Return air shall be through fluorescent light fixtures unless noted
otherwise.
19. All portions of perimeter slot not used for supply air shall be blanked
off. Perimeter zone slot diffusers and flexible duct connections are
existing to remain unless noted otherwise.
20. All air devices shall be selected to provide a noise criteria of 30 or
less at the indicated CFM. New square ceiling mounted air devices shall
have 4-way diffusion patterns unless indicated otherwise on the plans
with directional flow arrows.
21. When devices are installed in inaccessible ceilings, provide a flush
mounted remote damper regulator and extensions rod, Young model 301 or
approved equivalent where required.
22. The mechanical contractor shall provide a construction filter for the
duration of this project at the existing base building air handler, and
then replace existing air handler filters with new filters after
balancing and adjusting is complete.
23. Verify location of thermostat with the Architect/Engineer prior to
installation to coordinate with the latest furniture and millwork
plans. Install thermostats at the same elevation as light switches
(centerline). All thermostats are existing base building standard,
unless noted new on the plan.
24. All existing base building ductwork and equipment to remain is
indicated as dashed lines. Any new or relocated ductwork and equipment
is shown as solid lines.
25. Air balancing - Prior to any work that affects the HVAC system:
Contractor shall take traverse measurements at air handling unit for
every zone of each air handling unit affected by the work. In addition,
Contractor shall take traverse measurements in the ductwork as
indicated on the plans.
When the air system components have been installed, each supply air
device shall be balanced to within 10% of the air flow indicated on the
plan.
Contractor shall provide, if necessary, new sheaves on the air handling
unit motor to achieve air flows as indicated on the plan.
After the system is balanced as indicated on the plans: Contractor
shall take traverse measurements in each location which was measured
prior to the work and balance the air flows to match the quantities
measured prior to the work except as required at the air handling unit
to provide design quantities to the work.
Contractor shall provide a NEBB certified air balance report within one
week of occupancy.
26. The contractor shall demolish and remove from the site or return to
owner, at owner's discretion, all abandoned mechanical equipment and
devices. Piping and wiring for equipment shall be demolished back to
the point of connection to base building risers, junction boxes, or
panels.
27. All new piping shall be carefully installed to eliminate traps and
pockets in pressurized lines. Where air pockets and traps cannot be
avoided, provide valved and plugged manual air vents at air traps. All
new piping installations shall be leak tested before insulation is
installed. All piping taps into the base building piping risers will
require approval of the building engineer.
28. Provide full port ball valves with teflon seats at new fan coil unit
chilled water piping supply and return piping connections to existing
risers. Refer to the plans for specification on meter required at new
chilled water supply connection to the riser.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page ix
29. Provide a 22 gauge 2" deep galvanized iron drain pan with hemmed upper
edges under each fan coil unit suspended below the entire unit. Provide
a 3/4" brass tank flange at one end; grind off bottom of flange. Cross
break bottom of pan to the drain and apply one coat of tank mastic
inside. Primary drain from the unit shall be routed to nearest
mechanical room floor drain as shown on the plans. Route 3/4" secondary
drain line to drip "tell-tale" above nearest sink. Provide a chrome
plated escutcheon at the ceiling.
30. Refrigerant piping shall be fabricated of type "LACR" hard drawn tubing
that has been cleaned and capped for refrigeration service. Fittings
shall be wrought copper and shall be installed with silver solder sweat
joint. Furnish, size, install, and insulate refrigerant pipe for the
systems as shown. Pipe sizes shall be as recommended by the equipment
manufacturer. Slope all lines to facilitate oil return to the
compressor. Provide suction line traps per manufacturer's
recommendations.
31. Refrigerant piping shall be insulated with 1/2" thick Armstrong
Armaflex Flexible Elastomeric pipe insulation. Insulation shall be
installed in continuous lengths and glued with Armstrong 520 adhesive
at butt joints.
32. All mechanical rooms are to be kept clean at all times, and are not to
be used for storage.
ELECTRICAL
GENERAL NOTES
1. All electrical work performed under this contract shall comply with the
latest version of the national electrical code, NFPA 70-1993, ADA
(Americans with Disabilities Act) and all local codes and ordinances.
Base building tenant specifications shall prevail over all work and/or
equipment on these drawings unless otherwise noted. Any deviations
and/or questions regarding base building specifications vs.
specifications on these drawings shall be referred to the construction
manager.
2. Refer to architectural reflected ceiling plans for the exact location
of all ceiling mounted devices (i.e. light fixtures, smoke detectors,
speakers, exit signs, etc.). Refer to architectural plans for details
or elevations and coordinate the installation of all electrical devices
these areas with the appropriate trade.
3. All materials used for construction shall be installed in a neat and
workmanlike manner.
4. All data, communication and other miscellaneous cables not used for
this tenant leasehold improvement shall be completely removed back to
source of origination. Refer to data and telephone contractor for
coordination.
5. All materials and labor furnished under this contract shall be
warranted for a period of one year from the date of completion.
6. Electrical contractor shall field verify all circuit designations and
shall make corrections as needed.
7. In no case shall fire rated poke-through devices be installed less than
24" on center and/or no more than one penetration per 65 sq. ft. of
floor area in each span. Installations which may vary from these
requirements shall be referred to the construction manager with
appropriate U.L designation for approval prior to rough-in.
8. Fire proof all slab and partition penetrations per fire safing systems
described by the ASTM-E814 (U.L. 1479), NEC-300-21 and NEC-800-3(c) and
the City of Houston building code at time of installation and not at
the end of the job.
9. Existing floor outlets and slab penetrations not used for new tenant
leasehold improvements shall be removed and restored to original
integrity and fire rating during demolition.
10. The electrical contractor shall review the site prior to submission of
bid and shall include in his proposal costs for repair, relocation,
modifications and/or removal of existing electrical elements as
required to complete installation of all systems shown on these
drawings. The contractor, by submitting his proposal, shall agree to
accept all existing site conditions not specifically excepted. Any
exceptions must be submitted in writing to engineer and architect.
11. All electrical equipment, wiring devices, wiring device cover plates,
conduit and wire which is damaged shall be restored to original
integrity and shall be subject to review by architect and engineer. All
materials used for repair shall meet original specifications. Existing
equipment to be reused shall be reviewed by architect and engineer. All
unused electrical elements not used for this tenant leasehold
improvement shall be removed back to original source and returned to
Manager or disposed of at Manager's request.
12. The drawings refer to work in areas that must require special
consideration and scheduling to minimize disturbance to tenants. Work
must be scheduled with tenants and building management as to
availability and access to space on an after-hours or weekend basis.
The bid price should reflect after-hours access to spaces.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page x
13. Shop drawings: Submit 1 set of electrical as-built drawing sepias and
one set prints to architect w/copy of transmittal and 1 set prints to
construction manager. Circuiting for each wiring device shall be shown
with corresponding panel and circuit number similar to engineering
power plan.
14. The Manager requires all noisy work to be performed between 6:00 p.m.
and 7:00 a.m. or on weekends regardless of the location in the building
unless approved otherwise prior to bidding. "Noisy" work includes all
demolition, concrete coring or drilling, grinding, shooting stud track
or hangers and using power saws.
15. All mechanical rooms are to be kept clean at all times, and are not to
be used for storage.
DISTRIBUTION NOTES
1. All new or additional power distribution equipment shall be
manufactured by Westinghouse, General Electric, or Square D. No
substitutions will be accepted. Provide black phenolic nameplates with
engraved white letters (minimum 5/16" height) for new and existing
panelboards, transformers, switchgear and meters.
Supply new, typed accurate panel directories for each panelboard or
distribution panel in which any work is performed. Provide new breakers
in existing spaces as required for this installation.
Example: Panel____________________
480Y/277V, 3 Phase, 4 Wire, 60 Hertz
Main Bus:_______________, Braced for:_______SYM Amps
2. Where engraved plates are required, they shall be factory engraved and
plain block style, 3/16" high unless otherwise indicated. Provide black
letters for light plates, white letters for dark or stainless steel
plates.
3. Provide rubber vibration isolation pads under new transformer
installation.
4. Verify operation of all electrical meters prior to final payment.
5. All electrical meters are required to be "EMON". Replace all existing
non-complying meters with "EMON" type.
6. The only acceptable manufacturers of distribution panels are General
Electric, Westinghouse and Square D. NO SUBSTITUTIONS WILL BE ACCEPTED.
WIRING NOTES
1. All wiring shall be soft drawn, annealed copper, #12 AWG minimum. Wire
size #10 and smaller shall be solid. Insulation shall be THHN or THWN.
All 120V, 20A home runs longer than 100 ft. and 277V, 20A home runs
longer than 150 ft. shall be #10 AWG minimum.
2. All wiring shall be installed in conduit (electrical metallic tubing)
1/2" minimum size. In lieu of conduit and wire, and subject to the
local authority having jurisdiction, armored cable (BX) may be used in
branch circuits not having conductor size greater than #10 AWG. BX
shall not be used for homeruns from base to panelboards or in lengths
greater than 15' in the plenum.
3. Check all wire and cable for continuity of circuitry and for short
circuits prior to energization of all new feeders.
4. All wiring devices shall be specification grade and exactly match base
building standard device style, color and mounting height. Wallplates
shall match exact device style color unless otherwise noted.
5. For all telephone/data outlets provide a hole in the wall surface at
ADA receptacle height unless otherwise indicated and a pullstring to
the accessible ceiling space above. Where the wall is located below an
inaccessible ceiling space provide a 4" square junction box with a
single device plaster ring mounted flush with finished wall at normal
receptacle height, unless otherwise noted. Route a 3/4" conduit with a
pull string from the junction box to accessible ceiling space.
6. Provide dedicated homeruns of 1/2"c., 2#12 and 1#12 G., for each
isolated ground receptacle circuit. Conductors shall not be shared,
bonded, or tapped to any other circuits or outlets not on the dedicated
circuit. The grounding conductor shall have green insulation and shall
be identified with yellow tape at all wire access points.
7. Cable installed outside of a raceway shall be supported independently
and not from other systems. Securing cables to or from water lines,
electrical raceways or any other mechanical system shall not be
acceptable. Cables shall be supported from bar joists. Maximum spacing
shall be 10' on center with a maximum 8" sag. Cables shall maintain a
minimum 6" clearance from electrical equipment.
8. Junction & switch boxes shall have a 2-1/8" depth. Provide shallow
boxes where necessary.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page xi
9. Receptacles shall be Bryant CR20 or equal.
10. Light switches shall be Sierra 24 volt 1091 W.
LIGHTING NOTES
1. All light fixtures shall match base building standard unless otherwise
noted.
First Interstate Bank Plaza Standard: Existing Columbia - 2'X2'
parabolic fixtures, #45436-43-222, lay in mounting with (2) 34 watt
F40WW-U-6-EWII lamps, 277 volts, energy efficient tubes and 9 cell
parabolic lens. Corridor fixtures are Columbia 1'x4' parabolic
fixtures, 34 watt F40WW-RS-EW-II, lay in mounting.
New - Same as existing or equal except with (2) 32 watt FB31T8/TL 730/6
lamps and a low harmonic electronic ballast.
Contractor shall field verify all existing fixtures quantities and
conditions and shall supply new fixtures standard or be an approved
equal.
All 2' x 2' recessed lighting fixtures shall be supported as described
by the N.E.C. and the authority having jurisdiction.
LIFE SAFETY NOTES
Exit Signs:
1. All fire alarm system devices and exit signage shall be interfaced with
building fire alarm system. All new devices shall be fully compatible
with the existing fire alarm system. Fire alarm system contractor shall
verify location and quantity of fire alarm system initiating, automatic
initiating and audible devices as required by existing building system.
Additional fire alarm devices shall be added to meet building standards
and fire alarm system code requirements.
MINIMUM REQUIRED OF TENANT SPACE PLAN
Floorplans shall contain (but not be limited to) the following information:
1. Location and type of all partitions.
2. Location and types of all doors and hardware.
3. Location and type of glass partitions, windows and doors - indicate
framing if not building standard.
4. Location, weight per square foot and description of any exceptionally
heavy equipment or filing system exceeding 50 PSF live load.
5. Location and type of plumbing.
6. Location and size of any floor openings required.
7. Location and elevation of any non standard Corridor Entrance. (For
Tenant on multi-tenant floor).
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page xii
The following is a list of drawings to be attached to Exhibit "S":
1. Partition Type "A," "A1," "A2";
2. Demising Partition "B," "B1";
3. Chase Wall "C";
4. Low Wall "F";
5. Door and Glass Details; and
6. Door Types.
EXHIBIT "S" TO OFFICE LEASE AGREEMENT - Page xiii
EXHIBIT "T"
TO
OFFICE LEASE AGREEMENT BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY,
AND METROPOLITAN TOWER REALTY COMPANY, INC.,
AS LANDLORD, AND
NGC CORPORATION,
AS TENANT
ROOFTOP ANTENNAE
1. DEFINED TERMS. Terms defined in the Lease and delineated herein by
initial capital letters shall have the same meaning ascribed thereto in the
Lease, except to the extent that the meaning of such term is specifically
modified by the provisions hereof. In addition, other terms not defined in the
Lease but defined herein will, when delineated with initial capital letters,
have the meanings ascribed thereto in this exhibit. Terms and phrases which are
not delineated by initial capital letters shall have the meanings commonly
ascribed thereto.
2. LICENSE. During the Term Tenant is hereby granted a revocable
license to install on the roof of the Building not more than two (2) "receive
only" communications antennae, provided that (a) the size, location, and manner
of installation of such antennae shall be determined at Landlord's sole
discretion, which discretion shall take into consideration the functional
requirements of such equipment subject to standards of architectural integrity
with respect to the Building (and in that regard, the antennae shall be located
so as not to be visible except from above the Building), (b) no such antennae
shall be affixed to the roof of the Building by nail, bolt, screw or other
device which penetrates the roof, and (c) Tenant shall bear all costs and
liability incurred with respect to the installation, operation, maintenance,
removal, and insuring of any such antennae and any related wiring.
3. ACCESS TO ROOF. Tenant shall not have access to the roof without
having first obtained Landlord's written approval at least 24 hours in advance,
except in case of emergencies such prior notice period may be reduced at
Landlord's discretion.
4. INDEMNIFICATION. Tenant hereby covenants and agrees to indemnify,
defend and otherwise hold harmless Landlord, its respective partners, venturers,
affiliates, subsidiaries, parent corporations, related partnerships and
corporations, and all of their respective past, present and future shareholders,
officers, directors, agents, attorneys, servants and employees, and each of
their respective heirs, legal representatives, successors and assigns, and all
those at interest therewith, from any and all losses, claims, demands, actions
and causes of action of whatever nature, and any and all liability, accrued or
unaccrued, known or unknown, fixed or contingent, on account of, arising from or
in any manner growing out of or otherwise resulting from the process of
installing the antennae, from Tenant's antennae being on the roof of the
Building including any related wiring, and from any damage occurring to said
antennae or wiring. The indemnities contained in this paragraph shall survive
the expiration or termination of the Lease.
EXHIBIT "T" TO OFFICE LEASE AGREEMENT - Page Solo
EXHIBIT 13.1(i)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
COMMISSION FILE NUMBER: 1-11156
NGC CORPORATION
(Exact name of registrant as specified in its charter)
AND EACH OF THE SUBSIDIARY GUARANTORS OF $250 MILLION OF DEBT SECURITIES
DELAWARE 75-2386657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
13430 NORTHWEST FREEWAY
HOUSTON, TEXAS 77040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 507-6400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock, par value $.01 New York Stock Exchange
per share 6.75% Debt Securities
due 2005
Securities registered pursuant to Section 12(g) of the Act:None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes [X] No [ ]
The aggregate value of Common Stock held by non-affiliates of the registrant was
approximately $237,388,000 on March 28, 1996, (based on $12.25 per share, the
last sale price of the Common Stock as reported on the New York Stock Exchange
Composite Tape on such date). 110,722,066 shares of the registrant's Common
Stock were outstanding as of March 28, 1996.
DOCUMENTS INCORPORATED BY REFERENCE. As to Part III (items 10, 11, 12 and 13),
Notice and Proxy Statement for the 1996 Annual Meeting of Stockholders to be
filed not later than 120 days after December 31, 1995.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
- --------------------------------------------------------------------------------
NGC CORPORATION
FORM 10-K
Page
PART I
ITEM 1A Executive Officers ...............................................
ITEM 2 Properties .......................................................
ITEM 3 Legal Proceedings ................................................
ITEM 4 Submission Of Matters To A Vote Of Security Holders ..............
PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters ..........................................
Item 6 Selected Financial Data ..........................................
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................
Item 8 Financial Statements and Supplementary Data ......................
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .....................................
PART III
Item 10 Directors and Executive Officers of the Registrant ...............
Item 11 Executive Compensation ...........................................
Item 12 Security Ownership of Certain Beneficial Owners and Management ...
Item 13 Certain Relationships and Related Transactions ...................
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K .
Signatures ..................................................................
For definitions of certain terms used herein, see "Item 1. BUSINESS --
DEFINITIONS."
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
GENERAL
NGC Corporation ("NGC" or the "Company") is a leading North American
marketer of natural gas, natural gas liquids, crude oil and electric power and
is engaged in natural gas gathering, processing and transportation through
ownership and operation of natural gas processing plants, storage facilities and
pipelines. Acting in the role of a large-scale aggregator, processor, marketer
and reliable supplier of multiple energy products and services, NGC has evolved
into a "one-stop" energy commodity and service provider. Through joint ventures
in both Canada and the United Kingdom, the Company has expanded geographically
its vision of providing customers with multiple energy commodity needs combined
with cost-effective products and value added services. For the year ended
December 31, 1995, the Company reported revenues of $3.7 billion and net income
of $92.7 million.
NGC is a holding company that operates principally through two
subsidiaries, Natural Gas Clearinghouse ("Clearinghouse") and Trident NGL, Inc.
("Trident"). The Company is the result of a strategic business combination
("Combination"), consummated on March 14, 1995, between Clearinghouse and
Trident NGL Holding, Inc. ("Holding"), under which Holding was renamed NGC
Corporation. Following the Combination, British Gas plc, a United Kingdom
company ("British Gas"), and NOVA Corporation, an Alberta, Canada, company
("NOVA"), each indirectly owns approximately 35 percent of the outstanding
shares of common stock of the Company. British Gas and NOVA are among the
world's leading integrated natural gas service companies.
The principal executive office of the Company is located at 13430 Northwest
Freeway, Suite 1200, Houston, Texas 77040, and the telephone number of that
office is (713) 507-6400. NGC and its affiliates maintain marketing offices in
Boston, Massachusetts; Phoenix, Arizona; Englewood, Colorado; Rosemont,
Illinois; Tulsa, Oklahoma; Portland, Oregon; Pittsburgh, Pennsylvania; Mexico
City, Mexico; London, England and Calgary, Canada.
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DEFINITIONS
As used in this Form 10-K, the abbreviations listed below are defined
as follows:
BBL. 42 U.S. gallons, the basic unit for measuring
crude oil and natural gas condensate.
MBBLS. Volume of one thousand barrels.
MBBLS/D. Volume of one thousand barrels per day.
MMBBLS. Volume of one million barrels.
MMCF/D. Volume of one million cubic feet per day.
MMGALS. Volume of one millions gallons.
BCF. Volume of one billion cubic feet.
BCF/D. Volume of one billion cubic feet per day.
BPD. Barrels per day.
NGL Natural Gas Liquids.
SPOT. The Henry Hub cash price posting for natural gas
per the Inside FERC publication.
GROSS NGL PRODUCTION. The total volume of natural gas liquids extracted
from a natural gas stream by a gas processing
plant, adjusted for the Company's ownership
percentage in the plant.
NET NGL PRODUCTION. Gross NGL Production less volume taken-in-kind.
NYMEX New York Mercantile Exchange.
1
ACQUISITION OF GAS MARKETING AND MIDSTREAM ASSETS
On January 22, 1996, NGC and Chevron Corporation ("Chevron") jointly
announced they had entered into exclusive negotiations to merge substantially
all of Chevron's gas gathering, processing and marketing operations with NGC.
The combined company, which may retain the name NGC Corporation, will include
all of NGC and most of two Chevron business units: the Houston-based Natural Gas
Business Unit and Tulsa-based Warren Petroleum Company. As part of the proposed
transaction, NGC will market virtually all of Chevron's North American natural
gas production, NGLs and electricity as well as supply energy and feedstock to
virtually all of Chevron's refineries, chemical plants and other North American
facilities. For its contribution, Chevron will receive a total of 45.8 million
shares in the new company, in a combination of common and preferred stock, and
$300 million in cash and notes. Following consummation of the transaction,
Chevron, British Gas and NOVA will each own approximately 25 percent of the
outstanding common stock of the new company. The proposed transaction is
expected to be finalized in the second quarter of 1996.
The combination of NGC and the two Chevron business units will make the
combined company the leading marketer of natural gas in North America, with
average daily sales in excess of 10 billion cubic feet, or an estimated 14
percent of total North American gas consumption. The proposed transaction will
also establish NGC as the second largest producer and largest marketer of NGLs
in North America, with production of approximately 140,000 barrels per day and
sales of approximately 470,000 barrels per day. In addition, the proposed
transaction will allow NGC to expand its international operations and will
provide Chevron with an enhanced stake in the developing U.S. electric power
marketing industry.
BUSINESS
The Company has two primary business segments: (i) the natural gas and
electric power marketing segment and (ii) the natural gas liquids, crude oil and
gas transmission segment.
NATURAL GAS AND ELECTRIC POWER MARKETING
The Company's natural gas marketing activities consist of contracting to
purchase specific volumes of natural gas from suppliers at various points of
receipt to be supplied over a specific period of time; aggregating natural gas
supplies and arranging for the transportation of these gas supplies through
proprietary and third-party transmission systems; negotiating the sale of
specific volumes of natural gas over a specific period of time to local
distribution companies, utilities, power plants and other end-users; and
matching natural gas receipts and deliveries based on volumes required by
customers. The Company is also a provider of electric power products and
services in the United States.
NATURAL GAS PURCHASES. The Company purchases natural gas from a variety of
suppliers under contracts with varying terms and conditions intended to ensure a
stable supply of natural gas. When purchasing natural gas, the Company considers
price, location, liquids content and quantities available. In 1995, the Company
purchased natural gas in every major producing basin in the United States and
Canada from over 600 suppliers, ranging from major producers to small
independent companies. In recent years, Pan-Alberta Gas Ltd. ("Pan Alberta Gas")
and Apache Corporation ("Apache") were significant suppliers of natural gas to
the Company. An affiliate of the Company, Novagas Clearinghouse Ltd. ("NCL"),
acquired Pan Alberta Gas from NOVA in the second quarter of 1995 and effective
September 30, 1995, the gas supply contract with Apache terminated. The Company
believes sufficient alternative sources of natural gas are available and that
the termination of the Company's contract with Apache will not adversely affect
the Company's business. Further, the Company believes that the aforementioned
Chevron transaction will provide the Company with a significant natural gas
supply source. However, there can be no assurance that the Chevron transaction
will be consummated on the terms currently contemplated, if at all.
TRANSPORTATION. The Company arranges for transportation of the natural gas
it markets from the supplier receipt point to the delivery point requested by
the purchaser by utilizing its proprietary management information system to
schedule and nominate pipeline transportation and monitor transportation
availability. The Company generally retains title to the natural gas from the
receipt point to the delivery point and obtains transportation on unaffiliated
pipelines. The Company believes that its understanding of the United States'
pipeline network, along with the scale and geographic reach of its gas marketing
efforts, are important to the Company's success as a gas marketer. These
factors, as well as its efficiency in utilizing the gas transportation network,
allow the Company to provide its suppliers with multiple outlets for their
natural gas and, in times of significant changes in demand or supply due to
weather or other factors, to route gas to areas of the United States where it is
2
most needed. The Company attempts to reduce transportation charges by taking
advantage of its broad array of transportation agreements and by negotiating
competitive discounts. The Company uses a variety of transportation arrangements
to move its customers' volumes, including short-term and long-term firm and
interruptible agreements with pipelines and its customers.
NATURAL GAS SALES. The Company sells natural gas under sales agreements
that have varying terms and conditions intended to match seasonal and other
changes in demand. The Company's customer base consists primarily of gas and
electric utilities and industrial and commercial end-users. In 1995, sales were
made to over 850 customers located throughout the United States and parts of
Canada. For the year ended December 31, 1995, the Company's North American
operations sold an aggregate average of approximately 5.8 Bcf per day of natural
gas and during the fourth quarter of 1995 sold an aggregate 6.8 Bcf of natural
gas per day.
NATURAL GAS STORAGE, MARKETING HUBS AND MANAGEMENT INFORMATION SYSTEMS.
Natural gas storage capacity plays an important role in the Company's ability to
act as a full-service natural gas marketer by allowing it to manage relatively
constant gas supply volumes with uneven demand levels. Through the use of its
storage capabilities, the Company offers peak delivery services to satisfy
winter heating and summer electric-generating demands. Storage inventories also
provide performance security or "backup" service to the Company's customers. The
Company at various times leases short-term and long-term firm and interruptible
storage across the country.
The Company, together with three major gas utilities, maintains three
natural gas market area hubs to allow customers to manage short-term prices and
help solve imbalance and transportation problems. These strategic market hubs,
located where regional interstate pipelines converge, are designed to bring
buyers and sellers together over a broad geographic area. Services offered by
the hubs include wheeling, loaning, parking and title transfer, which complement
existing natural gas supply, transportation and storage services, and contribute
to a more efficient, reliable, cost-effective marketplace. Wheeling refers to
the simultaneous transfer of natural gas from one pipeline to another, while
loaning occurs when one party allows another party to borrow natural gas.
Parking services allow a customer to store natural gas in a hub for future
redelivery, while title transfer services allow a customer to assign title to
natural gas that is in storage.
The Company has developed a proprietary administrative, accounting and
management information system for its natural gas marketing and transportation
businesses and a complementary risk management information system. The Company
believes these proprietary systems provide it with a competitive advantage in
its natural gas marketing business.
FOREIGN MARKETS. The Company has entered into a joint venture with each of
its two principal stockholders, NOVA and British Gas, to provide energy
marketing services in Canada, the United Kingdom and Western Europe. The Company
owns an approximate 50 percent interest in NCL and a 49 percent interest in
Accord Energy Limited. ("Accord") and jointly controls each of these ventures.
NCL, formed by the Company and NOVA in 1994, is a full-service gas
gathering, processing, storage and marketing company operating in Canada. By
combining the Company's marketing and risk management capabilities with NOVA's
established operations and technical expertise, NCL is strategically positioned
to provide Canadian producers and consumers with comprehensive, value-added
services. NCL supplies natural gas and provides related services to customers in
the utility, industrial, commercial and other core marketing segments across
Canada. As previously stated, in June 1995 NCL acquired Pan Alberta Gas which
has served Canadian producers for more than 20 years as a major aggregator,
transporter and marketer of natural gas. The combined operations of NCL and Pan
Alberta Gas sold an average of 3.1 Bcf per day of natural gas in the fourth
quarter of 1995.
Accord was formed by the Company and British Gas in 1994 to develop energy
marketing and trading opportunities in the United Kingdom and, ultimately,
Western Europe. Accord is an active participant in the U.K. wholesale natural
gas and crude oil markets and purchases products from a wide assortment of
producers, including British Gas. In the fourth quarter of 1995, Accord sold an
average 0.5 Bcf per day of natural gas.
ELECTRIC POWER MARKETING. The Company formed Electric Clearinghouse, Inc.
("ECI") in February 1994 to pursue electric power marketing opportunities that
are being created as the domestic electric power industry becomes deregulated.
On January 1, 1995, ECI's trading center began real-time operations, trading and
scheduling power 24 hours a day, 365 days a year. ECI is also an electricity
risk management market maker, providing products and services similar to those
that are currently used
3
in the natural gas industry to manage customers' price risks. The Company's
electric power sales averaged 402 megawatts per hour in 1995 and have increased
from an average of 88 megawatts per hour in January 1995 to an average of 651
megawatts per hour during the last quarter of 1995.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
The Company's natural gas liquids, crude oil and gas transmission segment
includes natural gas gathering and processing, fractionation, NGL marketing,
natural gas transmission and crude oil marketing operations. The Company's
natural gas liquids business complements its natural gas marketing business by
providing the Company's customers with a full range of NGL products and related
services.
NATURAL GAS GATHERING AND PROCESSING. The natural gas processing industry
is a major segment of the oil and gas industry, providing the necessary service
of refining raw natural gas into marketable pipeline quality natural gas and
NGLs. The Company currently owns interests in 33 gas processing plants,
including 26 plants which it operates, and operates approximately 10,700 miles
of natural gas gathering pipeline systems. These assets are primarily located in
the key producing areas of Texas, Louisiana, Oklahoma and Kansas. During 1995,
on a pro forma basis giving effect to the Combination, the Company processed an
average of more than 2.0 Bcf per day of natural gas and produced an average of
84,000 barrels per day of NGLs, net to the Company's ownership interest.
FRACTIONATION. The NGLs removed from the natural gas stream at gas
processing plants are generally in the form of a commingled stream of liquid
hydrocarbons (raw product). The commingled NGLs are separated at fractionation
facilities into the component products ethane, propane, normal butane, isobutane
and natural gasoline. The Company has ownership interests in three fractionation
facilities. During 1995, the Company received 1,756 million gallons of product
for fractionation.
NGL MARKETING. The Company maintains a diversified NGL marketing program,
which includes all commercial NGL products, and currently markets these products
through a number of delivery means, including pipelines, trucks, tank cars,
barges and ships. The Company markets its own NGL production and also purchases
NGLs from third parties for resale. Through the Company's strategic combination
of pipeline connections, terminals and storage facilities, the Company moves NGL
products from producing regions in the Gulf Coast and Midwest to most major
domestic and international markets. The Company operates a large-scale marine
terminal in Hackberry, Louisiana, which can be used for both exporting and
importing NGLs. This terminal offers importers a variety of methods for
transporting products to the marketplace.
NGLs are typically consumed as a fuel or as petrochemical or petroleum
refining feedstocks. NGL fuel markets are dominated by propane, which is used in
commercial and residential heating and cooking, crop drying and as a motor fuel.
Petrochemical feedstocks are used principally in the production of ethylene, a
chemical used in the production of various plastics.
NATURAL GAS TRANSMISSION. Ozark Gas Transmission System ("Ozark"), acquired
by the Company in May 1995, expanded the Company's transmission capabilities.
Ozark gathers gas from eastern Oklahoma and transports it to central Arkansas,
where the system interconnects with interstate pipelines that serve the Midwest
and Northeast markets. The Company also operates an intrastate natural gas
pipeline system in south-central Kansas, which serves markets in the Wichita
area and throughout the Midwest and Mid-Continent areas on interconnected
intrastate and interstate pipelines.
CRUDE OIL MARKETING. The Company provides a full range of crude oil
marketing services to producers, and serves the United States refining community
as a regionally diversified supplier of crude oil. Through its participation in
major trading centers in the Mid-Continent, Rocky Mountain and Gulf Coast areas,
the Company has established itself as a dependable source of competitively
priced crude oil. In August 1995, the Company acquired the Oklahoma crude oil
pipeline and truck gathering assets of Kerr-McGee Refining & Marketing
Corporation. The 1,300-mile system gathers crude oil in 25 central and southern
Oklahoma counties, accessing more than half of the state's production, and
serves the U.S. crude oil trading hub in Cushing, Oklahoma and the Wynnewood,
Oklahoma refinery.
4
RISK MANAGEMENT ACTIVITIES
NGC utilizes certain types of fixed-price contracts in connection with
its natural gas and NGL marketing lines of business. These contracts include
contracts which commit the Company to purchase or sell energy commodities at
fixed prices in the future (i.e. fixed-price forward purchase and sales
contracts), futures and options contracts traded on the NYMEX and swaps and
options traded in the over-the-counter financial markets.
The availability and use of these types of contracts allow NGC to
manage and hedge its fixed-price purchase and sales commitments, to provide
fixed-price commitments as a service to its customers and suppliers, to reduce
its exposure relative to the volatility of cash market prices and to protect its
investment in storage inventories. The Company may, at times, have a bias in the
market, within established limits, resulting from the management of its
portfolio. In addition, by utilizing exchange for physical transactions allowed
by the NYMEX, which enable entities to take delivery of, or sell, a physical
quantity of natural gas in exchange for a futures position, NGC is able to
secure additional sources of physical natural gas supply, or create additional
markets for existing supply, through the use of natural gas futures contracts.
These fixed-price activities are referred to herein as risk management
activities.
Although the Company generally attempts to balance its fixed-price
physical and financial purchase and sales contracts in terms of contract volumes
and the timing of performance and delivery obligations, net open positions often
exist or are established due to the origination of new transactions and the
assessment of, and response to, changing market conditions. NGC will take
advantage of its bias in the market when it believes, based upon competitive
information gained from its energy marketing activities, that future price
movements will be consistent with its net open position. To the extent net open
positions exist, NGC is exposed to the risk that fluctuating market prices may
adversely impact its financial position or results of operations.
In addition to the risk associated with price movements, credit risk is
also inherent in the Company's risk management activities. Credit risk relates
to the risk of loss resulting from the nonperformance of contractual obligations
by a counterparty. NGC maintains credit policies with regard to its
counterparties which the Company believes significantly minimizes its overall
credit risk.
NGC has established a risk management committee which oversees its risk
management activities. This committee meets regularly to establish the Company's
overall risk management strategy and to monitor and ensure compliance with risk
management limitations, policies and procedures.
To assist in the monitoring of its risk management activities, NGC has
developed a risk management information system which allows monitoring of its
risk management activities and provides the wherewithal to assess the impact of
changing market conditions. The Company believes this proprietary risk
management information system provides risk management monitoring capability
rarely duplicated by its competitors.
THE COMBINATION
On October 21, 1994, Clearinghouse and Holding entered into a
definitive agreement providing for the strategic business combination of the two
companies. The Combination was consummated on March 14, 1995, with an effective
date of March 1, 1995, for accounting purposes.
Pursuant to the terms of the Combination, Holding, the legally
surviving corporation in the Combination, was renamed NGC Corporation and (i)
acquired through a tender offer (the "Tender Offer") 14.2 million shares of
Holding common stock (representing approximately 50 percent of the Holding
common stock outstanding immediately prior to the consummation of the
Combination) for $11.75 per share, net to the seller in cash; (ii) acquired
directly and indirectly, all of the outstanding general partnership interests in
Clearinghouse; (iii) the former owners of the partners of Clearinghouse (the
"Clearinghouse Owners") acquired 82 percent of the outstanding shares of NGC
common stock (giving effect to the issuance, but not allocation, of the
"Contingent Shares" (as defined below)), and (iv) the stockholders of Holding
prior to consummation of the Combination retained shares of common stock
representing approximately 13 percent of the outstanding shares of NGC common
stock (giving effect to the issuance, but not allocation, of the Contingent
Shares). The Contingent Shares, which total 5,461,538 shares of NGC common stock
and represent approximately 5 percent of the outstanding shares of NGC common
stock after giving effect
5
to the issuance of such shares, will be allocated in March 1996 in a ratio of 17
percent to the former stockholders of Holding and 83 percent to the
Clearinghouse Owners.
The Combination was accounted for under the purchase method of
accounting. Because the Clearinghouse Owners acquired approximately 82 percent
of NGC, Clearinghouse was the acquiring company for accounting purposes.
Accordingly, the purchase price of approximately $350 million was allocated to
the Trident assets acquired and liabilities assumed based on their estimated
fair values as of March 1, 1995, and the results of operations presented in the
financial statements contained in Item 8. of this Form 10-K include Trident's
results from March 1, 1995, forward.
RECENT DEVELOPMENTS
In 1995, NGC filed with the Securities and Exchange Commission a shelf
registration that provides for the issuance of $250 million of debt securities
pursuant to Rule 415 of the Securities Act of 1933. On December 15, 1995, under
this shelf registration, the Company sold $150 million of 6.75% Senior Notes due
December 15, 2005 ("Notes"). The Notes were issued at a price of 99.984 percent,
which, after deducting underwriting discounts and commissions, resulted in net
proceeds to the Company of approximately $149 million. Proceeds from the sale of
these notes were used to repay a portion of the Company's outstanding bank debt
under its $550 million revolving credit facility.
During 1995, the Company consummated several strategic asset
acquisitions, each of which expanded core business operations or enhanced the
economic viability of non-core businesses. Each of these transactions was
accounted for as a purchase of assets with the results of operations of the
acquired asset(s) included in the Company's consolidated results of operations
from the effective date of the transaction forward.
Effective May 1, 1995, NGC acquired Ozark for $44.8 million. Ozark
gathers gas from eastern Oklahoma and transports it to central Arkansas, where
the system interconnects with interstate pipelines that serve the Midwest and
Northeast markets. The Ozark gas transmissions system is a 266-mile interstate
natural gas pipeline having design capacity of 170 MMcf/d.
Effective June 1, 1995, NCL acquired Pan Alberta Gas from NOVA. NGC, as
an approximate 50 percent partner in NCL, contributed $13.7 million in cash to
NCL, representing its proportionate share of the acquisition value of Pan
Alberta Gas. The combined NCL/Pan Alberta Gas entity offers natural gas supply
services to consumers across Canada and provides gas gathering, processing,
storage and marketing services to Canadian natural gas producers. The
acquisition of Pan Alberta Gas provided NCL with access to long-term Canadian
gas supplies and ownership of the limited supply of pipeline capacity extending
across the border from Canada to the U.S.
In August 1995, the Company acquired the Oklahoma crude oil pipeline
and truck gathering assets of Kerr-McGee Refining & Marketing Corporation for
$8.3 million. The 1,300-mile system gathers crude oil in 25 central and southern
Oklahoma counties, accessing more than half of the state's production, and
serves the U.S. crude oil trading hub in Cushing, Oklahoma, and the Wynnewood,
Oklahoma refinery.
In October 1995, NGC purchased various gas gathering and processing
assets located in Kansas and Oklahoma from Sheffield Exploration Company, Inc.,
for $5.5 million. The Kansas-based assets include 284 miles of gathering lines
having throughput capacity of 7 MMcf/d and a storage reservoir having 1.2
billion cubic feet of capacity. The assets located in Oklahoma include 10 miles
of gathering lines and a gas processing facility capable of processing 4.5
MMcf/d.
In December 1995, NGC acquired the 180-mile Okeene gas gathering system
from ONG Gas Gathering Company, a subsidiary of ONEOK, Inc., for $2.4 million.
The gathering system extends through several central Oklahoma counties and
gathers approximately 18.5 million cubic feet per day of natural gas.
In February 1996, the Company consummated the acquisition of LPG
Services Group, Inc. ("LPG"), a Kansas City-based propane gas marketing and
distribution company for $2 million in cash and up to an additional $6.25
million in conditional payments primarily based on LPG's financial performance.
The acquisition of LPG provides the Company with a developed wholesale propane
marketing infrastructure which, in conjunction with NGC's established production
base and supply system, expands the Company's propane business nationwide.
6
COMPETITION
All phases of the businesses in which NGC is engaged are highly
competitive. In connection with both domestic and foreign operations, the
Company encounters strong competition from companies of all sizes, having
varying levels of financial and personnel resources.
NGC competes in its gas marketing business with other natural gas
merchants, producers and pipelines for sales based on its ability to aggregate
competitively priced supplies from a variety of sources and locations and to
efficiently utilize transportation through third-party pipelines. In past years,
the spot marketing business had a low cost barrier to entry; therefore, a number
of the Company's competitors were privately owned and relatively small in size
and may have been comparatively undercapitalized to meet the increasing
financial requirements of the natural gas industry. However, with respect to its
marketing operations, NGC anticipates that market customers will increasingly
scrutinize the financial condition of their suppliers to assure that contract
obligations will be met; suppliers and transporters will demand more stringent
credit terms to secure the performance of natural gas merchants; the increased
role of storage and other risk management tools will add to the financial costs
of doing business; the increasing availability of pricing information to
participants in the natural gas industry will continue to exert downward
pressure on per-unit profit margins in the industry; suppliers will have to be
multi-fuel marketers; and large competitors, such as megamarketer alliances,
will create competition from entities having significant liquidity and other
resources. As a result, NGC believes its financial condition and its access to
capital markets will play an increasing role in distinguishing the Company from
many of its competitors. Operationally, NGC believes its ability to remain a low
cost merchant and effectively combine value-added services, competitively priced
supplies and price risk management will determine the level of success in its
natural gas marketing operations.
NGC's electric power business is similar to its gas marketing business
in that it provides natural gas contract services to electric utilities, markets
and supplies electricity and invests in power-related assets and joint ventures.
As a result, the competition issues incumbent upon the Company's gas marketing
operations similarly impact the Company's electric power marketing business. As
with its gas marketing operations, the Company believes it has the ability to
establish itself as a low cost and dependable merchant providing competitively
priced supplies and a variety of services which will differentiate NGC from the
competition.
The Company's natural gas liquids, crude oil marketing and gas
transmission businesses face significant competition from a variety of
competitors including major integrated oil companies, major pipeline companies
and their marketing affiliates and national and local gas gatherers, processors,
brokers, marketers and distributors of varying sizes and experience. The
principal areas of competition include obtaining gas supplies for gathering and
processing operations, obtaining supplies of raw product for fractionation, the
marketing of NGLs, crude oil, residue gas, helium, condensate and sulfur, and
the transportation of natural gas, NGLs and crude oil. Competition typically
arises as a result of the location and operating efficiency of facilities, the
reliability of services and price and delivery capabilities. The Company
believes it has the infrastructure, long-term marketing abilities, financial
resources and management experience to enable it to compete effectively.
REGULATION
GENERAL. The Company is subject to the laws, rules and regulations of
the countries in which it conducts its operations. Domestically, numerous
departments and agencies at federal, state and local levels have issued rules
and regulations affecting the energy industry, some of which carry substantial
penalties for non-compliance. Internationally, environmental and other
regulatory matters are evolving as detailed rules and procedures are established
and their application and interpretation defined. The regulatory burden on the
energy industry increases its cost of doing business and, consequently, affects
its profitability. Inasmuch as these rules and regulations are frequently
amended or reinterpreted, the Company is unable to predict the future cost or
impact of complying with such regulations. These rules and regulations affect
the industry as a whole; therefore, the Company does not believe that it is
affected in a significantly different manner from its competitors.
REGULATORY MATTERS. The transportation and sale for resale of natural
gas is subject to regulation by the Federal Energy Regulatory Commission
("FERC") under the Natural Gas Act of 1938, as amended ("NGA") and, to a lesser
extent, the Natural Gas Policy Act of 1978, as amended ("NGPA"). Interstate
transportation and storage services by natural gas companies, including
interstate pipeline companies, and the rates charged for such services, are
regulated by the FERC. Certain of the
7
Company's pipeline activities and facilities are involved in interstate
transportation of natural gas and NGLs, and are subject to these federal
regulations.
Legislative and regulatory changes began in 1978 with the passage of
the NGPA, which initiated the process of price deregulation of gas sold at the
wellhead. Since 1978, various federal laws have been enacted which have resulted
in the termination on January 1, 1993 of all price and non-price controls for
natural gas sold in "first sales."
Commencing in 1985, the FERC promulgated a series of orders and
regulations adopting changes that significantly altered the business of
transporting and marketing natural gas by fostering competition. The thrust of
these regulations was to induce interstate pipeline companies to provide
nondiscriminatory transportation services to producers, distributors and other
shippers. The effect of the foregoing regulations has been the creation of a
more open access market for natural gas purchases and sales and the creation of
a business environment which has fostered the evolution of various unregulated,
privately negotiated natural gas sales, purchase and transportation
arrangements.
Order 636, issued in April 1992, as amended by Order 636-A (issued in
August 1992) and Order 636-B (issued in November 1992), was a continuation of
the FERC's efforts to improve the competitive structure of the pipeline industry
and to maximize consumer benefits resulting from a competitive structure of the
pipeline industry and a competitive wellhead gas market. The FERC's goal, as
stated in Order 636, "is to recognize the current characteristics of the natural
gas industry -- and to create a regulatory framework that will accommodate the
meeting of as many gas sellers and gas buyers as possible."
In Order 636, the FERC required interstate pipelines that perform open
access transportation under blanket certificates to "unbundle" or separate their
traditional merchant sales services from their transportation and storage
services and to provide comparable transportation and storage services with
respect to all gas supplies whether purchased from the pipeline or from other
merchants such as marketers or producers. The pipelines must now separately
state the applicable rates for each unbundled service (i.e., for the gas
commodity, transportation and storage). The unbundling and separate pricing of
services has significantly affected the pipelines' merchant function and
required a major restructuring of the relationships between pipeline companies
and their customers.
Certain segments of the industry have opposed aspects of Order 636, and
many parties have sought judicial review of Order 636. It is impossible for the
Company to predict the ultimate outcome regarding this judicial process because,
upon review, Order 636 may be reversed in whole or in part. In addition, parties
have sought judicial review of most of the FERC orders approving individual
pipeline restructuring plans which were authorized pursuant to Order 636.
Therefore, NGC cannot predict the ultimate outcome or permanence of the
unbundled regulatory regime of Order 636.
GAS PROCESSING. NGC's gas processing plant's primary function is the
extraction of NGLs and not natural gas transportation. The FERC has
traditionally maintained that a processing plant is not a facility for
transportation or sale for resale of natural gas in interstate commerce and
therefore is not subject to jurisdiction under the NGA. Even though the FERC has
made no specific declaration as to the jurisdictional status of the Company's
gas processing operations or facilities, NGC believes its gas processing plants
are primarily involved in removing NGLs and therefore exempt from FERC
jurisdiction.
GATHERING. The NGA exempts gas gathering facilities from the
jurisdiction of the FERC. Interstate transmission facilities, on the other hand,
remain subject to FERC jurisdiction. The FERC has historically distinguished
between these two types of facilities on a fact-specific basis. NGC believes its
gathering facilities and operations meet the current tests used by the FERC to
determine a nonjurisdictional gathering facility status. Some of the recent
cases applying these tests in a manner favorable to the determination of NGC's
nonjurisdictional status are still subject to rehearing and appeal. In addition,
the FERC's articulation and application of the tests used to distinguish between
jurisdictional pipelines and nonjurisdictional gathering facilities have varied
over time. While the Company believes current definitions create
nonjurisdictional status for NGC's gathering facilities, no assurance can be
given that such facilities will remain classified as gas gathering facilities
and the possibility exists that the rates, terms, and conditions of the services
rendered by those facilities, and the construction and operation of the
facilities will be subject to regulation by the FERC or by the various states in
the absence of FERC regulation.
PRORATION. The states of Texas and Oklahoma have adopted changes to oil
and gas production and proration regulations, as well as other regulatory
changes, that could affect volumes of gas available for purchase by NGC. To
date, the Company
8
has not experienced any material reductions in available supplies due to
proration. Nevertheless, these or future proration regulation revisions may
materially affect NGC's ability to purchase gas supplies.
MARKET HUBS. The market hubs for which Hub Services, Inc., a wholly
owned subsidiary of NGC, serves as hub administrator are combined gas storage,
transportation and interchange facilities. To the extent the market hubs provide
services in intrastate commerce, the rates, terms and conditions of service are
regulated by the applicable state public utility commissions. To the extent the
market hubs provide service in interstate commerce subject to the NGA or NGPA,
the FERC has overlapping regulatory authority with respect to rates, terms and
conditions of service.
OTHER REGULATORY ISSUES. The Company's gas purchases and sales are
generally not regulated by the FERC; however, as a gas merchant, the Company
depends on the gas transportation and storage services offered by various
interstate and intrastate pipeline companies to enable the sale and delivery of
its gas supplies. Additionally, certain other pipeline activities and facilities
of the Company are involved in intrastate transportation and storage services
and are subject to various state regulations which generally regulate rates,
terms and conditions of service.
ENVIRONMENTAL MATTERS
NGC's operations are subject to extensive federal, state and local
statutes, rules and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. Compliance with
these statutes, rules and regulations requires capital and operating
expenditures including those related to monitoring and permitting at various
operating facilities and remediation obligations. The Company's environmental
expenditures have not been prohibitive in the past, but are anticipated to
increase in the future with the trend toward stricter standards, greater
regulation, more extensive permitting requirements and an increase in the number
of assets operated by the Company subject to environmental regulation.
The vast majority of federal environmental remediation provisions are
contained in the Superfund laws -- the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Superfund Amendments and
Reauthorization Act ("SARA") and in the corrective action provisions of the
Federal Resource Conservation and Recovery Act ("RCRA"). Typically, the
Environmental Protection Agency ("EPA") acts pursuant to Superfund legislation
to remediate facilities that are abandoned or inactive or whose owners are
insolvent; however, the legislation may be applied to sites still in operation.
Superfund law imposes liability, regardless of fault or the legality of the
original conduct, on certain classes of persons that contributed to the release
of a "hazardous substance" into the environment. These persons include the
current or previous owner and operator of a site and companies that disposed, or
arranged for the disposal, of the hazardous substance found at a site. CERCLA
also authorizes the EPA and, in certain instances, private parties to take
actions in response to threats to public health or the environment and to seek
recovery from such responsible party. RCRA provisions apply to facilities that
have been used to manage or are currently managing hazardous waste and which are
either still in operation or have recently been closed. As amended, RCRA
requires facilities to remedy any releases of hazardous wastes or hazardous
waste constituents at waste treatment, storage or disposal facilities.
NGC is subject to the environmental risks normally incident to the
operation and construction of storage facilities, pipelines, plants and other
facilities for gathering, processing, treating, storing and transporting natural
gas and other products including, but not limited to, uncontrollable flows of
natural gas, fluids and other substances into the environment, fires, pollution
and other environmental and safety risks. These activities are subject to
environmental and safety regulation by federal and state authorities, including,
without limitation, the EPA, the Arkansas Department of Pollution Control and
Ecology, the Kansas Department of Health and Environment, the Kansas Corporation
Commission, the Louisiana Department of Environmental Quality, the Oklahoma
Department of Environmental Quality, the Oklahoma State Department of Health,
the Oklahoma Water Resources Development Board, the Texas Railroad Commission,
Texas Natural Resources Conservation Commission, the Utah Department of
Environmental Quality and the Wyoming Department of Environmental Quality. The
design, construction, operation and maintenance of the Company's pipeline
facilities are subject to the safety regulations established by the Secretary of
the Department of Transportation pursuant to the Natural Gas Pipeline Safety Act
("NGPSA"), or by state regulations meeting the requirements of the NGPSA.
In connection with the acquisition of substantially all of the natural
gas liquids business of OXY USA, Inc. ("OXY USA") by Holding in 1991, OXY USA
agreed to indemnify Trident for any liability, claims, damages, costs, duties of
remediation or loss of use resulting from the following environmental claims;
tort liability to third persons as a result of Emissions or
9
exposure to Environmental Contaminants (as such terms are defined in the
Acquisition Agreement between OXY USA and Holding ("Acquisition Agreement"))
resulting from operations of OXY USA prior to the closing date of the
transaction between OXY USA and Holding ("Acquisition Closing Date"); the
presence or emission of environmental contaminants related to the existence on
the properties operated by OXY USA of landfills or pits which, as of the
Acquisition Closing Date, were no longer in service; any untrue environmental
representation or warranty or the breach of any environmental representation,
warranty or covenant contained in the Acquisition Agreement (if notice of the
claim is provided to OXY USA prior to the tenth anniversary of the Acquisition
Closing Date, or August 30, 2001); the designation of Trident as a Potentially
Responsible Party under CERCLA or any analogous state statute as a result of
onsite or offsite disposal of hazardous substances that occurred prior to the
Acquisition Closing Date, or the listing of any of Trident's properties on the
National Priorities List under CERCLA or any similar state law as a result of
onsite disposal of hazardous substances prior to the Acquisition Closing Date;
fines or penalties for which Trident may become liable with respect to any
violation of environmental laws (as they existed on the Acquisition Closing
Date) that occurred prior to the Acquisition Closing Date; all past, present or
future emissions of environmental contaminants associated with the fractionator
located within the CITGO refinery at Sulphur, Louisiana; and any environmental
liability associated with certain disclosed exceptions to OXY USA's
environmental representations and warranties. In addition, OXY USA agreed to
indemnify Trident against any and all liabilities, claims, damages, costs,
duties of remediation or loss of use resulting from or related to emissions
(whether onsite or offsite) of environmental contaminants in, on, at or from
Trident's properties that result from operations that occurred prior to the
Acquisition Closing Date if such claims, damages, costs or liabilities are not
covered by any matter described in the preceding sentences, and if notice of the
claims is provided to OXY USA prior to the tenth anniversary of the Acquisition
Closing Date. The Acquisition Agreement provides, however, that Trident will
contribute 30 percent of the first $25 million (i.e., up to a maximum of $7.5
million) of any such liabilities, claims, damages, costs, duties of remediation
or loss of use resulting from or relating to any such emissions of environmental
contaminants. The Company believes that OXY USA has sufficient financial
resources to satisfy its environmental indemnity obligations.
In acquiring other operating assets from third parties, NGC has often
been required to indemnify the seller against losses arising from pre-closing
environmental liabilities, although in other instances it has been indemnified
against such losses by the seller. To minimize its exposure for such
liabilities, environmental audits of the assets NGC wishes to acquire are made,
either by NGC personnel, outside environmental consultants, or a combination of
the two. The Company has not heretofore incurred any material environmental
liabilities arising from its acquisition activities. The incurrence of a
material environmental liability, and/or the failure of an indemnitor to meet
its indemnification obligations with respect thereto, could have a material
adverse effect on NGC's operations and financial condition.
To the Company's knowledge, it is in substantial compliance with, and
is expected to continue to comply in all material respects with, applicable
environmental laws, regulations, orders and rules. Further, to the best of the
Company's knowledge, there are no existing, pending or threatened actions,
suits, investigations, inquiries, proceedings or clean-up obligations by any
governmental authority or third party relating to any violations of any
environmental laws with respect to the Company's assets which would have a
material adverse effect on the Company's operations and financial condition.
NGC's aggregate expenditures for compliance with laws and regulations related to
the discharge of materials into the environment or otherwise related to the
protection of the environment totaled $2.2 million in 1995. Total environmental
expenditures for both capital and operating maintenance and administrative costs
are not expected to exceed $4 million in 1996.
The Company's operations are subject to the requirements of the Federal
Occupational Safety and Health Act ("OSHA") and other comparable state statutes.
The OSHA hazard communication standard, the EPA community right-to-know
regulations under Title III of the Federal Superfund Amendment and
Reauthorization Act and similar state statutes require that information be
organized and maintained about hazardous materials used or produced in its
operations. Certain of this information must be provided to employees, state and
local government authorities and citizens. The Company believes it is in
substantial compliance with these rules and regulations.
OPERATIONAL RISKS AND INSURANCE
NGC is subject to all risks inherent in the various businesses in which
it operates. These risks include, but are not limited to, explosions, fires and
product spillage, which could result in damage to or destruction of operating
assets and other property, or could result in personal injury, loss of life or
pollution of the environment, as well as curtailment or suspension of operations
at the affected facility.
10
NGC maintains general public liability, property and business
interruption insurance in amounts that it considers to be adequate for such
risks. Such insurance is subject to deductibles that the Company considers
reasonable and not excessive.
The occurrence of a significant event not fully insured or indemnified
against, and/or the failure of a party to meet its indemnification obligations,
could materially and adversely affect NGC's operations and financial condition.
Moreover, no assurance can be given that NGC will be able to maintain insurance
in the future at rates it considers reasonable.
EMPLOYEES
The Company employs approximately 430 employees at its administrative
offices and approximately 625 employees at its operating facilities.
Approximately 130 employees at Company-operated facilities are subject to
collective bargaining agreements with the Oil, Chemical and Atomic Workers
International Union or the Lake Charles Metal Trades Council. Management
considers relations with both union and non-union employees to be satisfactory.
ITEM 1A. EXECUTIVE OFFICERS
Set forth below are the names and positions of the current executive
officers of the Company, together with their ages, position(s) and years of
service with the Company.
<TABLE>
<CAPTION>
SERVED WITH
THE COMPANY
NAME AGE * POSITION(S) SINCE
<S> <C> <C> <C>
C. L. Watson 46 Chairman of the Board, Chief Executive Officer, 1985
President and a Director of the Company
Stephen W. Bergstrom 38 Senior Vice President and a Director of the 1986
Company; President of Clearinghouse
Bruce M. Withers, Jr. 69 Vice Chairman of the Company and Chief 1995
Executive Officer of Trident NGL, Inc.
H. Keith Kaelber 47 Senior Vice President and Chief Financial Officer 1990
of the Company
Kenneth E. Randolph 39 Senior Vice President, General Counsel and 1984
Secretary of the Company
</TABLE>
* As of April 1, 1996.
The executive officers named above will serve in such capacities until
the next annual meeting of the Company's Board of Directors, or until their
respective successors have been duly elected and have been qualified, or until
their earlier death, resignation, disqualification or removal from office.
C. L. Watson serves as Chairman of the Board, Chief Executive Officer,
President, and a Director of the Company. He has served as Chairman and as a
member of the Management Committee since May 1989 and Chief Executive Officer
and President of NGC (or its predecessor, Clearinghouse) since September 1985.
Prior to his employment with the Company, Mr. Watson served as Director of Gas
Sales for the Western United States for Conoco Inc.
Stephen W. Bergstrom serves as Senior Vice President and a Director of
the Company and as President of Clearinghouse. He has served as Executive Vice
President of NGC (or its predecessor, Clearinghouse) and as a member of the
Management Committee since May 1989. In addition, Mr. Bergstrom served as Senior
Vice President -- Gas Marketing and Supply of Clearinghouse from May 1987
through May 1990 and as Vice President -- Gas Supply of Clearinghouse from July
1986
11
through May 1987. Prior to his employment with the Company, Mr. Bergstrom served
as Vice President -- Gas Supply of Enron Gas Marketing, a subsidiary of Enron
Corp.
Bruce M. Withers, Jr. serves as Vice Chairman of the Company and
Chairman of the Board and Chief Executive Officer of Trident. He served as
Chairman of the Board and Chief Executive Officer of Holding and Trident prior
to the Combination with Clearinghouse. Prior to his employment with Holding and
Trident, which began in 1991, Mr. Withers was employed by Mitchell Energy for 17
years where he served as President of the Transmission and Processing Division.
H. Keith Kaelber serves as Senior Vice President and Chief Financial
Officer of the Company. He has served as Senior Vice President and Chief
Financial Officer of NGC (or its predecessor, Clearinghouse) since August 1990.
Prior thereto, Mr. Kaelber was employed by NCNB, which has since become
NationsBank, from 1978 to 1990, serving as Executive Vice President.
Kenneth E. Randolph serves as Senior Vice President, General Counsel
and Secretary of the Company. He has served as Senior Vice President and General
Counsel of NGC (or its predecessor, Clearinghouse) since July 1987. In addition,
he served as a member of the Clearinghouse Management Committee from May 1989
through February 1994 and managed Clearinghouse's marketing operations in the
Western and Northwestern United States from July 1984 through July 1987. Prior
to his employment with the Company, Mr. Randolph was associated with the
Washington, D.C. office of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
ITEM 2. PROPERTIES
All of the Company's operating assets are held through wholly owned
subsidiaries. The Company's operations are principally located in Texas,
Oklahoma, Louisiana, Kansas, Arkansas, Utah, western Canada and the United
Kingdom. Current year activity conducted in these areas is discussed under "Item
1. BUSINESS -- General." Following is a description of such properties owned by
the Company at December 31, 1995.
GATHERING SYSTEMS AND PROCESSING FACILITIES
NGC's natural gas processing services are provided at two types of gas
processing plants, referred to as field plants and straddle plants. Field plants
aggregate volumes from multiple producing wells into quantities that can be
economically processed to extract NGLs and to remove water vapor, solids and
other contaminants. Straddle plants are situated on third-party mainline natural
gas pipelines and serve to provide flexibility to changing market conditions by
allowing operators to extract NGLs from a natural gas stream when the market
value of NGLs separated from the natural gas stream is higher than the market
value of the same unprocessed natural gas. NGC owns an interest in 22 field
plants which are each associated with a gas gathering system that collects and
transports natural gas from individual wells to the plant. The Company owns an
interest in 18 of the gas gathering systems associated with its field plants.
The gathering systems associated with the other 4 field plants are owned
entirely by third parties. The remaining 11 gas processing plants in which NGC
owns an interest are straddle plants. The Company owns an interest in the gas
gathering systems associated with 2 of these straddle plants, with the remainder
being owned entirely by third parties. The following table provides certain
information, including operational data for the year ended December 31, 1995,
concerning the gathering systems and gas processing plants in which NGC owns an
interest.
<TABLE>
<CAPTION>
LOCATION TOTAL PLANT
----------------- -----------------------------
COUNTY/ PRACTICAL 1995 INLET GAS NGL
GAS PROCESSING FACILITIES % OWNED PARISH STATE CAPACITY(3) THROUGHPUT PRODUCTION
(MMCFD)(1) (BPD)(2)
<S> <C> <C> <C> <C> <C> <C>
COMPANY OPERATED:
*Ambrose (4)(10)(12) ...................100.00 Kay OK 400.0 163.6 5,052
*Barracuda (8) ...................100.00 Cameron LA 195.0 184.3 5,164
Binger (4) ...................100.00 Caddo OK 8.0 7.5 820
Breckenridge (4)(12)...................100.00 Stephens TX 15.0 8.9 1,357
Bridger Lake (9) ..............100 - 33.33 Summit UT 25.0 11.1 378
*Cameron (4)(12)(13) ....................50.00 Cameron LA 500.0 357.3 3,467
*Cheney (12) ...................100.00 Kingman KS 85.0 65.8 3,595
Chico (4)(12) ...................100.00 Wise TX 100.0 66.3 10,691
</TABLE>
12
<TABLE>
<CAPTION>
LOCATION TOTAL PLANT
----------------- -----------------------------
COUNTY/ PRACTICAL 1995 INLET GAS NGL
GAS PROCESSING FACILITIES % OWNED PARISH STATE CAPACITY(3) THROUGHPUT PRODUCTION
(MMCFD)(1) (BPD)(2)
<S> <C> <C> <C> <C> <C> <C>
Company Operated:
East Texas (4)(12) ................... 100.00 Gregg TX 33.0 24.3 4,746
Eustace (4)(12) ...................... 100.00 Henderson TX 64.0 29.8 2,267
Haynesville I ........................ 96.00 Claiborne LA 35.0 33.8 1,104
Haynesville II ....................... 100.00 Claiborne LA 50.0 53.2 2,829
*Jayhawk (12) ......................... 100.00 Grant KS 480.0 393.4 10,432
Kellerville (4)(12) .................. 100.00 Wheeler TX 9.5 5.9 1,223
Lefors (4)(12) ....................... 100.00 Gray TX 11.6 6.7 1,617
*Lowry (12) ........................... 100.00 Cameron LA 300.0 222.7 5,501
Madill (4)(12) ....................... 100.00 Marshall OK 25.0 17.8 972
Ringwood (4)(11) ..................... 100.00 Major OK 75.0 64.3 4,292
Roberts Ranch (4)(12) ................ 56.25 Midland TX 82.0 47.3 1,033
Rodman (4)(12) ....................... 100.00 Garfield OK 50.0 33.9 3,095
Shackelford (4)(12) .................. 100.00 Shackelford TX 15.0 10.3 1,647
Sligo ................................ 100.00 Bossier LA 40.0 33.4 629
Spivey (5)(6)(12) .................... 3.87 Harper KS 66.0 15.2 27
*Stingray (8) ......................... 100.00 Cameron LA 300.0 303.1 2,540
Texarkana (4) ........................ 100.00 Miller AR 22.0 18.2 588
West Seminole (4)(12) ................ 40.14 Gaines TX 15.0 12.0 439
Outside Operated:
*Calumet (6)(12) ...................... 1.94 St. Mary's LA 1,200.0 842.5 237
Corney Bayou(12) ..................... 10.05 Union LA 6.0 5.2 10
*Grand Chenier (6)(12) ................ 2.69 Cameron LA 950.0 220.7 161
*Laverne (12) ......................... 7.89 Harper OK 240.0 77.4 287
Maysville (4)(12) .................... 23.00 Garvin OK 135.0 121.0 3,333
Snyder (7)(12) ....................... 3.25 Scurry TX 60.0 39.0 132
*Yscloskey (6)(12) .................... 5.97 St. Bernard LA 1,850.0 1,475.1 1,196
</TABLE>
- -------------------
* Indicates a straddle plant, all other gas processing facilities are field
plants.
(1) Gross to the facility.
(2) Gross production, net to the Company's ownership interest. In certain
instances, production associated with assets consolidated into a given
facility is included in the surviving facility's production.
(3) Capacity data is at practical recovery rates.
(4) NGC owns the indicated percentage of an associated gas gathering system.
(5) NGC owns 2.19 percent of the associated gas gathering system.
(6) NGC ownership is adjustable and subject to periodic (usually annual)
redetermination.
(7) NGC owns the indicated percentage of the Snyder gas gathering system and
3.98 percent of the Diamond M gas gathering system which also supplies the
Snyder plant.
(8) This facility has no gathering lines.
(9) This facility consists of a 100 percent interest in a processing plant and
an NGL pipeline, a 100 percent interest in a crude oil pipeline and a 33.33
percent interest in reserves connected and dedicated to the plant. The
gathering system behind the processing plant gathers production from Utah
and Wyoming.
(10) This facility was shut down in December 1995.
(11) Includes Enid facility.
(12) These assets were acquired in the Combination. Consequently, the "1995
Inlet Gas Throughput" and "NGL Production" statistics are for the ten month
period ended December 31, 1995.
(13) Effective March 1, 1996, NGC no longer acts as operator of this facility.
FRACTIONATION FACILITIES
NGLs removed from a natural gas stream at gas processing plants
are in the form of a commingled stream of liquid hydrocarbons. The commingled
hydrocarbons are separated at fractionation facilities into the component NGL
products ethane, propane, normal butane, isobutane and natural gasoline. The
following table provides certain information concerning the fractionation
facilities in which NGC owns an interest, including operational data for the ten
months ended December 31, 1995.
13
<TABLE>
<CAPTION>
Location Total Plant
------------------ ----------------------------
County/ Practical 1995 Inlet Gas
Fractionation Facilities: % Owned Parish State Capacity(1) Throughput (2)
(MBbls/d)
<S> <C> <C> <C> <C> <C>
Lake Charles (3) ............................ 100.00 Calcasieu LA 39.8 30.2
Mont Belvieu I .............................. 80.00 Chambers TX 110.0 96.9
Mont Belvieu II ............................. 38.75 Chambers TX 110.0 101.5
</TABLE>
(1) Capacity data is at practical recovery rates.
(2) These assets were acquired in the Combination. Consequently, the "1995
Inlet Gas Throughput" statistics are for the ten month period ended
December 31, 1995.
(3) NGC also owns the associated liquids gathering system. In August 1995, the
Company shutdown operations principally as a result of operational
inefficiencies resulting from the age of the facility. The Company diverted
daily production in part to a third-party fractionator and in part to its
fractionation facilities at Mont Belvieu and is currently assessing its
options, which focus on the construction of a new fractionation facility.
STORAGE AND TERMINAL FACILITIES
The Hackberry marine import/export terminal is located on the Calcasieu
ship channel south of Lake Charles, Louisiana. The terminal is capable of
receiving certain NGL products from water-borne carriers as well as loading
carriers for shipment to international ports. The terminal is connected to a
Company-operated storage facility at Hackberry, Louisiana and, by pipeline, to
markets along the Gulf Coast and the southeastern United States. The storage
facility consists of numerous storage caverns, which provide 15.5 million
barrels of NGL storage capacity, used to support the Company's fractionation
operations and marketing program. Some excess capacity is leased to or exchanged
with third parties. The following table provides information concerning these
facilities.
LOCATION
------------------
COUNTY/
STORAGE AND TERMINAL FACILITIES: % OWNED PARISH STATE
Hackberry Storage .................... 100.00 Cameron LA
Hackberry Terminal ................... 100.00 Cameron LA
MARKETING HUBS
Effective in June 1995, the Company, through its wholly owned
subsidiary Hub Services, Inc. ("HSI"), participated in the formation of
Enerchange L.L.C. ("Enerchange") which owns and operates three natural gas
market area hubs. These marketing hubs are transportation and interchange
facilities located in the vicinity of an interconnection of two or more
interstate pipelines. Each hub takes deliveries from a large number of suppliers
and provides these suppliers with a wide variety of markets in which to sell
their gas. By providing access to a large number of gas buyers and sellers, a
hub improves the gas market by reducing transaction costs of matching buyers and
sellers of gas, enhances the reliability of gas supply and provides buyers and
sellers a wide range of gas marketing services. Each marketing hub provides
customers with "wheeling", "loaning", "parking" and "title transfer" services.
"Wheeling" refers to the simultaneous transfer of gas from one pipeline to
another, while "loaning" occurs when one party allows another party to borrow
gas. "Parking" services allow a customer to store gas in a hub for future
redelivery and "title transfer" services allow a customer to assign title to gas
that is in storage. A fee is charged by the hub for services provided to its
customers.
The three gas marketing hubs are the Chicago Hub, the California Energy
Hub and the Ellisburg-Leidy Northeast Hub. These hubs are each operated by
Enerchange and HSI provides administrative services with respect to these hubs.
The hub operator generally provides asset management services, such as
determining the availability of hub services, confirming all nominations for hub
services and providing personnel to operate the hub. The hub administrator
typically provides marketing, accounting and administrative services. The
accounting and administrative services include performing credit checks on
prospective customers, negotiating and executing agreements with hub customers,
billing and making collections from customers, distributing revenues to hub
partner(s) and maintaining accounting records. Although HSI owns a revenue
interest in each hub, HSI provides administrative services independent of any
influence of NGC and the Company may only use a hub's services on a
non-discriminatory basis in accordance with the mandates of pertinent federal
and state regulations and contractual terms with its hub partners.
14
The following table provides information with respect to the marketing
hubs in which NGC indirectly owns an interest.
<TABLE>
<CAPTION>
HSI'S
REVENUE SERVICE NAMES OF
FACILITY NAME HSI'S PARTNERS INTEREST AREA CONNECTING PIPELINES
<S> <C> <C> <C> <C>
Chicago Hub................ NICOR Hub Services 51% Midwest ANR Pipeline Company, Midwestern Gas
Pacific Enerchange Transmission Company, Northern Natural
Leidy Hub Inc. Gas Company and Natural Gas Pipeline
Company of America
Ellisburg-Leidy
Northeast Hub............ NICOR Hub Services 51% Northeast Transcontinental Gas Pipeline Corporation,
Pacific Enerchange Tennessee Gas Pipeline, CNG
Leidy Hub Inc. Company, Columbia Gas Transmission
Company and National Fuel Gas Supply
Corporation
California Energy Hub...... NICOR Hub Services 51% California El Paso Natural Gas Company, Kern River
Pacific Enerchange Gas Transmission Company, Mojave
Leidy Hub Inc. Pipeline Operating Company, Pacific Gas
& Electric Company, San Diego Gas &
Electric Company, and Transwestern
Pipeline Company
</TABLE>
NATURAL GAS AND CRUDE OIL PIPELINES
NGC owns interests in various interstate and intrastate pipelines and
gathering systems, the more significant of which include: (i) the Ozark Gas
Transmission System, a 266-mile interstate natural gas pipeline with design
capacity of 170 MMcf/d that transports gas from eastern Oklahoma to central
Arkansas, where the system interconnects with interstate pipelines that serve
Midwest and Northeast markets; (ii) the crude oil pipeline system acquired from
Kerr-McGee Refining & Marketing Corporation, a 1,300-mile system which gathers
crude oil in 25 central and southern Oklahoma counties, accessing more than half
of the state's production, and serves the U.S. crude oil trading hub in Cushing,
Oklahoma and the Wynnewood, Oklahoma refinery; (iii) the Kansas Gas Supply
Corporation that owns and operates an approximate 1,200 mile regulated
intrastate gas pipeline system in south-central Kansas maintaining current
capacity to transport approximately 100 MMcf/d of natural gas; and (iv) an
extensive liquids gathering system at the Lake Charles fractionation facility
and a 12-inch liquids pipeline that connects the Lake Charles area facilities
with the Mont Belvieu fractionation facilities. The following table identifies
these and other pipeline and gathering system assets in which NGC owns an
interest:
<TABLE>
<CAPTION>
1995
PIPELINE SYSTEMS: % OWNED THROUGHPUT STATE
DESCRIPTION:
<S> <C> <C> <C> <C>
Ozark Gas Transmission System...............100.00 102.5 MMcf/d OK/AR Interstate gas pipeline
Crude Oil Pipeline System...................100.00 44.0 MBbls/d OK Intrastate crude oil pipeline
Kansas Gas Supply...........................100.00 68.9 MMcf/d KS/OK Intrastate natural gas pipeline
Trident NGL Pipeline........................100.00 99.0 MBbls/d TX/LA Liquids pipeline between Lake
Charles and Mont Belvieu
Bridger Lake/Phantex Pipeline...............100.00 2.2 MBbls/d UT/WY Interstate crude oil/liquids pipeline
Cominco Pipeline............................100.00 15.5 MMcf/d TX Intrastate natural gas pipeline
Pelican Pipeline............................100.00 43.5 MMcf/d LA Gas gathering pipeline
Vermillion Pipeline.........................100.00 50.6 MMcf/d Gulf of Mexico Gas gathering pipeline
Western Gas Gathering.......................100.00 3.2 MMcf/d KS Gas gathering pipeline
Mesa Pipeline...............................100.00 6.6 MMcf/d UT Gas gathering pipeline
Bradshaw Gathering.......................... 50.00 19.4 MMcf/d KS Gas gathering pipeline
</TABLE>
TITLE TO PROPERTIES
15
The Company believes it has satisfactory title to its properties in
accordance with standards generally accepted in the energy industry, subject to
such exceptions which, in the opinion of the Company, in the aggregate would not
have a material adverse effect on the use or value of said properties.
The operating agreements for certain of the Company's natural gas
processing plants and fractionation facilities grant a preferential purchase
right to the plant owners in the event any owner desires to sell its interest.
Such agreements may also require the consent of a certain percentage of owners
before rights under such agreements can be transferred. The Company is subject,
as a plant owner under such agreements, to all such restrictions on transfer of
its interest. In addition, Trident has granted OXY USA certain rights of first
refusal with respect to any future sale of certain assets.
Substantially all of NGC's gathering and transmission lines are
constructed on rights-of-way granted by the apparent record owners of such
property. In some instances, land over which rights-of-way have been obtained
may be subject to prior liens that have not been subordinated to the
right-of-way grants. Permits have been obtained from public authorities to cross
over or under, or to lay facilities in or along, water courses, county roads,
municipal streets and state highways, and in some instances, such permits are
revocable at the election of the grantor. Permits have also been obtained from
railroad companies to cross over or under lands or rights-of-way, many of which
are also revocable at the grantor's election. Some such permits require annual
or other periodic payments. In a few minor cases, property was purchased in fee.
ACQUISITION AND CONSTRUCTION PROJECTS
NGC, indirectly through subsidiaries, has formed a joint venture to
develop the Avoca storage project located in southeastern New York. The Avoca
facility will be developed in three stages and, upon completion of each
respective stage, is expected to have storage capacity of 2 Bcf, 4 Bcf and 5
Bcf, respectively. NGC expects the three stages will be completed in October of
1997, 1998 and 1999, respectively, at an aggregate cost of $10.1 million, net to
NGC's interest. Upon completion of the facility, NGC will own an approximate 28
percent interest in the Avoca storage facility.
A subsidiary of the Company is committed to contribute a total of $10
million to Indeck North American Power Fund, L.P. and Indeck North American
Power Partners, L.P. (collectively "Indeck"), two partnerships that are engaged
in the acquisition of electric power generating facilities. The contributions
represent the Company's pro rata share of funds to be used for selected
acquisitions. At December 31, 1995, the Company had paid $3.7 million of this
commitment.
INDUSTRY SEGMENTS
Segment financial information is included in Note 13 of NGC's
consolidated financial statements and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
NGC is involved in certain legal proceedings that have arisen in the
ordinary course of business. Management believes the outcome of such
proceedings, even if adversely determined, will not have a material effect on
NGC's business or financial condition.
On July 24, 1995, definitive settlement documentation was entered into
relating to two separate purported class-action lawsuits that were filed in
connection with the Combination and alleged, among other things, that members of
the Trident Board of Directors breached their fiduciary duties to Trident's
stockholders by approving the Combination. The suits, JOSHUA TEITELBAUM V.
THOMAS O. HICKS, ET. AL.,which was filed on August 9, 1994, and ERROL RUDMAN V.
THOMAS O. HICKS, ET. AL., which was filed on September 16, 1994, sought certain
injunctive relief and recovery of unspecified monetary damages. The definitive
settlement documentation provides dismissal with prejudice of the lawsuits and
for the payment by Trident of the fees and expenses of the plaintiff
stockholders' attorneys in an aggregate amount not to exceed $350,000. The
definitive settlement documentation also provides that the members of the
Trident Board of Directors deny that they have committed any violations of law,
and that the settlement was agreed to solely to eliminate the burden, risk and
expense of further litigation. At a settlement hearing held on October 13, 1995,
Vice Chancellor Jacobs of the Delaware Chancery Court entered an order
certifying the lawsuits as a class action, dismissing the action with prejudice
and awarding plaintiffs' counsel $300,000 in legal fees and $49,835 in costs and
expenses. The order was not appealed and the fees and expenses awarded were paid
in 1995.
16
OXY USA has agreed to indemnify Trident for litigation based on
occurrences or events that occurred prior to the closing date of the 1991
acquisition by Trident of substantially all of the natural gas liquids business
of OXY USA, Inc. In view of such indemnity, management believes the outcome of
any proceedings which pertain to occurrences or events relating to Trident that
occurred prior to the Acquisition Closing Date, even if adversely determined,
will not have a material effect on NGC's business, financial condition or
results of operations. Although the Company believes OXY USA has sufficient
financial resources to satisfy its indemnity obligations, the failure of OXY USA
to meet such obligations could have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's $0.01 par value common stock ("Common Stock") is listed
and traded on the New York Stock Exchange under the ticker symbol "NGL". The
number of stockholders of record of the Common Stock as of March 28, 1996, was
322. On March 14, 1995, in connection with the Combination, each share of
Holding common stock (including Holding non-voting common stock) was converted
into one share of Common Stock. The following table sets forth the high and low
closing prices for transactions involving the Company's Common Stock for each
calendar quarter, as reported on the New York Stock Exchange Composite Tape and
related dividends paid per common share during such periods.
HIGH LOW DIVIDEND
------- ------ -------
1995 (a)
--------
First Quarter $11.500 $9.000 $0.0125
Second Quarter 10.375 8.750 0.0125
Third Quarter 10.375 9.000 0.0125
Fourth Quarter 9.625 8.375 0.0125
1994 (b)
--------
First Quarter $11.875 $ 8.875 $0.0125
Second Quarter 10.000 8.000 0.0125
Third Quarter 12.250 9.375 0.0125
Fourth Quarter 11.125 9.375 0.0125
------------
(a) Stock price and per share dividend rate information relates to Holding
for the period commencing on January 1, 1995 and continuing through
and including March 13, 1995, and NGC thereafter.
(b) Reflects the high and low price of Holding's common stock and the per
share dividend rate declared by Holding during the stated periods.
The holders of the Common Stock are entitled to receive dividends if,
when and as declared by the Board of Directors of the Company out of funds
legally available therefor. Consistent with the Board of Directors' intent to
establish a policy of declaring quarterly cash dividends, a cash dividend of
$0.0125 per share was declared and paid in each of the four quarters of 1995.
The NGC Corporation Credit Agreement and the Company's 6.75% Senior
Notes do not contain any specific restrictions on the ability of the Company or
any of its subsidiaries to declare and pay dividends in respect of its or their
capital stock, although certain financial covenants contained in such credit
agreement and in the indenture covering the 6.75% Senior Notes may limit the
ability of the Company to do so.
The indenture setting forth the terms and conditions of the 14% Senior
Subordinated Notes of Trident due 2001 and the 10.25% Subordinated Notes of
Trident due 2003 contain restrictions on Trident's ability to pay cash dividends
to NGC, which in turn may adversely affect NGC's ability to pay dividends to its
shareholders.
17
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information presented below was derived from,
and is qualified by reference to, the Consolidated Financial Statements of the
Company, including the Notes thereto, appearing elsewhere in this Report. Please
refer to the Notes to Consolidated Financial Statements for information on
transactions and accounting classifications which have affected the
comparability of the periods presented below. The selected financial information
should be read in conjunction with the Consolidated Financial Statements and
related Notes and "Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 (1) 1994 (2) 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ........................................... $ 3,665,946 $ 3,237,843 $ 2,790,977 $ 2,492,935 $ 2,098,773
Operating margin ................................... 194,660 99,126 91,850 96,806 78,477
General and administrative expenses ................ 68,057 47,817 36,585 41,103 31,659
Depreciation and amortization expense .............. 44,913 8,378 7,594 7,221 6,790
Net income (3) ..................................... $ 92,705 $ 42,101 $ 45,997 $ 43,858 $ 38,554
Pro forma income per common share (4) .............. $ 0.40 $ 0.28 $ 0.30 $ 0.30 $ 0.25
Net income per common share (5) .................... $ 0.82 n/a n/a n/a n/a
Weighted average common and common
equivalent shares outstanding ................... 113,176 97,804 97,804 97,804 97,804
CASH FLOW DATA:
Cash flows from operating activities ............... $ 90,648 $ 17,170 $ 20,292 $ 66,869 $ 24,577
Cash flows from investing activities ............... (310,623) (38,376) (7,911) (21,024) (38,754)
Cash flows from financing activities ............... 221,022 18,959 (46,418) (19,816) (12,930)
OTHER FINANCIAL DATA:
EBITDA (6) ......................................... $ 142,538 $ 57,716 $ 57,553 $ 58,299 $ 49,902
Dividends or distributions to partners ............. 9,253 14,041 14,118 19,816 16,418
Capital expenditures and investments (7) ........... 309,595 47,014 16,464 12,197 38,754
AS OF DECEMBER 31,
---------------------------------------------------------------------------
1995 (1) 1994 (2) 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Current assets...................................... $ 762,939 $ 445,782 $ 402,602 $ 385,334 $ 342,071
Current liabilities................................. 705,674 404,144 375,662 357,946 319,105
Property and equipment, net (8)..................... 948,511 114,062 84,539 90,037 83,637
Total assets........................................ 1,875,252 645,471 512,534 480,458 421,685
Long-term debt...................................... 522,764 33,000 --- 19,800 32,300
Total equity........................................ 552,380 152,213 120,689 88,745 61,570
</TABLE>
- ------------------------------------
(1) The Combination was accounted for under the purchase method of
accounting and, because the Clearinghouse Owners acquired approximately
82 percent of NGC, for accounting purposes Clearinghouse was considered
the acquiring company. Accordingly, the purchase price was allocated to
the Trident assets acquired and liabilities assumed based on their
estimated fair values as of March 1, 1995, the effective date of the
Combination for accounting purposes, and the results of operations
include Trident's operations from March 1, 1995, forward.
(2) Results for the year ended December 31, 1994, include the effects of a
change to mark-to-market accounting for fixed-price natural gas
transactions. See Note 3 to the Notes to the Consolidated Financial
Statements for more information.
(3) Net income does not include a provision for federal income taxes, other
than minimal amounts on the taxable income of Clearinghouse's corporate
subsidiaries, for the years ended December 31, 1994, 1993, 1992 and
1991, respectively.
(4) Pro forma net income per common and common equivalent share is based on
reported net income for the period adjusted for the incremental
statutory federal and state income taxes that would have been provided
had Clearinghouse been a taxpaying entity. The weighted average shares
outstanding for the year ended December 31, 1995, is based on the
weighted average number of common shares outstanding plus the common
stock equivalents that would arise from the exercise of outstanding
options or warrants, when dilutive. Pro forma weighted average shares
outstanding of 97.8 million shares for the years ended December 31,
1994, 1993, 1992 and 1991, respectively, give effect to the terms of
the Combination and the common stock equivalent shares outstanding as
of the effective date of the Combination assuming a common stock market
price of $12 in all periods.
(5) Net income per common and common equivalent share is based on reported
net income for the period. The weighted average shares outstanding for
the year ended December 31, 1995, is based on the same parameters as
discussed in footnote (4).
(6) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is presented as a measure of the Company's ability to
service its debt and to make capital expenditures, not as a measure of
operating results, and is not presented in the Consolidated Financial
Statements.
(7) Includes cash paid in 1995 for Trident NGL Holding, Inc.
(8) The 1992 amount of $90.0 million includes $16.4 million of property,
plant and equipment classified as held for sale. These assets were sold
in March 1993.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
COMPANY PROFILE
The Company is a leading North American marketer of natural gas,
natural gas liquids, crude oil and electric power and is engaged in natural gas
gathering, processing and transportation through ownership and operation of
natural gas processing plants, storage facilities and pipelines. Acting in the
role of a large-scale aggregator, processor, marketer and reliable supplier of
multiple energy products and services, NGC has evolved into a "one-stop" energy
commodity and service provider. Through joint ventures in both Canada and the
United Kingdom, the Company has expanded geographically its vision of providing
customers with multiple energy commodity needs combined with cost-effective
products and value-added services.
From inception of operations in 1984 until 1990, the Company limited
its activities primarily to natural gas marketing. Since 1990, the Company has
expanded its core business operations to now include natural gas marketing,
natural gas gathering and processing, and the marketing of natural gas liquids,
crude oil and electric power. Beginning in 1994, the Company initiated gas
gathering, processing and marketing operations in Canada through NCL, a joint
venture with NOVA Corporation ("NOVA"), and energy marketing operations in the
United Kingdom through Accord, a joint venture with British Gas plc ("British
Gas"). NOVA and British Gas are both major NGC shareholders.
NGC's operations are divided into two segments: the Natural Gas and
Electric Power Marketing Segment ("Marketing") and the Natural Gas Liquids,
Crude Oil and Gas Transmission Segment ("Liquids"). Marketing consists of
subsidiaries engaged in the business of; contracting to purchase specific
volumes of natural gas from suppliers at various points of receipt to be
supplied over a specific period of time; aggregating natural gas supplies and
arranging for the transportation of these gas supplies through proprietary and
third-party transmission systems; negotiating the sale of specific volumes of
natural gas over a specific period of time to local distribution companies,
utilities, power plants and other end-users; and matching natural gas receipts
and deliveries based on volumes required by customers. Marketing also includes
the operations of Electric Clearinghouse Inc., a provider of electric power
products and services in the United States. Liquids consists of subsidiaries
engaged in the business of natural gas gathering and processing, fractionation,
NGL marketing, natural gas transmission and crude oil marketing. The Company's
natural gas liquids business complements its natural gas marketing business by
providing the Company's customers with a full range of NGL products and related
services.
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION
This Annual Report contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in this
document, words such as "anticipate", "estimate", "project", and "expect" are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on NGC's results of operations and
financial condition are: (i) competitive practices in the industries in which
NGC competes, (ii) fluctuations in energy commodity prices which have not been
properly hedged or which are inconsistent with NGC's open position in its energy
marketing activities, (iii) environmental liabilities to which NGC may become
subject in the future which are not covered by indemnity or insurance, and (iv)
the impact of current and future laws and governmental regulations (particularly
environmental regulations) affecting the energy industry in general and NGC's
operations in particular.
ACQUISITION OF GAS MARKETING AND MIDSTREAM ASSETS
On January 22, 1996, NGC and Chevron jointly announced they had entered
into exclusive negotiations to merge substantially all of Chevron's gas
gathering, processing and marketing operations with NGC. The combined company,
which may retain the name NGC Corporation, will include all of NGC and most of
two Chevron business units: the Houston-based
19
Natural Gas Business Unit and Tulsa-based Warren Petroleum Company. As part of
the proposed transaction, NGC will market virtually all of Chevron's North
American natural gas production, NGLs and electricity as well as supply energy
and feedstock to virtually all of Chevron's refineries, chemical plants and
other North American facilities. For its contribution, Chevron will receive a
total of 45.8 million shares in the new company, in a combination of common and
preferred stock, and $300 million in cash and notes. Following consummation of
the transaction, Chevron, British Gas and NOVA will each own approximately 25
percent of the outstanding common stock of the new company. The proposed
transaction is expected to be finalized in the second quarter of 1996.
The combination of NGC and the two Chevron business units will make the
combined company the leading marketer of natural gas in North America, with
average daily sales in excess of 10 billion cubic feet, or an estimated 14
percent of total North American gas consumption. The proposed transaction will
also establish NGC as the second largest producer and largest marketer of NGLs
in North America, with production of approximately 140,000 barrels per day and
sales of approximately 470,000 barrels per day. In addition, the proposed
transaction will allow NGC to expand its international operations and will
provide Chevron with an enhanced stake in the developing U.S. electric power
marketing industry.
IMPACT OF PRICE FLUCTUATIONS
Marketing's operating margin, exclusive of risk management activities,
is relatively insensitive to commodity price fluctuations since most of this
segment's purchase and sales contracts do not contain fixed-price provisions.
Generally, the prices contained in these contracts are tied to a current or
index price and, therefore, adjust with changes in overall market conditions.
Commodity price fluctuations can, however, have a significant impact on the
operating margin derived from the segment's risk management activities. The
impact depends, in large part, on NGC's net open position and the magnitude of
any price fluctuation.
Portions of the Liquids businesses are sensitive to commodity price
fluctuations. Operating margin associated with natural gas gathering and
processing activities is sensitive to changes in NGL prices and to a lesser
extent, natural gas prices. Straddle plants are more sensitive to changing
prices than field plants because field plant margins are impacted primarily by
fluctuations in NGL prices. Straddle plant margins are impacted by changes in,
and the relationship between, NGL and natural gas prices. In the NGL marketing
business, NGC enters into contracts with third-party gas plants and producers
which, when favorable gas processing economics exist, allow the Company to
process natural gas at such third-party plants and market the extracted NGLs and
residue gas. Like straddle plant margins, operating margins associated with such
third-party processing activities are not only sensitive to changes in both NGL
and natural gas prices, but also the relationship between the two.
SEASONALITY
NGC's revenue and operating margin are subject to fluctuations during
the year primarily due to the impact certain seasonal factors have on sales
volumes and the prices of natural gas and NGLs. Marketing's sales volumes and
operating margin are typically higher in the winter months than in the summer
months, reflecting increased demand due to greater heating requirements and,
typically, higher natural gas prices. Liquids is also subject to seasonal
factors; however, such factors typically have a greater impact on sales prices
than on sales volumes. NGL prices typically increase during the winter season
due to greater heating requirements.
EFFECT OF INFLATION
Although NGC's operations are affected by general economic trends,
management does not believe inflation has had a material effect on the Company's
results of operations.
RESULTS OF OPERATIONS
On March 14, 1995, Clearinghouse consummated a strategic Combination
with Holding, and the combined entities were renamed NGC Corporation. The
Combination was accounted for under the purchase method of accounting and,
because the Clearinghouse Owners acquired approximately 82 percent of the
outstanding shares of NGC, Clearinghouse was considered the acquiring company
for accounting purposes. Accordingly, the purchase price was allocated to the
Trident assets acquired
20
and liabilities assumed based on their estimated fair values as of March 1,
1995, the effective date of the Combination for accounting purposes. The results
of operations presented in the consolidated financial statements contained
elsewhere herein include Trident's results from March 1, 1995, forward. The
December 31, 1994 and 1993 consolidated balance sheets and the consolidated
statements of operations and of cash flows for each of the years ended December
31, 1994 and 1993 reflect the financial position and operating results of
Clearinghouse. The following table reflects certain operating and financial data
for the Company's business segments and subsegments for the years ended December
31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
For the Year ended December 31,
------------------------------------------
1995 1994 1993
---------- -------- --------
($ in Millions)
<S> <C> <C> <C>
Natural Gas and Electric Power Marketing Segment:
Operating margin ............................................... $ 63.8 $ 78.4 $ 68.5
Natural Gas Marketing -
Average sales volume per day (Bcf/d):
U.S.(1) ............................................. 3.5 3.5 2.9
Canada (2) .......................................... 2.3 0.5 --
U.K. (3) ............................................ 0.3 -- --
Electric Power Marketing -
Gross sales volumes (Gigawatt Hours) .................... 3.5 -- --
Average megawatts per hour .............................. 402 -- --
Natural Gas Liquids, Crude Oil and Gas Transmission Segment:
Operating margin ............................................... $ 130.9 $ 20.7 $ 23.4
Natural Gas Processing -
Operating margin ........................................ $ 75.8 $ 13.5 $ 19.8
Gross gallons processed (MMGals) ........................ 1,115.9 252.4 224.3
Net gallons processed (MMGals) .......................... 889.3 167.2 152.4
Fractionation (4) -
Operating margin ........................................ $ 15.2 -- --
Gallons received for fractionation (MMGals) ............. 1,756.5 -- --
Liquids and Crude Oil Marketing and Other -
Operating margin ........................................ $ 39.9 $ 7.2 $ 3.6
NGL marketing - sales volumes (MMGals) .................. 1,849.0 363.1 319.9
Crude oil marketing - sales volumes (MBbls) ............. 60.9 47.4 26.6
</TABLE>
- --------------
(1) Includes 0.1 Bcf/d in intercompany gas sales for the year ended
December 31, 1995.
(2) Represents volumes marketed through NGC's Canadian affiliate, NCL.
(3) Represents volumes marketed through NGC's U.K. affiliate, Accord.
(4) Information excludes the Company's proportionate share of GCF's margin
and fractionation volumes.
YEAR ENDED DECEMBER 31, 1995, COMPARED WITH YEAR ENDED DECEMBER 31, 1994
NGC's net income for the year ended December 31, 1995, increased to
$92.7 million, or $0.82 per share, compared with $42.1 million for Clearinghouse
for the comparable 1994 period. Net income for the 1995 period includes a
non-recurring income tax benefit of $45.7 million, or $0.40 per share, related
to the Combination and an after-tax charge of $1.1 million, or $0.01 per share,
related to tornado damage at a gas processing plant. Income before income taxes
totaled $65.2 million for the year ended December 31, 1995, a $21.1 million
increase over the comparable 1994 period. Cash flows from operating activities
increased to $90.6 million in 1995 compared with $17.2 million reported in 1994.
The increase in both net income and operating cash flow is largely a result of
the positive financial effect of the Combination, including the synergies
realized therefrom, and the earnings contributed by the Company's international
joint ventures, NCL and Accord.
Operating margin was $194.7 million in 1995 compared with $99.1 million
in 1994, an increase of $95.6 million. The increase reflects improvement in the
Liquids operating margin of $110.2 million offset by a $14.6 million decline in
Marketing's operating margin. Operating income was $81.7 million in 1995
compared with $42.9 million for the equivalent 1994 period, an increase of $38.8
million. Increases in both operating margin and operating income are generally
attributable to the Combination.
21
The Company's equity in the earnings of its unconsolidated affiliates
totaled $21.1 million for the year ended December 31, 1995, more than five times
the earnings recognized in the comparable 1994 period. NCL and Accord, which
both began significant operations during the latter half of 1994, contributed an
aggregate $19.2 million to pretax earnings in 1995 as compared with $3.2 million
in 1994. Aggregate sales volumes for NCL and Accord, which averaged 2.6 Bcf/d
for the year and 3.6 Bcf/d for the quarter ended December 31, 1995,
respectively, reflect NGC's growing international market share. The remaining
$1.9 million of equity earnings for the year ended December 31, 1995, was
primarily attributable to the Company's 38.75 percent ownership interest in Gulf
Coast Fractionators ("GCF").
Interest expense increased to $32.4 million in 1995 as compared with
$2.4 million in the comparable 1994 period. The increase is reflective of higher
outstanding debt balances resulting primarily from debt assumed in conjunction
with the Combination and long-term borrowings for capital expenditures and
investments in unconsolidated affiliates made during 1995.
Other expenses of $8.2 million reported for the year ended December 31,
1995, include a $1.8 million pretax charge for tornado damage at a gas
processing plant, $2.4 million in minority interests in certain majority owned
subsidiaries and other miscellaneous non-recurring costs and expenses.
The Company reported an income tax benefit of $27.5 million on pretax
income of $65.2 million for the year ended December 31, 1995, which compares
with an income tax provision of $2.0 million on pretax income of $44.1 million
for the comparable 1994 period. Reported results for 1994 do not include a
provision for federal income tax, other than minimal amounts on taxable income
of Clearinghouse's corporate subsidiaries, as the majority of Clearinghouse's
earnings for the period were taxed as partnership income. During the first
quarter of 1995, the Company recognized a $45.7 million income tax benefit in
connection with the Combination. The income tax benefit, that can be used to
reduce NGC's future income tax liabilities, was a result of the recognition of
the excess tax basis held by certain Clearinghouse partners. After giving effect
to the one-time benefit, the 1995 income tax provision totaled $18.2 million, an
effective rate of 28 percent. The difference between the effective rate and the
statutory rate is primarily attributed to pre-combination earnings of
Clearinghouse that were predominantly taxed as partnership income and permanent
differences associated with certain foreign equity investments.
NATURAL GAS AND ELECTRIC POWER MARKETING
Marketing reported operating margin of $63.8 million for the year ended
December 31, 1995, compared with $78.4 million for the comparable 1994 period.
Although domestic natural gas marketing volumes were essentially constant
between the two periods, gas marketing margins were lower in 1995 as compared
with 1994, principally due to strong risk management margins and exceptionally
strong physical gas marketing margins achieved in the first quarter of 1994 as a
result of strong demand created by significantly colder weather in that period.
Also, physical gas marketing margins were lower during the first half of 1995
resulting from decreased demand due to moderate temperatures and increased
competition. Marketing's strong fourth quarter 1995 operating margin of $27.4
million, which was $9.7 million higher than the comparable 1994 period, was not
enough to offset the lower operating margin realized in the first half of 1995.
Included in 1995's operating margin is $6.8 million related to a service
agreement between NGC Futures, Inc. ("NGCF"), a wholly owned subsidiary of NGC,
and NCL whereby NGCF provides NCL and its affiliates natural gas marketing and
risk management services. As a result of this service agreement, NGC and its
subsidiaries share disproportionately in NCL's economic returns resulting from
the services provided.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
Liquids reported operating margin of $130.9 million for the year ended
December 31, 1995, compared with $20.7 million for the equivalent 1994 period.
Financial results for 1995 were positively impacted by the Combination and the
synergies realized from that acquisition, the acquisition and efficient
operation of the Ozark Gas Transmission System and improved liquids processing
margins. Natural gas processing volumes and NGL marketing sales volumes
increased substantially in 1995, compared with 1994, principally as a result of
the Combination. The Company also acquired all of its fractionation capacity in
the Combination.
22
PRO FORMA FOR THE YEARS ENDED DECEMBER 31, 1995, AND 1994
The pro forma information provided below gives effect to the Combination
as if it had occurred on January 1, 1994, and, accordingly, combines the
activities of both Clearinghouse and Trident for each period. These pro forma
results do not give effect to any cost savings expected as a result of the
Combination. The pro forma information is presented for illustrative purposes
only and is not necessarily indicative of what the actual results of operations
would have been had the Combination occurred at the beginning of the periods
presented nor does it purport to indicate the future results of the Company.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------------
1995 1994
-------- ------
($ IN MILLIONS)
<S> <C> <C>
Natural Gas and Electric Power Marketing Segment:
Operating margin $63.8 $78.4
Natural Gas Marketing -
Average sales volume per day (Bcf/d):
U.S. (1) 3.5 3.5
Canada (2) 2.3 0.5
U.K. (3) 0.3 ---
Electric Power Marketing -
Gross sales volumes (Gigawatt Hours) 3.5 ---
Average megawatts per hour 402 ---
Natural Gas Liquids, Crude Oil and Gas Transmission Segment:
Operating margin $144.6 $109.0
Natural Gas Processing -
Operating margin $86.2 $73.9
Gross gallons processed (MMGals) 1,287.0 1,255.3
Net gallons processed (MMGals) 1,028.4 1,072.1
Fractionation (4) -
Operating margin $17.0 $19.5
Gallons received for fractionation (MMGals) 2,061.7 2,071.1
Liquids and Crude Oil Marketing and Other -
Operating margin $41.4 $15.6
NGL marketing - sales volumes (MMGals) 2,086.0 1,829.6
Crude oil marketing - sales volumes (MMBbls) 60.9 47.4
</TABLE>
- --------------
(1) Includes 0.1 Bcf/d in intercompany gas sales for the year ended
December 31, 1995.
(2) Represents volumes marketed through NGC's Canadian affiliate, NCL.
(3) Represents volumes marketed through NGC's U.K. affiliate, Accord.
(4) Information excludes the Company's proportionate share of GCF's margin
and fractionation volumes.
On a pro forma basis, net income for the year ended December 31, 1995,
was $46.1 million, or $0.39 per share, compared with $25.1 million, or $0.21 per
share, for the same period in 1994. Pro forma 1995 net income excludes the
aforementioned non-recurring income tax benefit of $45.7 million. Pro forma
operating margin increased $21.0 million to $208.4 million as compared with
$187.4 million in the equivalent 1994 period. The increase in pro forma
operating margin reflects a higher Liquids operating margin as a result of
increased volumes in natural gas processing and NGL and crude oil marketing and
improved Liquids' margins in 1995 as compared with 1994. The improved Liquids'
operating margin was offset by a lower Marketing operating margin due
principally to lower physical gas marketing margins in 1995 as compared with
1994 generally as a result of the same factors that affected the actual results
for the years ended December 31, 1995 and 1994, discussed previously.
YEAR ENDED DECEMBER 31, 1994, COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Net income for the year ended December 31, 1994, was $42.1 million as
compared with $46.0 million for the year ended December 31, 1993. The decrease
in net income was primarily attributable to a decline in the performance of
Liquids and an increase in general and administrative expense that was partially
offset by the improved profitability of Marketing. Cash flow
23
from operating activities decreased $3.1 million to $17.2 million in 1994 as
compared with the $20.3 million reported in 1993. The decrease in operating cash
flows was principally a result of lower net income in 1994 as compared with 1993
and changes in working capital.
Operating margin totaled $99.1 million in 1994 as compared with $91.9
million in 1993. The $7.2 million increase was mainly due to increased Marketing
earnings, which were partially offset by the decreased profitability of Liquids
as a result of lower NGL prices. Operating income totaled $42.9 million for the
year ended December 31, 1994, as compared with $47.7 million for the comparable
1993 period. The $4.8 million decline in operating income was generally
attributed to an $11.2 million increase in general and administrative expenses,
resulting principally from higher personnel costs required to support
Clearinghouse's natural gas and electric power marketing businesses, partially
offset by the aforementioned increase in operating margin. Depreciation and
amortization expense was $0.8 million higher in 1994 as compared with 1993 as a
result of a higher average investment in property, plant and equipment in 1994
as compared with 1993.
Interest expense increased to $2.4 million in 1994, as compared with
$1.8 million in the comparable 1993 period. The increase is reflective of higher
outstanding debt balances resulting primarily from higher average long-term
borrowings for capital expenditures.
As discussed previously, prior to the Combination, Clearinghouse's
income was not subject to federal income tax, other than minimal amounts on the
taxable income of Clearinghouse's corporate subsidiaries. The income tax
provisions in 1994 and 1993 were not material to Clearinghouse's reported net
income in either period.
NATURAL GAS AND ELECTRIC POWER MARKETING
Marketing reported operating margin of $78.4 million for the year ended
December 31, 1994, compared with $68.5 million for the comparable 1993 period,
an increase of $9.9 million. This increase was primarily attributable to
increased natural gas sales volumes of more than 0.6 Bcf/d. The increase in
natural gas sales volumes was primarily attributable to Clearinghouse's
successful long-term contracting efforts resulting from the implementation of
Order 636, as well as the continued growth in Clearinghouse's gas marketing
business in general.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
Liquids reported operating margin of $20.7 million for the year ended
December 31, 1994, compared with $23.4 million for the equivalent 1993 period, a
decrease of $2.7 million. The decrease was primarily attributed to lower NGL
prices; the suspension, from August 1993 to early December 1994, of NGL recovery
activities at Clearinghouse's Stingray gas processing facility due to a change
in the NGL content of its gas supply; and the March 1993 sale of Clearinghouse's
50 percent interest in NGC Anadarko Gathering Systems, Inc. These factors more
than offset the increases in NGL and crude oil sales volumes.
LIQUIDITY AND CAPITAL RESOURCES
NGC has historically relied upon operating cash flow and borrowings
under its credit facilities for its liquidity and capital resource requirements.
As a result of the Company's continued positive operating results, combined with
the liquidity and flexibility provided by available funds under its credit
facilities, the Company believes it will be able to meet all foreseeable cash
requirements, including working capital, capital expenditures, debt service and
costs associated with the proposed Chevron transaction.
OPERATING CASH FLOW
The Company's cash flow from operating activities differs from reported
net income primarily as a result of depreciation and amortization, undistributed
earnings of its unconsolidated affiliates, deferred income taxes, timing
differences associated with risk management activities and net changes in
working capital components. The following describes generally the impact working
capital changes may have on the Company's operating cash flow from period to
period.
24
ACCOUNTS RECEIVABLE. Generally, the level of NGC's accounts receivable
is impacted primarily by sales volumes and prices. Given the impact of seasonal
demand factors on the Company's sales volumes and the prices of natural gas,
NGLs and crude oil, NGC's accounts receivable are typically higher in the winter
months than during the balance of the year.
INVENTORIES. Historically, the Company has maintained varying levels of
natural gas, NGL and crude oil inventories. Due to seasonal demand factors,
natural gas and NGL inventories are typically purchased during the summer months
and sold during the winter months. Inventory volumes include product in
pipelines, referred to as "line fill", which represents perpetual inventory
volumes. Otherwise, a large part of the Company's product inventories held as of
a year-end are expected to be sold during the first quarter of the following
year. Inventory purchases are generally discretionary and not a prerequisite to
maintaining deliveries or sales due to the availability of supplies through term
contracts and spot market purchasing activities. However, periodic inventory
accumulations allow the Company to capture peak deliverability opportunities and
to take advantage of expected seasonal price differentials. Material and
supplies inventory, used primarily at the Company's processing plants and
fractionation facilities, typically turnover more slowly than product inventory
volumes.
ACCOUNTS PAYABLE. The level of the Company's trade accounts payable will
generally follow in tandem with the level of trade accounts receivable because
purchased volumes and product prices will typically fluctuate directionally with
sales volumes and prices.
OTHER WORKING CAPITAL ACCOUNTS. Other working capital accounts, which
include prepayments, other current assets and accrued liabilities, reflect
expenditures or recognition of liabilities for insurance costs, certain
deposits, salaries, taxes other than on income, certain deferred revenue
accounts and other similar items. Fluctuations in these accounts from period to
period reflect changes in facts or changes in the timing of payments or
recognition of liabilities and are not directly impacted by seasonal factors.
THE COMBINATION
Approximately $166.9 million, exclusive of transaction related costs,
was required to consummate the tender offer related to the Combination. These
funds were provided by British Gas, NOVA and Clearinghouse. Specifically,
British Gas and NOVA each contributed $67.5 million to their respective
subsidiaries that participated in the Combination and Clearinghouse provided
$31.9 million to fund the balance. Clearinghouse funded the $31.9 million and
certain other costs associated with the Combination through a combination of
cash on hand and $25.0 million in borrowings under its then existing credit
agreement.
REVOLVING CREDIT FACILITY
On March 14, 1995, the Company entered into the Credit Agreement, which
established a five-year $550 million revolving credit facility. The revolving
credit facility provides for letters of credit (up to $150 million) and
borrowings for working capital, capital expenditures and general corporate
purposes of up to $550 million in the aggregate. The $550 million commitment
under the revolving credit facility reduces by $22.5 million each quarter
beginning in March 1998 and continuing through maturity. Generally, borrowings
under the Credit Agreement bear interest at a Eurodollar rate plus a margin that
is determined based on the Company's debt to capitalization ratio. The margin at
December 31, 1995, was 0.5 percent and the average interest rate applicable to
borrowings under the Credit Agreement approximated 6.3 percent. During the first
quarter of 1995, NGC entered into arrangements with financial institutions that
effectively capped the base Eurodollar rate on $100 million of borrowings at
rates between 8.5 percent and 9.1 percent through January 1998. The Credit
Agreement contains certain financial covenants which require the Company to meet
certain financial position and performance tests. At December 31, 1995, letters
of credit and borrowings outstanding under the Credit Agreement aggregated $199
million and unused borrowing capacity under the revolving credit facility
approximated $351 million.
SHELF REGISTRATION OF $250 MILLION OF SENIOR NOTES
During 1995, NGC filed with the Securities and Exchange Commission a
shelf registration that provides for the issuance of $250 million of debt
securities pursuant to Rule 415 of the Securities Act of 1933. On December 15,
1995, under this shelf registration, the Company sold $150 million of 6.75%
Senior Notes due December 15, 2005. The Notes were issued at a price of 99.984
percent, which, after deducting underwriting discounts and commissions, resulted
in net proceeds to the Company
25
of approximately $149 million. Proceeds from the sale of these Notes were used
to retire outstanding indebtedness under the Credit Agreement. Interest on the
Notes is payable semiannually on June 15 and December 15 of each year, beginning
June 15, 1996. The Notes represent general unsecured obligations of the Company
and are fully and unconditionally guaranteed on a joint and several basis by the
following subsidiaries of the Company: Natural Gas Clearinghouse; Trident NGL,
Inc.; NGC Energy Resources, Limited Partnership; NGC Liquids Marketing, Inc.;
NGC Oil Trading and Transportation, Inc.; NGC Futures, Inc.; HUB Services, Inc.;
NGC Storage, Inc.; NGC Anadarko Gathering System, Inc.; Trident Gas Marketing,
Inc.; Trident NGL Pipeline Company; Kansas Gas Supply Corporation; Trident
Acquisition Corp.; NGC U.K. Ltd.; and NGC Canada, Inc. (collectively "Subsidiary
Guarantors"). Upon issuance, the Notes were priced based on the then existing
yield for 10-year U.S. Treasury Notes ("Base Treasury Rate") plus a spread based
principally on the Company's credit rating. Prior to issuing the Notes, the
Company entered into two separate transactions with two separate financial
institutions, the effect of which was to lock in the Base Treasury Rate at
approximately 6.2 percent on the full $150 million face value of the Notes.
Separate financial statements of each Subsidiary Guarantor have not been
provided herein because management has determined that such information would
not be material to investors as the aggregate assets, liabilities, earnings and
equity of the Subsidiary Guarantors is substantially equivalent to the Company's
consolidated assets, liabilities, earnings and equity. The Company also has
direct and indirect subsidiaries that are not Subsidiary Guarantors
(collectively "Non-guarantor Subsidiaries").These Non-guarantor Subsidiaries,
both individually and in the aggregate, are inconsequential to NGC (and its
accounting predecessor - Clearinghouse) as of and for each of the three years in
the period ended December 31, 1995.
TRIDENT NOTES
At December 31, 1995, Trident had outstanding $105 million principal
amount of 10.25% Subordinated Notes due 2003 (interest payable semi-annually in
arrears each April and October) and $65 million principal amount of 14% Senior
Subordinated Notes due 2001 (interest payable semi-annually in arrears each
February and August). Beginning in 1998, corresponding with the first call
dates, the Company may repurchase the Subordinated Notes and Senior Subordinated
Notes at 104.5 percent and 107 percent of the principal amount, respectively,
with such reacquisition prices reducing as the notes mature. The indentures
covering the Subordinated Notes and Senior Subordinated Notes contain covenants
that, among other things, require Trident to meet certain financial tests; limit
the amount of investments, dividends and asset sales that can be made by
Trident; and restrict the ability of Trident and its subsidiaries to incur
additional indebtedness, create or permit liens and engage in certain
transactions. Although Trident's net assets at December 31, 1995, approximated
$350 million, management does not believe that the terms of the indentures
materially restrict the ability of Trident to transfer funds to the Company
given that Trident is a Subsidiary Guarantor combined with the level of advances
made by NGC to Trident. The unamortized premium balance associated with each of
the Subordinated Notes and Senior Subordinated Notes represents a fair value
adjustment to the aggregate principal balance of the notes recognized as part of
the Combination. The unamortized premium balance of $18.9 million at December
31, 1995, is being amortized using the interest method.
CAPITAL EXPENDITURES, COMMITMENTS AND DIVIDEND REQUIREMENTS
The Company's business strategy has been to grow horizontally across all
sectors of the midstream energy business segment through strategic acquisitions
or construction of core operating facilities in order to capture the significant
synergies which management believes exist among these types of assets and NGC's
natural gas and NGL marketing businesses. For 1996, the Company has budgeted to
spend approximately $175 million in connection with these efforts. Such
expenditures do not contemplate planned expenditures associated with the Chevron
acquisition discussed previously. Actual capital expenditures may vary from
budgeted amounts due to many factors.
During 1995, the Company spent approximately $310 million in acquisition
and asset maintenance activities. The most significant component of cash used in
investing activities during the 1995 period relates to the acquisition cost and
related expenses associated with the Combination. The Company expended an
additional $145 million for the acquisition of other assets, the most
significant of which were Ozark, the Kerr-McGee pipeline and Pan Alberta Gas,
through a contribution to NCL, as well as capital improvements at existing
facilities and investments in other unconsolidated affiliates.
26
During 1994 and 1993, the Company spent $38.4 million and $7.9 million,
respectively, on investing activities. Such capital expenditures were used to
maintain existing assets and to acquire additional midstream natural gas assets,
namely gas processing plants and gathering systems.
A wholly owned subsidiary of NGC is committed to expend its respective
share of the construction costs related to the Avoca Natural Gas Storage
construction project. Current cost estimates commit the Company to approximately
$10 million of expenditures from 1996 through 1999. NGC and NGC Holding, Inc.
have guaranteed the commitment by the wholly owned subsidiary.
A subsidiary of the Company is committed to contribute approximately $10
million to Indeck, two partnerships which are engaged in the acquisition of
electric power generating facilities. The contribution represents the Company's
pro rata share of funds to be used for selected acquisitions. At December 31,
1995, the Company had paid $3.7 million of this commitment.
Trident has guaranteed its pro rata share of the unfunded debt service
reserve account of GCF. Trident's obligation under the guarantee at December 31,
1995, assuming Trident had to fund such obligation as of that date, approximated
$3 million.
At December 31, 1995, GCF was in full compliance with its debt agreement.
NGC currently declares an annual dividend of $0.05 per common share
payable in quarterly installments. During 1995, NGC paid $9.3 million in
dividends and distributions, principally to the Clearinghouse Owners and holders
of record of the Company's outstanding shares of common stock. Prior to the
Combination, Clearinghouse made distributions primarily to enable
Clearinghouse's partners to pay tax liabilities incurred as a result of
Clearinghouse generated income which was taken into account by the Clearinghouse
partners in computing their personal income tax liabilities. Amounts distributed
in 1994 and 1993 totaled $14.0 and $14.1 million, respectively.
ENVIRONMENTAL MATTERS
NGC's operations are subject to extensive federal, state and local
statutes, rules and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. Compliance with
these statutes, rules and regulations requires capital and operating
expenditures including those related to monitoring and permitting at various
operating facilities and the cost of remediation obligations. The Company's
environmental expenditures have not been prohibitive in the past, but are
anticipated to increase in the future with the trend toward stricter standards,
greater regulation, more extensive permitting requirements and an increase in
the number of assets operated by the Company subject to environmental
regulation.
To the Company's knowledge, it is in substantial compliance with, and is
expected to continue to comply in all material respects with, applicable
environmental laws, regulations, orders and rules. Further, to the best of the
Company's knowledge, there are no existing, pending or threatened actions,
suits, investigations, inquiries, proceedings or clean-up obligations by any
governmental authority or third party relating to any violations of any
environmental laws with respect to the Company's assets that would have a
material adverse effect on the Company's operations and financial condition.
NGC's aggregate expenditures for compliance with laws and regulations related to
the discharge of materials into the environment or otherwise related to the
protection of the environment totaled $2.2 million in 1995. Total environmental
expenditures for both capital and operating maintenance and administrative costs
are not expected to exceed $4 million in 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, the financial statement schedule and
supplementary data of the Company are set forth at pages F-1 through F-27
inclusive, found at the end of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information required by this Item 10 will be contained
in the definitive Proxy Statement of the Company for its 1996 annual Meeting of
Stockholders (the "Proxy Statement") under the heading "Proposal 1 -- Election
of Directors" and is incorporated herein by reference. The Proxy Statement will
be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1995. Reference is also made to the information appearing in
Part I of this Annual Report on Form 10-K under the caption "Item 1A. Executive
Officers."
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be contained in
the Proxy Statement under the heading "Executive Compensation" and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of certain of the Company's outstanding
securities will be contained in the Proxy Statement under the heading "Principal
Stockholders" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding related party transactions will be contained in
the Proxy Statement under the headings "Principal Stockholders", "Proposal 1 --
Election of Directors" and "Executive Compensation -- Stock Option Grants" and
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON 8-K
The following documents, which have been filed by the Company with the
Securities and Exchange Commission pursuant to the Securities and Exchange Act
of 1934, as amended, are by this reference incorporated in and made a part of
this statement:
a. Financial Statements and Supplemental Data.
Consolidated financial statements of the Company and its subsidiaries are
incorporated under Item 8. of this Form 10-K.
b. Financial Statement Schedule.
The condensed financial statements of the registrant is incorporated under
Item 8 of this Form 10-K.
c. Exhibits.
The following instruments and documents are included as exhibits to this
Form 10-K.
EXHIBIT
NUMBER DESCRIPTION
2.1 -- Letter of Intent, dated August 4, 1994, between Trident NGL
Holding, Inc. and Natural Gas Clearinghouse.(10)
2.2 -- Combination Agreement and Plan of Merger, dated October 21, 1994,
among Trident NGL Holding, Inc., Natural Gas Clearinghouse,
British Gas General Partner Inc., British Gas Limited Partner
Inc., British Gas NGC L.P., NOVA NGC, Inc., Participating
Employee Partners, C. L. Watson, Inc., Stephen W. Bergstrom,
Inc., Gilbert Burciaga, Inc., A. R. Cipriani, Jr., Inc., David C.
Feldman, Inc., James T. Hackett, Inc., H. Keith Kaelber, Inc.,
Kenneth E. Randolph, Inc., Donald R. Sinclair, Inc. and Jacob S.
Ulrich, Inc.(11)
28
EXHIBIT
NUMBER DESCRIPTION
3.1 -- Certificate of Incorporation of NGC Corporation.(5)
3.2 -- Amended and Restated By-Laws of NGC Corporation.(17)
4.1 -- Indenture, dated as of September 9, 1993, between Trident NGL,
Inc. and Ameritrust Texas National Association, as Trustee.(6)
4.2 -- Form of Senior Subordinated Note (included in Exhibit 4.1).
4.3 -- Indenture, dated as of August 30, 1991, between Trident NGL, Inc.
and Ameritrust Texas National Association, as Trustee.(1)
4.4 -- Form of Senior Subordinated Note (included in Exhibit 4.3).
4.5 -- Note Purchase Agreement, dated as of August 30, 1991, by and
among Trident NGL, Inc. and the Purchasers named therein.(2)
4.6 -- Indenture, dated as of April 15, 1993, between Trident NGL, Inc.
and The First National Bank of Boston, as Trustee.(4)
4.7 -- Form of Subordinated Note (included in Exhibit 4.6).
4.8 -- First Supplemental Indenture, dated as of April 15, 1993, between
Trident NGL, Inc. and Ameritrust Texas National Association, as
Trustee.(4)
4.9 -- Second Supplemental Indenture, dated as of September 9, 1993,
between Trident NGL, Inc. and Ameritrust Texas National
Association, as Trustee.(6)
4.10 -- Waiver and Agreement, dated as of October 31, 1993, by and among
Trident NGL Holding, Inc. and the other parties signatory
thereto.(5)
4.11 -- Lock-up Agreement, dated November 9, 1993, by and among
Donaldson, Lufkin & Jenrette Securities Corporation, Kidder,
Peabody & Co. Incorporated, Morgan Stanley & Co., Incorporated,
S. G. Warburg & Co., Inc., as Representatives of the U.S.
Underwriters; Donaldson, Lufkin & Jenrette Securities
Corporation, S. G. Warburg Securities, Kidder, Peabody
International Limited and Morgan, Stanley International as
Representatives of the International Managers; and the other
parties signatory thereto.(5)
4.12 -- Warrant exercisable for 6,228 shares of Common Stock of NGC
Corporation registered in the name of J. Otis Winters.(5)
4.13 -- Terms of the Contingent Right of Certain Trident stockholders to
receive the Contingent Shares.(12) (See Appendix IV to the Proxy
Statement/Prospectus.)
4.14 -- Terms of the NGC Partners Right to receive the Contingent
Shares.(12) (See Appendix V to the Proxy Statement/Prospectus.)
4.15 -- Credit Agreement dated as of March 14, 1995, among NGC
Corporation and The First National Bank of Chicago, individually
and as agent, The Chase Manhattan Bank National Association and
Nations Bank of Texas N.A., individually and as co-agent, and
certain other lenders named therein. (14)
29
EXHIBIT
NUMBER DESCRIPTION
4.16 -- Indenture, dated as of December 11, 1995, between NGC
Corporation, the Subsidiary Guarantors named therein and The
First National Bank of Chicago, as Trustee. (13)
4.17 -- Form of Senior Notes (included in Exhibit 4.16).
10.1 -- Stock Purchase Agreement, dated as of August 30, 1991, among
Trident NGL Holding, Inc., Trident NGL Holding Subsidiary, Inc.,
HM/Trident, L.P., OXY NGL Inc. and the other purchasers listed on
Schedule I thereto.(1)
10.2 -- Amended and Restated Stockholders Agreement, dated as of April
15, 1993, among Trident NGL Holding, Inc., HM/Trident, L.P. and
the other parties listed on Schedule I thereto.(9)
10.3 -- Stock Purchase Agreement, dated as of April 15, 1993, among
Trident NGL Holding, Inc., HM/Trident, L.P. and the other
purchasers listed on Schedule I thereto.(9)
10.4 -- Letter Agreement, dated as of February 5, 1993, between OXY NGL
Inc. and Trident NGL Holding, Inc. regarding purchase of
preferred stock of Trident NGL Holding, Inc. and Trident NGL
Holding Subsidiary, Inc.(3)
10.5 -- Agreement of Sale and Purchase of Assets, dated as of May 5,
1991, as amended on June 6, 1991 and August 30, 1991, by and
between OXY USA Inc. and Trident Energy, Inc.(1)
10.6 -- Master Agreement on Gas Processing, dated as of May 5, 1991, by
and between OXY USA Inc. and Trident NGL, Inc.(1)
10.7 -- Agreement on Employment, Employee Benefits and Wages, dated as of
August 30, 1991, by and between OXY USA Inc. and Trident NGL,
Inc.(1)
10.8 -- Product Sale and Delivery Agreement between Trident NGL, Inc.,
OXY NGL Pipeline Company and OXY Petrochemicals, Inc. dated as of
August 30, 1991.(1)
10.9 -- Right of First Refusal Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc. (Lake Charles
facilities and Trident NGL Pipeline).(1)
10.10 -- Right of First Refusal Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc. (Hackberry storage
facilities and terminal).(1)
10.11 -- Amended and Restated Gulf Coast Fractionators Partnership
Agreement.(7)
10.12 -- Employment Agreement, dated as of July 9, 1991, by and between
Bruce M. Withers, Jr. and Trident NGL, Inc.(1)
10.13 -- Amendment to Employment Agreement, dated as of April 28, 1994, by
and between Bruce M. Withers, Jr., Trident NGL Holding, Inc. and
Trident NGL, Inc.(8)
10.14 -- Second Amendment, dated as of October 21, 1994, to Employment
Agreement, dated as of July 9, 1991, as amended, by and between
Bruce M. Withers, Jr. and Trident NGL, Inc.
10.15 -- Trident NGL, Inc. Savings Plan.(1)
30
EXHIBIT
NUMBER DESCRIPTION
10.16 -- Amendment No. 1 to Trident NGL, Inc. Savings Plan.(8)
10.17 -- Amendment No. 2 to Trident NGL, Inc. Savings Plan.(9)
10.18 -- Amendment No. 3 to Trident NGL, Inc. Savings Plan.(16)
10.19 -- Trident NGL Holding, Inc. Amended and Restated 1991 Stock Option
Plan.(5)
10.20 -- Letter Agreement dated January 14, 1993 between Trident NGL, Inc.
and The First National Bank of Boston, regarding interest rate
swap transaction.(3)
10.21 -- Letter Agreement dated January 14, 1993 between Trident NGL, Inc.
and Chemical Bank, regarding interest rate exchange
transaction.(3)
10.22 -- Proprietary Software Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc.(1)
10.23 -- Stock Purchase Agreement between Trident NGL Holding, Inc. and J.
Otis Winters.(6)
10.24 -- Underwriting Agreement dated November 9, 1993, by and among
Trident NGL Holding, Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Kidder Peabody & Co. Incorporated, Morgan
Stanley & Co. Incorporated and S. G. Warburg & Co. Inc., as
Representatives of the U. S. Underwriters, and Donaldson, Lufkin
& Jenrette Securities Corporation, Kidder, Peabody International
Limited, Morgan Stanley International and S. G. Warburg
Securities, as Representatives of the International Managers.(5)
10.25 -- Agreement for the Construction, Ownership and Operation of the
Mont Belvieu I Fractionation Facility between Trident NGL, Inc.
and Union Pacific Fuels, Inc. dated November 17, 1993.(7)
10.26 -- Lock-up Agreement, dated as of October 21, 1994, executed by BG
Holdings, Inc. in favor of Trident NGL Holding, Inc.(12)
10.27 -- Lock-up Agreement, dated as of October 21, 1994, executed by NOVA
Gas Services (U.S.) Inc. in favor of Trident NGL Holding,
Inc.(12)
10.28 -- Lock-up Agreement, dated as of October 21, 1994, executed by C.
L. Watson, Stephen W. Bergstrom, Gilbert Burciaga, A. R.
Cipriani, Jr., David C. Feldman, Inc., James T. Hackett, H. Keith
Kaelber, Kenneth E. Randolph, Donald R. Sinclair, and Jacob S.
Ulrich in favor of Trident NGL Holding, Inc.(12)
10.29 -- Agreement, dated as of October 21, 1994, between Hicks, Muse,
Tate & Furst Incorporated ("HMTF") and Natural Gas
Clearinghouse.(12)
10.30 -- Agreement, dated as of October 21, 1994, among DLJ Capital
Corporation, DLJ First ESC, L.L.C., and Natural Gas
Clearinghouse.(12)
10.31 -- Support Agreement, dated as of October 21, 1994, among DLJ
Capital Corporation, DLJ First ESC, L.L.C., HMTF and Natural Gas
Clearinghouse.(12)
31
EXHIBIT
NUMBER DESCRIPTION
10.32 -- Indemnification Agreements dated as of October 21, 1994, between
Trident NGL Holding, Inc. and BG Holdings, Inc.(12)
10.33 -- Indemnification Agreement, dated as of October 21, 1994, among
Trident NGL Holding, Inc., NOVA Gas Services (U.S.) Inc. and NOVA
Investments (U.S.) Inc.(12)
10.34 -- Indemnification Agreements, dated as of October 21, 1994, between
Trident NGL Holding, Inc. and each of C. L. Watson, Stephen W.
Bergstrom, Gilbert Burciaga, A. R. Cipriani, Jr., James T.
Hackett, H. Keith Kaelber, Kenneth E. Randolph, Donald R.
Sinclair, and Jacob S. Ulrich, respectively.(12)
10.35 -- Indemnification Agreement, dated as of October 21, 1994, among
Trident NGL Holding, Inc. David C. Feldman, Inc. and David C.
Feldman.(12)
10.36 -- Administrative Services Agreement, dated as of October 21, 1994,
between Trident NGL Holding, Inc. and NOVAGAS Clearinghouse
Limited Partnership.(12)
10.37 -- Master Services Contract, dated as of October 21, 1994, between
Accord Energy Limited and Trident NGL Holding, Inc.(12)
10.38 -- Stockholders Agreement, dated as October 21, 1994, among Trident
NGL Holding, Inc. and certain of its Stockholders.(12)
10.39 -- Stockholders Agreement, dated as of October 21, 1994, among
Trident NGL Holding, Inc., HMTF, BG Holdings, Inc., NOVA Gas
Services (U.S.) Inc. and certain other stockholders named
therein.(12)
10.40 -- Registration Rights Agreement, dated as of October 21, 1994,
among Trident NGL Holding, Inc., BG Holdings, Inc., NOVA Gas
Services (U.S.) Inc. and each of C. L. Watson, Stephen W.
Bergstrom, Gilbert Burciaga, A. R. Cipriani, Jr., David C.
Feldman, Inc., James T. Hackett, H. Keith Kaelber, Kenneth E.
Randolph, Donald R. Sinclair, and Jacob S. Ulrich.(12)
10.41 -- Investment Agreements dated as of October 21, 1994 by each of
Gilbert Burciaga, Stephen W. Bergstrom, James T. Hackett, C. L.
Watson, BG Holdings, Inc., Kenneth E. Randolph, Jacob S. Ulrich,
David C. Feldman, NOVA Gas Services (U.S.), Inc., Donald R.
Sinclair, H. Keith Kaelber and A. R. Cipriani, Jr. in favor of
Trident NGL Holding, Inc. and each of the other parties to the
Combination Agreement.(12)
10.42 -- Release and Termination Agreement, dated as of October 21, 1994,
among Trident NGL Holding, Inc., Trident NGL, Inc., HMTF and
Natural Gas Clearinghouse.(12)
10.43 -- Release and Termination Agreement, dated as of October 21, 1994,
among Trident NGL Holding, Inc., Trident NGL, Inc., Donaldson
Lufkin & Jenrette Securities Corporation and Natural Gas
Clearinghouse.(12)
10.44 -- Letter Agreement, dated as of October 21, 1994, by Apollo
Investment Fund, L.P. in favor of Trident NGL Holding, Inc. and
Natural Gas Clearinghouse.(12)
10.45 -- Form of Investment Agreement, dated as of October 21, 1994, made
by certain non-accredited investors who will receive shares of
common stock in connection with the Combination and Trident NGL
Holding, Inc.(12)
32
EXHIBIT
NUMBER DESCRIPTION
10.46 -- Employment Agreement, dated as of May 19, 1992, between C.L.
Watson and Natural Gas Clearinghouse.(12)
10.47 -- Employment Agreement, dated as of May 19, 1992, between Stephen
W. Bergstrom and Natural Gas Clearinghouse.(12)
10.48 -- NGC Corporation Employee Equity Option Plan.(12) (See Appendix
III to the Proxy Statement/Prospectus).
10.49 -- The Amended and Restated Natural Gas Clearinghouse Deferred
Compensation Plan, dated February 28, 1992.(12)
10.50 -- Natural Gas Clearinghouse Above Base Incentive Compensation Plan,
as amended and restated, effective as of January 1, 1994.(12)
10.51 -- Unanimous Shareholder Agreement dated February 25, 1994, among
Novacorp International, Inc. (formerly NOVA Gas Services Ltd.),
NGC Canada Inc. and Novagas Clearinghouse Ltd.(12)
10.52 -- First Amendment to Unanimous Shareholders Agreement, dated May
20, 1994, among Novacorp International, Inc. (formerly NOVA Gas
Services Ltd.), NGC Canada Inc. and Novagas Clearinghouse
Ltd.(12)
10.53 -- Limited Partnership Agreement, dated February 25, 1994, among
Novacorp International, Inc. (formerly NOVA Gas Services Ltd.),
NGC Canada Inc. and Novagas Clearinghouse Ltd.(12)
10.54 -- Amended and Restated Lease Agreement entered into June 3, 1992,
between Cypress Crossing Venture, as Landlord, and Natural Gas
Clearinghouse, as Tenant.(12)
10.55 -- First Amendment to Amended and Restated Lease Agreement dated
effective as of November 1, 1992, between Cypress Crossing
Venture and Natural Gas Clearinghouse.(12)
10.56 -- Second Amendment to Amended and Restated Lease Agreement dated
effective as of May 1, 1994, between Cypress Crossing Venture and
Natural Gas Clearinghouse.(12)
10.57 -- Amended Contract for Processing Gas, dated January 1, 1995, by
and between Amoco Production Company and Trident NGL, Inc.(15)
10.58 -- Exclusivity Agreement dated January 21, 1996, among NGC
Corporation and Chevron Corporation.(16)
22.1 -- Subsidiaries of the Registrant.(17)
+23.1 -- Consent of Arthur Andersen LLP.
- ----------------
+ Filed herewith.
(1) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-43871.
33
(2) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-46416.
(3) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-59200.
(4) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 31, 1993 of Trident NGL, Inc.
Commission File No. 1-11156.
(5) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended September 30, 1993 of Trident NGL Holding,
Inc., Commission File No. 1-11156.
(6) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL Holding, Inc. on Form S-1, Registration No. 33-68842.
(7) Incorporated by reference to exhibits to the Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1993 of Trident NGL Holding, Inc.,
Commission File No. 1-11156.
(8) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 31, 1994 of Trident NGL Holding, Inc.,
Commission File No. 1-11156.
(9) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended June 30, 1994 of Trident NGL Holding, Inc.,
Commission File No. 1-11156.
(10) Incorporated by reference to exhibits to the Current Report on Form 8-K of
Trident NGL Holding, Inc., Commission File No. 1-11156, dated August 4,
1994.
(11) Incorporated by reference to exhibits to the Current Report on Form 8-K of
Trident NGL Holding, Inc., Commission File No. 1-11156, dated October 21,
1994.
(12) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL Holding, Inc. on Form S-4, Registration No. 33-88907.
(13) Incorporated by reference to the Registration Statement of NGC Corporation
on Form S-3, Registration No. 33- 97368.
(14) Incorporated by reference to exhibits to the current report on Form 8-K of
NGC Corporation, Commission File 1-11156, dated March 14, 1995.
(15) Incorporated by reference to exhibits to the Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1994, of NGC Corporation, Commission
File No. 1-11156.
(16) Incorporated by reference to exhibits to the current report on Form 8-K of
NGC Corporation, Commission File 1-11156, dated January 21, 1996.
(17) Incorporated by reference to exhibits to the Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1995, of NGC Corporation, Commission
File No. 1-11156.
(b) Reports on Form 8-K of NGC Corporation.
Current Report on Form 8-K of NGC Corporation, Commission File No.
1-11156, dated December 20, 1995 (On December 20, 1995, the Company
sold $150 million of its 6 3/4% Senior Notes due December 15, 2005
pursuant to an underwritten public offering).
Current Report on Form 8-K of NGC Corporation, Commission File No.
1-11156, dated December 28, 1995 (Resignation of James T. Hackett,
Senior Vice President of the Company and President of Trident NGL,
Inc.).
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC CORPORATION
Date: March 29,1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board, Chief
Executive Officer, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board, Chief
Executive Officer, President and Director
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, Senior Vice President
and Director
Date: March 29, 1996 By: /s/ Stuart David Anderson
Stuart David Anderson, Director
Date: March 29, 1996 By: /s/ Dennis W. Cottrell
Dennis W. Cottrell, Director
Date: March 29, 1996 By: /s/ Roy Alan Gardner
Roy Alan Gardner, Director
Date: March 29, 1996 By: /s/ C. Kent Jespersen
C. Kent Jespersen, Director
35
Date: March 29, 1996 By: /s/ Jeffrey M. Lipton
Jeffrey M. Lipton, Director
Date: March 29, 1996 By: /s/ Albert Terence Poole
Albert Terence Poole, Director
Date: March 29, 1996 By: /s/ Daniel L. Dienstbier
Daniel L. Dienstbier, Director
Date: March 29, 1996 By: /s/ J. Otis Winters
J. Otis Winters, Director
The Annual Report to Stockholders of the Company for the year ended
December 31, 1995, and the proxy statement relating to the annual meeting of
stockholders will be furnished to stockholders subsequent to the filing of this
Annual Report on Form 10-K. Such documents have not been mailed to stockholders
as of the date of this report.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NATURAL GAS CLEARINGHOUSE
By: NGC Corporation, its general partner
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board, Chief
Executive Officer, President and Director of
NGC Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board, Chief
Executive Officer, President and Director
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer of NGC Corporation
(Principal Financial and Accounting Officer)
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, Senior Vice President
and Director of NGC Corporation
Date: March 29, 1996 By: /s/ Stuart David Anderson
Stuart David Anderson, Director of NGC
Corporation
Date: March 29, 1996 By: /s/ Dennis W. Cottrell
Dennis W. Cottrell, Director of NGC
Corporation
Date: March 29, 1996 By: /s/ Roy Alan Gardner
Roy Alan Gardner, Director of NGC Corporation
37
Date: March 29, 1996 By: /s/ C. Kent Jespersen
C. Kent Jespersen, Director of NGC
Corporation
Date: March 29, 1996 By: /s/ Jeffrey M. Lipton
Jeffrey M. Lipton, Director of NGC
Corporation
Date: March 29, 1996 By: /s/ Albert Terence Poole
Albert Terence Poole, Director of NGC
Corporation
Date: March 29, 1996 By: /s/ Daniel L. Dienstbier
Daniel L. Dienstbier, Director of NGC
Corporation
Date: March 29, 1996 By: /s/ J. Otis Winters
J. Otis Winters, Director of NGC Corporation
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIDENT NGL, INC.
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Senior Vice President
and Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Director
Date: March 29, 1996 By: /s/ Bruce M. Withers, Jr.
Bruce M. Withers, Jr., Director
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Senior Vice President
and Director
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC ENERGY RESOURCES, LIMITED PARTNERSHIP
By: NGC Energy, Inc., its general partner
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer of NGC Energy, Inc.
(Principal Financial and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Senior Vice President
and Director of NGC Energy, Inc.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC LIQUIDS MARKETING, INC.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ William A. Zartler
William A. Zartler, Vice President and
Director
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Senior Vice President
and Director
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC OIL TRADING AND TRANSPORTATION, INC.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Senior Vice President
and Director
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC UK LIMITED
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board and
Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board and
Director (Principal Executive Officer)
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Jacob S. Ulrich
Jacob S. Ulrich, Director
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Senior Vice President
and Director
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC CANADA
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board and
Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ C.L. Watson
C.L. Watson, Chairman of the Board and
Director (Principal Executive Officer)
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Michael J. Cyrus
Michael J. Cyrus, Director
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC FUTURES, INC.
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, President and Director
(Principal Executive Officer)
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
Date: March 29, 1996 By: /s/ Joel M. Staib
Joel M. Staib, Director
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HUB SERVICES, INC.
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, President and Director
(Principal Executive Officer)
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC STORAGE, INC.
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, President and Director
(Principal Executive Officer)
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NGC ANADARKO GATHERING SYSTEMS, INC.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
Date: March 29, 1996 By: /s/ Stephen W. Bergstrom
Stephen W. Bergstrom, Director
48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIDENT GAS MARKETING, INC.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIDENT NGL PIPELINE COMPANY
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
KANSAS GAS SUPPLY CORPORATION
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIDENT ACQUISITION CORP.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By: /s/ H. Keith Kaelber
H. Keith Kaelber, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
Date: March 29, 1996 By: /s/ Kenneth E. Randolph
Kenneth E. Randolph, Director
52
NGC CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS .................................... PAGE
Report of Independent Public Accountants ........................ F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 .... F-3
Consolidated Statements of Operations for the years ended ....... F-4
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended ....... F-5
December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity ...... F-6
for the years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements ...................... F-7
FINANCIAL STATEMENT SCHEDULE
Condensed Financial Statements of the Registrant ................ F-23
FINANCIAL STATEMENTS OF UNCONSOLIDATED AFFILIATE
Accord Energy Limited Annual Report for the year
ended December 31, 1995 ....................................... 1 - 18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of NGC Corporation:
We have audited the accompanying consolidated balance sheets of NGC
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1995, 1994 and 1993.
These financial statements and schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NGC Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years ended December 31, 1995, 1994 and
1993, in conformity with generally accepted accounting principles.
As explained in Note 3 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for fixed-price
natural gas transactions to the mark-to-market method of accounting.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information included in Schedule I is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statments.
This schedule has been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
March 15, 1996
<PAGE>
NGC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
DECEMBER 31, DECEMBER 31,
1995 1994
----------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ...................... $ 16,266 $ 15,219
Accounts receivable, net ....................... 562,278 330,979
Accounts receivable, affiliates ................ 1,624 2,008
Inventories .................................... 74,263 25,359
Assets from risk management activities ......... 88,093 68,133
Prepayments and other assets ................... 20,415 4,084
----------- ---------
762,939 445,782
----------- ---------
PROPERTY, PLANT AND EQUIPMENT .................. 1,013,354 134,593
Less: accumulated depreciation ................. (64,843) (20,531)
----------- ---------
948,511 114,062
----------- ---------
OTHER ASSETS
Investments in unconsolidated affiliates ....... 62,370 14,365
Assets from risk management activities ......... 26,380 43,772
Other assets ................................... 75,052 27,490
----------- ---------
$ 1,875,252 $ 645,471
=========== =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable ............................... $ 543,108 $ 300,946
Accounts payable, affiliates ................... 22,547 21,086
Accrued liabilities ............................ 58,736 13,709
Liabilities from risk management activities .... 81,283 68,403
----------- ---------
705,674 404,144
LONG-TERM DEBT ................................. 522,764 33,000
OTHER LIABILITIES
Liabilities from risk management activities .... 22,570 35,833
Deferred income taxes .......................... 43,227 3,058
Other long-term liabilities .................... 28,637 17,223
----------- ---------
1,322,872 493,258
----------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
EQUITY
Partners' capital and undistributed earnings ... -- 152,213
Preferred stock, $.01 par value, 50,000,000
shares authorized ......................... -- --
Common stock, $.01 par value, 300,000,000 shares
authorized; 110,493,411 shares issued and
105,031,874 shares outstanding at December
31, 1995 .................................. 1,105 --
Additional paid-in capital ..................... 515,785 --
Retained earnings .............................. 35,490 --
----------- ---------
552,380 152,213
----------- ---------
$ 1,875,252 $ 645,471
=========== =========
See Notes to Consolidated Financial Statements.
F-3
NGC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues ...................................... $ 3,665,946 $ 3,237,843 $ 2,790,977
Cost of sales ................................. 3,471,286 3,138,717 2,699,127
----------- ----------- -----------
Operating margin ......................... 194,660 99,126 91,850
Depreciation and amortization ................. 44,913 8,378 7,594
General and administrative expenses ........... 68,057 47,817 36,585
----------- ----------- -----------
Operating income ......................... 81,690 42,931 47,671
Equity in earnings of unconsolidated affiliates 21,060 3,803 --
Other income .................................. 3,096 2,604 2,288
Interest expense .............................. (32,391) (2,381) (1,772)
Other expenses ................................ (8,221) (2,852) (1,411)
----------- ----------- -----------
Income before income taxes .................... 65,234 44,105 46,776
Income tax provision (benefit) ................ (27,471) 2,004 779
----------- ----------- -----------
NET INCOME .................................... $ 92,705 $ 42,101 $ 45,997
=========== =========== ===========
PRO FORMA NET INCOME PER SHARE:
Income before income taxes .................... $ 65,234 $ 44,105 $ 46,776
Pro forma provision for income taxes .......... 20,438 16,319 17,307
----------- ----------- -----------
Pro forma net income .......................... $ 44,796 $ 27,786 $ 29,469
=========== =========== ===========
Pro forma net income per common and common
equivalent share ........................... $ 0.40 $ 0.28 $ 0.30
=========== =========== ===========
Weighted average number of common
and common equivalent shares ................ 113,176 97,804 97,804
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
NGC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
----------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .......................................................... $ 92,705 $ 42,101 $ 45,997
Items not affecting cash flows from operating activities:
Depreciation and amortization ....................................... 44,913 8,378 7,594
Equity in earnings of affiliates, net of cash distributions ......... (9,169) (3,803) --
Risk management activities .......................................... (2,951) (6,529) --
Deferred income taxes ............................................... (28,281) 1,014 (679)
Amortization of bond premium ........................................ (3,214) -- --
Other ............................................................... 3,484 1,528 374
Change in assets and liabilities resulting from operating activities:
Accounts receivable ................................................. (152,557) 28,440 (54,758)
Inventories ......................................................... (23,403) (20,693) (2,734)
Prepayments and other assets ........................................ (16,518) 5,660 (2,070)
Accounts payable .................................................... 185,215 (37,831) 26,068
Accrued liabilities ................................................. 11,611 (154) 1,613
Other, net .......................................................... (11,187) (941) (1,113)
----------- -------- --------
Net cash provided by operating activities ........................... 90,648 17,170 20,292
----------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................................................ (128,871) (36,452) (16,464)
Acquisition of Trident NGL, Inc., net of cash acquired .............. (165,267) -- --
Investment in unconsolidated affiliates ............................. (15,457) (10,562) --
Investment in marketable securities, net ............................ -- 8,100 (7,915)
Other ............................................................... (1,028) 538 16,468
----------- -------- --------
Net cash used in investing activities ............................... (310,623) (38,376) (7,911)
----------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings .................................. 1,237,589 33,000 --
Repayments of long-term borrowings .................................. (1,143,039) -- (32,300)
Proceeds from sale of capital stock, options and warrants ........... 725 -- --
Capital contributions ............................................... 135,000 -- --
Dividends and other distributions ................................... (9,253) (14,041) (14,118)
----------- -------- --------
Net cash provided by (used in) financing activities ................. 221,022 18,959 (46,418)
----------- -------- --------
Net increase (decrease) in cash and cash equivalents ................ 1,047 (2,247) (34,037)
Cash and cash equivalents, beginning of year ........................ 15,219 17,466 51,503
----------- -------- --------
Cash and cash equivalents, end of year .............................. $ 16,266 $ 15,219 $ 17,466
=========== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
NGC CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
CLEARINGHOUSE NGC CORPORATION
---------------------- ----------------------------------------
Additional
Contributed Undistributed Paid-In Retained
Capital Earnings Shares Amount Capital Earnings
--------- --------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 ........... $ 24,824 $ 63,921 -- $ -- $ -- $ --
Net income ............................. -- 45,997 -- -- -- --
Options granted ........................ -- 374 -- -- -- --
Partnership distributions .............. -- (14,427) -- -- -- --
--------- --------- ------- ------ --------- -------
BALANCE AT DECEMBER 31, 1993 ........... 24,824 95,865 -- -- --
Net income ............................. -- 42,101 -- -- --
Options granted ........................ -- 1,528 -- -- --
Partnership distributions .............. -- (12,105) -- -- --
--------- --------- ------- ------ --------- -------
BALANCE AT DECEMBER 31, 1994 ........... 24,824 127,389 -- -- --
Net income ............................. -- 52,930 -- -- 39,775
Capital contribution ................... 135,000 -- -- -- --
Partnership distributions .............. -- (5,227) -- -- --
Options granted ........................ -- 323 -- 1,692 --
Acquisition of Trident NGL Holding, Inc. (159,824) (175,415) 109,886 1,098 510,918 --
Dividends and other distributions ...... -- -- -- -- (4,285)
401(k) plan stock issuances ............ -- -- 199 3 1,873 --
Stock options exercised ................ -- -- 408 4 1,302 --
--------- --------- ------- ------ --------- -------
BALANCE AT DECEMBER 31, 1995 ........... $ -- $ -- 110,493 1,105 515,785 35,490
========= ========= ======= ====== ========= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
NGC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES
NGC Corporation ("NGC" or the "Company") is a leading gatherer, processor,
transporter and marketer of energy products and services in North America. The
Company also markets natural gas and crude oil in the United Kingdom. NGC is a
holding company that operates principally through two subsidiaries, Natural Gas
Clearinghouse ("Clearinghouse") and Trident NGL, Inc. ("Trident"), and is the
result of a strategic business combination (the "Combination") between
Clearinghouse and Trident NGL Holding, Inc. ("Holding"), under which Holding was
renamed NGC Corporation.
The accounting policies of NGC reflect industry practices and conform to
generally accepted accounting principles. The more significant of such
accounting policies are described below. The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles
requires management to develop estimates and make assumptions that affect
reported financial position and results of operations and that impact the nature
and extent of disclosure, if any, of contingent assets and liabilities. Actual
results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of the Company and its majority-owned
subsidiaries after elimination of intercompany accounts and transactions.
Investments in affiliates in which the Company has a significant ownership
interest, generally 20 percent to 50 percent, are accounted for by the equity
method. Other investments are carried at cost. Certain reclassifications have
been made to prior period amounts to conform with current period financial
statement classifications.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist of all demand
deposits and funds invested in short-term investments with original maturities
of three months or less.
CONCENTRATION OF CREDIT RISK. NGC provides multiple energy commodity needs
principally to customers in the electric and gas distribution industries and to
entities engaged in industrial and petrochemical businesses. These industry
concentrations have the potential to impact the Company's overall exposure to
credit risk, either positively or negatively, in that the customer base may be
similarly affected by changes in economic, industry or other conditions.
Receivables are generally not collateralized; however, NGC believes the credit
risk posed by industry concentration is offset by the diversification and
creditworthiness of the Company's customer base.
INVENTORIES. Inventories consisting primarily of natural gas in storage of
$15.3 million and $6.6 million, natural gas liquids of $37.0 million and $16.6
million, and crude oil of $9.5 million and $1.4 million at December 31, 1995 and
1994, respectively, are valued at the lower of weighted average cost or market.
Materials and supplies inventory of $12.5 million and $0.8 million at December
31, 1995 and 1994, respectively, is carried at the lower of cost or market using
the specific identification method.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment consisting
principally of gas gathering, processing and fractionation facilities, natural
gas transmission lines, pipelines and supporting infrastructure is recorded at
cost. Expenditures for major replacements and renewals are capitalized while
expenditures for maintenance, repairs and minor renewals to maintain facilities
in operating condition are expensed. Depreciation is provided using the
straight-line method over the estimated economic service lives of the assets,
ranging from three to 25 years. Composite depreciation rates are applied to
functional groups of property having similar economic characteristics. Gains and
losses are not recognized for retirements of property, plant and equipment
subject to composite depreciation rates ("composite rate") until the asset group
subject to the composite rate is retired.
ENVIRONMENTAL COSTS. Environmental costs relating to current operations are
expensed or capitalized, as appropriate, depending on whether such costs provide
future economic benefit. Liabilities are recorded when environmental assessment
indicates that remedial efforts are probable and the costs can be reasonably
estimated. Measurement of liabilities is based on currently enacted laws and
regulations, existing technology and undiscounted, site-specific costs.
Environmental liabilities in connection with assets that are sold or closed are
realized upon such sale or closure, to the extent they are probable, can be
estimated and have not previously been reserved. In assessing environmental
liabilities, no offset is made for potential insurance recoveries. Recognition
of any joint and several liability is based upon the Company's best estimate of
its final pro rata share of such liability. At December 31, 1995, reserves for
environmental matters were not material.
F-7
INTANGIBLE ASSETS. Intangible assets are generally amortized by the
straight-line method over an estimated useful life of 20 years.
REVENUE RECOGNITION. Revenues for product sales and gas processing and
marketing services are recognized when title passes to the customer or when the
service is performed. Fractionation and transportation revenues are recognized
based on volumes received in accordance with contractual terms.
Effective January 1, 1994, the Company adopted the mark-to-market method of
accounting for its fixed-price natural gas activities. Under such method, all
fixed-price natural gas contracts are recorded at fair value, net of future
servicing costs and reserves. Changes in the market value of these contracts are
recognized as gain or loss in the period of change. The resulting unrealized
gains and losses are recorded as assets and liabilities from risk management
activities.
The Company enters into financial instrument contracts to hedge purchase
and sale commitments and inventories of natural gas liquids and crude oil in
order to minimize the risk of market fluctuations. NGC also monitors its
exposure to fluctuations in interest rates and foreign currency exchange rates
and may execute swaps, forward-exchange contracts or other financial instruments
to manage these exposures. Gains and losses from hedging transactions are
recognized in income and are reflected as cash flows from operating activities
in the periods for which the underlying commodity, interest rate or foreign
currency transaction was hedged. If the necessary correlation to the commodity,
interest rate or foreign currency transaction being hedged ceases to exist, the
gain or loss associated with such contract(s) is no longer deferred and is
recognized in the period correlation is lost.
INCOME TAXES. The Company files a consolidated United States federal income
tax return and, for financial reporting purposes, provides income taxes for the
difference in the tax and financial reporting bases of its assets and
liabilities in accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." Prior to the effective date of
the Combination, the operations of Clearinghouse, a Colorado partnership, were
generally not subject to corporate federal income tax and Clearinghouse's
earnings were generally allocated to and taken into account in computing the
taxable income of its partners.
EARNINGS PER SHARE. Net income per share is based on the weighted average
number of shares of common stock outstanding plus the common stock equivalents
that would arise from the exercise of outstanding options or warrants, when
dilutive. For the years ended December 31, 1994 and 1993, a pro forma amount of
97.8 million shares outstanding was used to compute the pro forma earnings per
share. Such amount represents the equivalent number of shares obtained in the
Combination by the owners of the partners of Clearinghouse plus the equivalent
number of shares that would arise from the exercise of outstanding options
existing as of the effective date of the Combination, assuming a market value of
$12 per share. Primary and fully diluted earnings per share are the same for all
periods presented.
Pro forma net income used to compute pro forma earnings per share for each
of the three years in the period ended December 31, 1995, reflect incremental
statutory federal and state income tax provisions applied to Clearinghouse's
partnership income for the periods prior to the effective date of the
Combination. The incremental tax provision represents an estimate of the
aggregate federal and state income taxes that would have been provided had
Clearinghouse been a taxpaying entity during the respective accounting periods.
FOREIGN CURRENCY TRANSLATIONS. For subsidiaries whose functional currency
is other than U.S. dollar, assets and liabilities are translated at year-end
rates of exchange and revenue and expenses are translated at average exchange
rates prevailing during the year. The cumulative translation adjustment is
included as a separate component of Equity, if material.
NOTE 2 -- BUSINESS COMBINATION WITH TRIDENT NGL HOLDING, INC.
F-8
On March 14, 1995, Clearinghouse consummated the Combination with Holding,
a fully integrated natural gas liquids company. Pursuant to the terms of the
Combination, Holding, the legally surviving corporation, was renamed NGC
Corporation and (i) acquired through a tender offer 14.2 million shares of its
common stock (representing approximately 50 percent of Holding's common stock
outstanding immediately prior to consummation of the Combination) for $11.75 per
share, net to the seller in cash; (ii) acquired, directly and indirectly, all of
the outstanding general partnership interests in Clearinghouse; (iii) the former
owners of the partners of Clearinghouse (the "Clearinghouse Owners") acquired 82
percent of the outstanding shares of NGC common stock (giving effect to the
issuance, but not the allocation, of the Contingent Shares, as defined); and
(iv) the stockholders of Holding prior to consummation of the Combination
retained shares of stock representing approximately 13 percent of the
outstanding shares of NGC common stock (giving effect to the tender offer and
the issuance, but not the allocation, of the Contingent Shares). In addition,
5,461,538 shares of NGC common stock (the "Contingent Shares"), representing
approximately 5 percent of the outstanding shares of NGC common stock after
giving effect to the issuance of such shares, will be allocated in March 1996 in
a ratio of 17 percent to the former stockholders of Holding and 83 percent to
the Clearinghouse Owners.
The Combination was accounted for under the purchase method of accounting.
Because the Clearinghouse Owners acquired approximately 82 percent of NGC,
Clearinghouse was the acquiring company for accounting purposes. Accordingly,
the purchase price of approximately $350 million was allocated to the Holding
assets acquired and liabilities assumed based on their estimated fair values as
of March 1, 1995, the effective date of the Combination for accounting purposes.
The following table reflects certain unaudited pro forma information for
the periods presented as if the Combination had occurred on January 1, 1994 (in
thousands, except per share amounts):
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
Pro forma revenues ........... $ 3,744,870 $ 3,804,213
============ ============
Pro forma net income ......... $ 46,067 $ 25,085
============ ============
Pro forma net income per share $ 0.39 $ 0.21
============ ============
NOTE 3 -- PRICE RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
PRICE RISK MANAGEMENT ACTIVITIES. NGC utilizes fixed-price forward purchase
and sales contracts, futures and option contracts traded on the NYMEX and swaps
and options traded in the over-the-counter financial markets to manage and hedge
its fixed-price purchase and sales commitments, to provide fixed-price
commitments as a service to its customers and suppliers, to reduce its exposure
relative to the volatility of cash market prices and to protect its investment
in storage inventories. The Company may, at times, have a bias in the market,
within established guidelines, resulting from the management of its portfolio.
In addition, by utilizing exchange for physical transactions allowed by the
NYMEX, which enable entities to take delivery of, or sell, a physical quantity
of natural gas in exchange for a futures position, NGC is able to secure
additional sources of physical natural gas supply, or create additional markets
for existing supply, through the use of natural gas futures contracts. These
fixed-price activities are referred to herein as risk management activities.
ACCOUNTING FOR PRICE RISK MANAGEMENT ACTIVITIES -- NATURAL GAS. Effective
January 1, 1994, the Company changed its method of accounting for fixed-price
natural gas transactions to the mark-to-market method of accounting in order to
accurately portray its price risk management and trading activities. Previously,
these financial instruments were accounted for on an accrual basis. The
cumulative effect of the accounting change on periods prior to January 1, 1994,
was immaterial.
F-9
NGC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under mark-to-market accounting, fixed-price forwards, swaps, options,
futures and other financial instruments with third parties are reflected at
market value, net of future servicing costs and reserves, with resulting
unrealized gains and losses recorded as assets and liabilities from risk
management activities in the consolidated balance sheets. These assets and
liabilities are affected by the actual timing of settlements related to these
contracts and current-period changes resulting primarily from newly originated
transactions and the impact of price movements. These changes are recognized as
revenues in the consolidated statements of operations in the period in which the
change occurs. Market prices used to value outstanding financial instruments
reflect management's consideration of, among other things, closing exchange and
over-the-counter quotations, the time value of money and volatility factors
underlying the commitments. These market prices are adjusted to reflect the
potential impact of liquidating NGC's position in an orderly manner over a
reasonable period of time under present market conditions.
MARKET RISK. NGC generally attempts to balance its fixed-price physical and
financial purchase and sales contracts in terms of contract volumes and the
timing of performance and delivery obligations. However, net open positions
often exist or are established due to the origination of new transactions and
the Company's assessment of, and response to, changing market conditions. NGC
will take advantage of its bias in the market when it believes, based upon
competitive information gained from its energy marketing activities, that future
price movements will be consistent with its net open position. To the extent a
net open position exists, NGC is exposed to the risk that fluctuating market
prices may adversely impact its financial position or results of operations. The
net open position is actively managed, and the impact of a change in price on
the Company's financial condition at a point in time is not necessarily
indicative of the impact of price movements throughout the year. At December 31,
1995, a $0.10 increase or decrease in the price of natural gas would have
impacted net income by approximately $4 million either favorable or unfavorably.
The impact of the $0.10 price movements referred to above are before application
of market reserves which would likely reduce the after-tax earnings impact of
these price movements.
MARKET RESERVES. In connection with the market valuation of its fixed-price
contracts, the Company maintains certain reserves for a number of risks and
costs associated with these future commitments. Among others, these include
reserves for credit risks based on the financial condition of counterparties,
reserves for product location ("basis") differentials and consideration of the
time value of money for long-term contracts. Counterparties in its trading
portfolio consist principally of financial institutions, major oil and gas
companies and local distribution companies. The creditworthiness of these
counterparties may impact its overall exposure to credit risk, either positively
or negatively; however, with regard to its counterparties NGC maintains credit
policies that management believes minimizes overall credit risk. Determination
of the credit quality of its counterparties is based upon a number of factors,
including credit ratings, financial condition, project economics and collateral
requirements. When applicable, the Company employs standardized agreements that
allow for the netting of positive and negative exposures associated with a
single counterparty. Based on these policies, its current exposures and its
credit reserves, NGC does not anticipate a material adverse effect on the
financial position or results of operations as a result of counterparty
nonperformance. The following table displays the mark-to-market results of NGC's
natural gas fixed-price transactions at December 31, 1995:
BELOW
INVESTMENT INVESTMENT
GRADE CREDIT GRADE CREDIT
QUALITY QUALITY TOTAL
-------- ------- --------
($ IN THOUSANDS)
Utilities and power generators .......... $ 32,087 $ 1,621 $ 33,708
Financial institutions .................. 12,834 1,842 14,676
Oil and gas producers ................... 232 7,961 8,193
Industrial companies .................... (1,061) (3,332) (4,393)
Other ................................... (14,226) (5,262) (19,488)
-------- ------- --------
Value of fixed-price transactions
before reserves .................... $ 29,866 $ 2,830 $ 32,696
======== ======= ========
Reserves ................................ (16,380)
--------
$ 16,316
========
At December 31, 1995, the term of NGC's portfolio extends to 2004, and the
average remaining life of an individual transaction was five months.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments." The estimated fair-value amounts have been determined by the
Company using available market information and selected valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. The use of different market assumptions or valuation
methodologies could have a material effect on the estimated fair-value amounts.
The carrying values of current assets and liabilities approximate fair
values due to the short-term maturities of these instruments. The carrying
amounts and fair values of the Company's other financial instruments were:
F-10
NGC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
------------------------------------------
1995 1994
-------------------- ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- ------- -------
($ IN THOUSANDS)
Credit Agreement ................. 183,000 183,000 33,000 33,000
6.75% Senior Notes ............... 150,000 151,500 -- --
Senior Subordinated Notes ........ 65,000 78,000 -- --
Subordinated Notes ............... 105,000 116,000 -- --
Risk management contracts ........ -- (7,700) -- (21,900)
The carrying amount of the Credit Agreement in the consolidated
financial statements was assumed to approximate fair value. The fair values of
the Senior Notes, Senior Subordinated Notes and Subordinated Notes were based on
quoted market prices by financial institutions that actively trade these debt
securities. The fair value of the Company's cost basis investments was not
estimated as the investments were considered immaterial.
The fair value of commodity price and basis swaps and options was
based upon the estimated consideration that would be received to terminate those
swaps or options in a gain position and the estimated cost that would be
incurred to terminate those swaps or options in a loss position. Such
transactions are referred to in the above table as "Risk management contracts."
The commodity swap and option agreements extend for a period of up to eight
years. At December 31, 1995, 1994 and 1993, financial instruments related to
natural gas had an absolute notional contract quantity of 881 billion cubic
feet, 914 billion cubic feet and 768 billion cubic feet, respectively. In
addition, financial instruments related to crude oil and natural gas liquids had
absolute notional contract quantities of 0.2 million and 2.5 million barrels at
December 31, 1995, respectively. The estimated fair value and cash-flow
requirements for these commodity swaps and options were based upon the market
prices in effect at the financial statement date and do not necessarily reflect
NGC's entire trading portfolio. Cash-flow requirements related to these
commodity price swaps and options at December 31, 1995, were as follows:
DECEMBER 31,
1995
--------
($ IN THOUSANDS)
Net premiums paid to date ................................ $ 12,718
Net future inflows ....................................... (5,018)
--------
Net cash outflow ......................................... $ 7,700
========
F-11
NOTE 4 -- CASH FLOW INFORMATION
Detail of supplemental disclosures of cash flow and non-cash investing and
financing information for each of the three years in the period ended December
31, 1995, was:
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
--------- ------ ------
($ IN THOUSANDS)
Interest paid (net of amount capitalized) .... $ 32,909 $3,575 $1,644
========= ====== ======
Taxes paid (net of refunds) .................. $ (150) $1,068 $1,456
========= ====== ======
Detail of business acquired:
Current assets and other ................... 87,416
Fair value of non-current assets ........... 832,384
Liabilities assumed, including deferred
taxes ................................... (572,680)
Capital stock issued and options
exercised .................................... (180,220)
Cash balance acquired ...................... (1,633)
---------
Cash paid, net of cash acquired ............ 165,267
=========
In 1995, the Company recognized a one-time tax benefit of $45.7 million
which occurred in conjunction with the Combination. The deferred income tax
benefit, which can be used to reduce NGC's future income tax liabilities,
resulted from the recognition of the excess tax basis held by certain
Clearinghouse partners . Also in 1995, the Company assumed a liability of $2.5
million related to the purchase of a crude oil pipeline.
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Investments in property, plant and equipment by segment and sub-segment
consisted of:
DECEMBER 31,
--------------------------
1995 1994
----------- ---------
($ IN THOUSANDS)
Natural gas and electric power marketing ....... $ 15,128 $ 14,652
Natural gas liquids, crude oil and gas
transmission:
Natural gas processing ....................... 663,971 119,941
Fractionation ................................ 188,199 --
Liquids marketing ............................ 25,000 --
Natural gas gathering and transmission ....... 107,627 --
Crude oil .................................... 11,719 --
Other .......................................... 1,710 --
----------- ---------
1,013,354 134,593
Accumulated depreciation ....................... (64,843) (20,531)
----------- ---------
$ 948,511 $ 114,062
=========== =========
During 1995, the Company capitalized $1.0 million of interest related to
costs of projects in process of development. No interest was capitalized during
the years ended December 31, 1994 and 1993.
During 1995, the Company consummated several strategic asset acquisitions,
each of which expanded core business operations or enhanced the economic
viability of non-core businesses. Each of these transactions was accounted for
as a purchase of assets with the results of operations of the acquired asset(s)
included in the Company's consolidated results of operations from the effective
date of the transaction forward.
F-12
Effective May 1, 1995, NGC acquired the Ozark Gas Transmission System
("Ozark") for $44.8 million. Ozark consists of an extensive gas gathering system
and interstate pipeline that gathers and transports gas from eastern Oklahoma to
central Arkansas, where the system interconnects with interstate pipelines that
serve the midwest and northeast markets.
In August 1995, the Company purchased the Oklahoma crude oil and truck
gathering assets of Kerr-McGee Refining and Marketing Corporation for
approximately $8 million. The 1,300-mile system gathers crude in 25 central and
southern Oklahoma counties, accessing more than half of the state's crude
production, and serves the U.S. crude oil trading hub in Cushing, Oklahoma, and
the Wynnewood, Oklahoma refinery.
In October 1995, NGC purchased various gathering and processing assets
located in Kansas and Oklahoma from Sheffield Exploration Company, Inc., for
$5.5 million. The Kansas-based assets include 284 miles of gathering lines
having throughput capacity of 7 MMcf/d and a storage reservoir having 1.2
billion cubic feet of capacity. The assets located in Oklahoma include 10 miles
of gathering lines and a gas processing facility capable of processing 4.5
MMcf/d.
In December 1995, NGC acquired the 180-mile Okeene gas gathering system
from ONG Gas Gathering Company, a subsidiary of ONEOK, Inc., for $2.4 million.
The gathering system extends through several central Oklahoma counties and
gathers approximately 18.5 million cubic feet per day of natural gas.
NOTE 6 -- UNCONSOLIDATED AFFILIATES
The equity method of accounting is used for investments in certain
partnerships and for investments in companies in which NGC has a voting interest
between 20 percent and 50 percent. Such investments include:
Novagas Clearinghouse Ltd. ("NCL") -- NCL is an Alberta, Canada limited
partnership formed in 1994 and based in Calgary, Canada. NGC owns an
aggregate 49.9 percent interest in the partnership. Effective June 1, 1995,
NCL acquired Pan-Alberta Gas Ltd. ("Pan-Alberta"), from NOVA Corporation.
NGC contributed $13.7 million to NCL, representing its proportionate share
of the acquisition value of Pan-Alberta. The combined NCL/Pan- Alberta
entity offers natural gas supply services to consumers across Canada and
provides gas gathering, processing, storage and marketing services to
Canadian natural gas producers. The Company shares disproportionately in
the economic returns of NCL, as compared with its ownership interest,
resulting primarily from stipulations contained in the Pan-Alberta purchase
agreement and a service agreement entered into by a subsidiary of NGC with
NCL in 1995.
Accord Energy Limited. ("Accord") -- Accord is a limited partnership based
in London, England. It was formed in 1994 to market energy resources in the
United Kingdom and Europe. NGC owns 49 percent of the limited partnership.
Gulf Coast Fractionators ("GCF") -- GCF is a Texas limited partnership that
owns and operates a natural gas liquids fractionation facility located in
Mont Belvieu, Texas. NGC acquired its 38.75 percent limited partner
interest in GCF through the Combination and is operator of the facility. At
December 31, 1995, the unamortized excess of the Company's investment in
GCF over its equity in the underlying net assets of the affiliate
approximated $18 million. This amount is being amortized on the
straight-line method over the economic service life of the GCF assets.
Avoca Natural Gas Storage ("Avoca") -- Avoca is a New York general
partnership engaged in the construction and operation of an underground,
salt-bed gas storage facility in Avoca, New York. The Company owns an
approximate 28 percent interest in the partnership.
NATGAS Joint Venture ("NATGAS") -- NATGAS was a joint venture with
Pan-Alberta, based in Alberta, Canada, engaged in the natural gas marketing
business. The joint venture ceased operations in July 1994.
Aggregate equity method investment at December 31, 1995, and 1994, was
$58.7 million and $14.4 million, respectively. There was no investment in
unconsolidated affiliates at December 31, 1993. Dividends received on these
investments in 1995 totaled $11.9 million. There were no dividends received in
1994. NCL and Accord both utilize the accrual method of accounting
F-13
for their risk management activities. Summarized aggregate financial information
for these investments and NGC's equity share thereof was:
1995 1994 1993
--------------- -------------- ------------
Equity Equity Equity
TOTAL SHARE TOTAL SHARE TOTAL SHARE
------ ------ ------ ----- ----- -----
($US IN MILLIONS)
Current assets ............. $276.7 $135.4 $124.2 $61.7 $-- $--
Non-current assets ......... 179.1 75.7 20.2 10.1 -- --
Current liabilities ........ 280.0 135.3 106.1 52.7 -- --
Non-current liabilities .... 86.5 36.2 9.8 4.9 -- --
Operating margin ........... 85.8 41.0 13.9 6.9 -- --
Net income ................. 34.2 21.1 7.7 3.8 -- --
The cost method of accounting is used to account for investment in
partnerships or companies in which NGC has a voting interest of less than 20
percent. At December 31, 1995, the Company had two cost basis investments:
Indeck North American Power Fund, L.P. and Indeck North American Power Partners,
L.P. (collectively "Indeck"). Indeck was formed in 1995 and is engaged in the
acquisition and operation of electric power generating facilities. NGC's
aggregate investment in these entities totaled $3.7 million at December 31,
1995, and NGC received an aggregate $0.5 million of dividends from Indeck during
the year.
NOTE 7 -- LONG-TERM DEBT
Long-term debt consisted of:
DECEMBER 31,
----------------------
1995 1994
-------- -------
($ IN THOUSANDS)
Credit Agreement .................................. $183,000 $33,000
6.75% Senior Notes, due 2005 ...................... 150,000 --
14% Senior Subordinated Notes, due 2001 ........... 65,000 --
10.25% Subordinated Notes, due 2003 ............... 105,000 --
Other, non-interest bearing ....................... 1,125 --
Unamortized premium ............................... 18,939 --
-------- -------
523,064 33,000
Less: long-term debt due within one year .......... 300 --
-------- -------
$522,764 $33,000
======== =======
CREDIT AGREEMENT. On March 14, 1995, the Company entered into the NGC
Corporation Credit Agreement ("Credit Agreement"), which established a five-year
$550 million revolving credit facility. The revolving credit facility provides
for letters of credit (up to $150 million) and borrowings for working capital,
capital expenditures and general corporate purposes of up to $550 million in the
aggregate. The $550 million commitment under the Credit Agreement reduces by
$22.5 million each quarter beginning in March 1998 and continuing through
maturity. Generally, borrowings under the Credit Agreement bear interest at a
Eurodollar rate plus a margin that is determined based on the Company's debt to
capitalization ratio. The margin at December 31, 1995, was 0.5 percent and the
average interest rate applicable to borrowings under the Credit Agreement
approximated 6.3 percent. During the first quarter of 1995, NGC entered into
arrangements with financial institutions that effectively capped the base
Eurodollar rate on $100 million of borrowings at rates between 8.5 percent and
9.1 percent through January 1998. The Credit Agreement contains certain
financial covenants that require the Company to meet certain financial position
and performance tests. At December 31, 1995, letters of credit and borrowings
under the Credit Agreement aggregated approximately $199 million and unused
borrowing capacity under the revolving credit facility approximated $351
million.
F-14
6.75% SENIOR NOTES DUE 2005. During 1995, NGC filed with the Securities and
Exchange Commission a shelf registration that provides for the issuance of $250
million of debt securities pursuant to Rule 415 of the Securities Act of 1933.
On December 15, 1995, under this shelf registration, the Company sold $150
million of 6.75% Senior Notes due December 15, 2005 ("Notes"). The Notes were
issued at a price of 99.984 percent, which, after deducting underwriting
discounts and commissions, resulted in net proceeds to the Company of
approximately $149 million. Proceeds from the sale of these Notes were used to
repay a portion of the outstanding indebtedness under the Credit Agreement.
Interest on the Notes is payable semiannually on June 15 and December 15 of each
year, beginning June 15, 1996. The Notes represent general unsecured obligations
of the Company and are fully and unconditionally guaranteed on a joint and
several basis by the following subsidiaries of the Company: Natural Gas
Clearinghouse; Trident NGL, Inc.; NGC Energy Resources, Limited Partnership; NGC
Liquids Marketing, Inc.; NGC Oil Trading and Transportation, Inc.; NGC Futures,
Inc.; HUB Services, Inc.; NGC Storage, Inc.; NGC Anadarko Gathering Systems,
Inc.; Trident Gas Marketing, Inc.; Trident NGL Pipeline Company; Kansas Gas
Supply Corporation; Trident Acquisition Corp.; NGC U.K. Ltd.; and NGC Canada,
Inc. (collectively "Subsidiary Guarantors"). Upon issuance, the Notes were
priced based on the then existing yield for 10-year U.S. Treasury Notes ("Base
Treasury Rate") plus a spread based principally on the Company's credit rating.
Prior to issuing the Notes, the Company entered into two separate transactions
with two separate financial institutions, the effect of which was to lock in the
Base Treasury Rate at approximately 6.2 percent on the full $150 million face
value of the Notes.
Separate financial statements of each Subsidiary Guarantor have not been
provided because management has determined that such information would not be
material to investors as the aggregate assets, liabilities, earnings and equity
of the subsidiary guarantors is substantially equivalent to the Company's
consolidated assets, liabilities, earnings and equity. The Company also has
certain direct and indirect subsidiaries that are not Subsidiary Guarantors
(collectively "Non-guarantor Subsidiaries"). These Non-guarantor Subsidiaries,
both individually and in the aggregate, are inconsequential to NGC (and its
accounting predecessor, Clearinghouse) as of and for each of the three years in
the period ended December 31, 1995.
SENIOR SUBORDINATED NOTES. The Senior Subordinated Notes represent
Trident's unsecured general obligations that mature on August 30, 2001, and bear
interest at 14% per annum, payable semiannually in arrears each February and
August. The indenture governing the Senior Subordinated Notes contains certain
covenants that, among other things, require Trident to meet certain financial
tests; limit the amount of investments, dividends and asset sales that can be
made by Trident; and restrict the ability of Trident and its subsidiaries to
incur additional indebtedness, create or permit liens and engage in certain
transactions. Although Trident's net assets at December 31,1995, approximated
$350 million, management does not believe that the terms of the indenture
materially restrict the ability of trident to transfer funds to the Company
given that Trident is a Subsidiary Guarantor combined with the level of advances
made by NGC to Trident. Beginning in 1998, corresponding with the first call
date, the Senior Subordinated Notes may be repurchased by the Company at an
initial price of 107 percent of the principal amount, with such reacquisition
price reducing as the notes mature.
SUBORDINATED NOTES. The Subordinated Notes represent Trident's unsecured
general obligations that mature on April 15, 2003, and bear interest at the rate
of 10.25% per annum, payable semiannually in arrears each April and October. The
Subordinated Notes' indenture contains similar restrictive covenants to those
contained in the Senior Subordinated Notes' indenture. Beginning in 1998,
corresponding with the first call date, the Subordinated Notes may be
repurchased by the Company at an initial price of 104.5 percent of the principal
amount, with such reacquisition price reducing as the notes mature.
Aggregate maturities of all long-term indebtedness are: 1996 - $0.3
million; 1997 - $0.3 million; 1998 - $0.3 million; 1999 - $0.3 million; and 2000
and beyond - $521.9 million.
F-15
NOTE 8 -- INCOME TAXES
The Company is subject to U.S. federal, foreign and state income taxes on
its operations. Components of income tax expense (benefit) were:
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- ------ -------
($ IN THOUSANDS)
Current tax expense ................... $ -- $ 990 $ 1,458
Deferred tax expense (benefit) ........ (27,471) 1,014 (679)
-------- ------ -------
$(27,471) $2,004 $ 779
======== ====== =======
Included in the above table is a $45.7 million deferred tax benefit in
1995, resulting from book and tax bases differences associated with the
technical termination of the Clearinghouse partnership resulting from the
Combination.
Deferred income taxes are provided for the temporary differences between
the tax basis of NGC's assets and liabilities and their reported financial
statement amounts. Significant components of deferred tax liabilities and assets
were:
DECEMBER 31,
--------------------
1995 1994
-------- ------
($ IN THOUSANDS)
Deferred tax assets:
Clearinghouse partnership basis differential ........ $ 38,747 $ --
Loss carryforward ................................... 87,690 --
Tax credits ......................................... 5,400 --
Other ............................................... 4,450 --
-------- ------
136,287 --
Valuation allowance ................................. -- --
-------- ------
136,287 --
-------- ------
Deferred tax liabilities:
Items associated with capitalized costs ............. 179,514 3,058
-------- ------
Net deferred tax liability ........................... $ 43,227 $3,058
======== ======
Realization of the aggregate deferred tax asset is dependent on the
Company's ability to generate taxable earnings in the future. No valuation
allowance has been established at December 31, 1995, as management believes the
aggregate deferred asset will be fully realized in the future.
Income tax provision (benefit) for the years ended December 31, 1995, 1994
and 1993, was equivalent to effective rates of (42%), 5% and 2%, respectively.
Differences between taxes computed at the U.S. federal statutory rate and the
Company's reported income tax provision (benefit) were:
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
($ IN THOUSANDS)
Expected tax at U.S. statutory rate ..... $ 22,832 $ 15,437 $ 16,372
State taxes ............................. 1,305 -- --
Foreign tax benefit ..................... (3,846) -- --
Clearinghouse partnership basis
differential ............................ (45,736) -- --
Partnership income ...................... (2,174) (13,433) (15,593)
Other ................................... 148 -- --
-------- -------- --------
$(27,471) $ 2,004 $ 779
======== ======== ========
F-16
At December 31, 1995, the Company had approximately $15 million of
alternative minimum tax ("AMT") net operating loss carryforwards available as a
reduction of future AMT income and $237 million of regular tax net operating
loss carryforwards. The net operating loss carryforwards expire from 2006
through 2010. Certain provisions of the Internal Revenue Code place an annual
limitation on the Company's ability to utilize tax carryforwards existing as of
the date of the Combination. Management believes such carryforwards will be
fully realized prior to expiration.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
On July 24, 1995, definitive settlement documentation was entered into
relating to two separate purported class-action lawsuits that were filed in
connection with the Combination and alleged, among other things, that members of
the Trident Board of Directors breached their fiduciary duties to Trident's
stockholders by approving the Combination. The suits, Joshua Teitlebaum v.
Thomas O. Hicks, et.al., which was filed on August 9, 1994, and Errol Rudman v.
Thomas O. Hicks, et.al., which was filed on September 16, 1994, sought certain
injunctive relief and recovery of unspecified monetary damages. The definitive
settlement documentation provides for the dismissal with prejudice of the
lawsuits and for the payment by Trident of the fees and expenses of the
plaintiff stockholders' attorneys in an aggregate amount not to exceed $350,000.
The definitive settlement documentation also provides that the members of the
Trident Board of Directors deny that they have committed any violations of law,
and that the settlement was agreed to solely to eliminate the burden, risk and
expense of further litigation. At a settlement hearing held on October 13, 1995,
Vice Chancellor Jacobs of the Delaware Chancery Court entered an order
certifying the lawsuits as a class action, dismissing the action with prejudice
and awarding plaintiffs' counsel $300,000 in legal fees and $49,835 in costs and
expenses. The order was not appealed and the fees and expenses awarded were paid
in 1995.
In connection with the acquisition of certain gas processing and gathering
facilities from Mesa Operating Limited Partnership ("Mesa"), the Company assumed
liability for various claims and litigation, the significant items of which are
discussed below. NGC believes, based on its review of these matters and
consultation with outside legal counsel, that the ultimate resolution of such
items, individually or in the aggregate, will not have a material adverse impact
on the Company's financial position or results of operations.
PRICING PROVISIONS IN GAS PURCHASE CONTRACTS. In connection with certain
gas purchase contracts assigned to NGC that provide for fixed-pricing
obligations, the Company assumed liability for four cases involving alleged
breach of contractual pricing provisions, in addition to several unasserted
claims of a similar nature. The amount of such claims pending against the
Company approximates $6 million plus interest. Such claims include certain
claims for punitive damages and claims on behalf of working interest owners who
are not parties to the pending cases. The Company successfully defended one such
claim in January 1996; however, there is no guarantee that other similar claims
which are pending in different courts will be resolved the same way. Management
believes that in the event any payments are eventually made in connection with
these cases or in connection with any additional such claims and litigation,
they will be substantially less than the amount claimed.
MINERALS MANAGEMENT SERVICE. On November 22, 1988, Mesa received an audit
letter from the Minerals Management Service ("MMS") alleging underpayments of
royalties on certain Indian leases in an amount of less than $10,000. Mesa
appealed that order, prompting the MMS to request an appeal bond from Mesa of
$5.4 million, the amount of which Mesa also appealed. On December 31, 1992, the
Interior Board of Land Appeals ("IBLA") ruled that the MMS could not lawfully
hold Mesa (and subsequently NGC) liable for any royalty underpayments on the oil
and gas produced from the Indian leases related to the claim in the MMS audit
letter dated November 22, 1988. The MMS asked the IBLA to reconsider its
position and in February 1994, the IBLA affirmed part of its earlier decision,
reversed part of its earlier decision and remanded the case for further
proceedings. NGC moved for reconsideration of the IBLA's decision but the motion
was denied. The Company is now considering further appellate and/or
administrative actions; however, notwithstanding the February 1994 decision, NGC
believes that any liability for underpayment shall be borne by the applicable
lessees and that any liability to the Company would not be material.
COMMITMENTS. A wholly owned subsidiary of NGC is committed to expend its
respective share of the construction costs related to the Avoca storage project.
Current cost estimates commit the Company to approximately $10 million of
expenditures from 1996 through 1999. NGC and NGC Holding, Inc. have guaranteed
the commitment by the wholly owned subsidiary.
F-17
A subsidiary of the Company is committed to contribute a total of $10
million to Indeck as its respective share of funds to be used for the
acquisition of selected electric power generating facilities. At December 31,
1995, the Company had paid $3.7 million of this commitment.
Trident has guaranteed its pro rata share of the unfunded debt service
reserve account of GCF. Trident's obligation under the guarantee at December 31,
1995, assuming Trident had to fund such obligation as of that date, approximated
$3 million. Currently, GCF is in full compliance with its debt agreement.
OTHER COMMITMENTS. Minimum commitments in connection with office space,
equipment, reservation charges under gas purchase and firm transportation
contracts and other leased assets by the Company are: 1996 - $17.5 million; 1997
- - $9.1 million; 1998 - $8.7 million; 1999 - $8.3 million; and 2000 and beyond -
$19.7 million. Rental payments made under the terms of these arrangements
totaled $24.9 million in 1995, $11.1 million in 1994 and $6.5 million in 1993.
NOTE 10 -- CAPITAL STOCK
The Company has authorized capital stock consisting of 300,000,000 shares
of common stock, $0.01 par value, and 50,000,000 shares of preferred stock,
$0.01 par value. No preferred shares were issued and outstanding at December 31,
1995.
COMMON STOCK. Pursuant to the terms of the Combination, Holding, the
legally surviving corporation, was renamed NGC Corporation and (i) acquired
through a tender offer 14.2 million shares of its common stock (representing
approximately 50 percent of Holding's common stock outstanding immediately prior
to consummation of the Combination) for $11.75 per share, net to the seller in
cash; (ii) acquired, directly and indirectly, all of the outstanding general
partnership interests in Clearinghouse; (iii) the Clearinghouse Owners acquired
82 percent of the outstanding shares of NGC common stock (giving effect to the
issuance, but not the allocation, of the Contingent Shares); and (iv) the
stockholders of Holding prior to consummation of the Combination retained shares
of stock representing approximately 13 percent of the outstanding shares of NGC
common stock (giving effect to the tender offer and the issuance, but not the
allocation, of the Contingent Shares). In addition, the 5,461,538 Contingent
Shares, representing approximately 5 percent of the outstanding shares of NGC
common stock after giving effect to the issuance of such shares, will be
allocated in March 1996 in a ratio of 17 percent to the former stockholders of
Holding and 83 percent to the Clearinghouse Owners. At December 31, 1995, there
were 110,493,411 shares of common stock issued and 105,031,874 shares of common
stock outstanding. NGC Corporation pays quarterly cash dividends on common stock
of $0.0125 per share, or $0.05 per share on an annual basis.
STOCK WARRANTS. At December 31, 1995, the Company had warrants outstanding
that entitle the holder thereof to purchase an aggregate 5,859 shares of common
stock at an exercise price of $8.64 per share. The warrants expire in October
2003.
STOCK OPTIONS. Each option granted is valued at an option price which
ranges from $5.95 per share to the fair market value per share at date of grant.
The difference between the option price and the fair market value, if any, of
each option on the date of grant is recorded as compensation expense over a
vesting period. Options granted at prices below fair market vest and become
immediately exercisable on the fifth anniversary date of the date of grant.
Options granted at market value vest ratably over a three year period.
Compensation expense related to options granted totaled $1.6 million, $1.5
million and $0.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively. Stock option transactions for 1995 and 1994 were:
F-18
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
OPTION OPTION
SHARES PRICE SHARES PRICE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 11,918,090 $2.13 - $5.95 5,889,139 $ 2.13
Options arising from Combination 1,467,500 $6.40 - $8.64 -- --
Granted ........................ 1,644,578 $5.95 - $9.38 6,111,904 $2.13 - $5.95
Exercised ...................... (1,451,633) $2.13 - $8.64 -- --
Canceled or expired ............ (964,020) $2.13 - $5.95 (82,953) $2.13 - $5.95
----------- ------------- ----------- -------------
Outstanding at end of year ..... 12,614,515 $2.13 - $9.38 11,918,090 $2.13 - $5.95
=========== ============= =========== =============
Excercisable at end of year .... 271,969 $6.40 - $8.81 -- --
=========== ============= =========== =============
</TABLE>
NOTE 11 -- EMPLOYEE COMPENSATION, SAVINGS AND PENSION PLANS
ABOVE BASE INCENTIVE COMPENSATION PLAN. NGC has an Above Base Incentive
Compensation Plan ("ABICP") to reward employees based on NGC's annual operating
income, as defined in the ABICP. Specific awards are at the discretion of the
Compensation Committee of the Board of Directors ("Compensation Committee"). The
ABICP was amended January 1, 1994, to provide for payment of no less than 10
percent but not greater than 15 percent of operating income, as defined.
PROFIT SHARING/401(K) SAVINGS PLAN. Effective May 1, 1989, the Company
established the NGC Profit Sharing/401(k) Savings Plan ("Plan"). The Plan meets
the requirements of Section 401(k) of the Internal Revenue Code, and is a
defined contribution plan subject to the provisions of the Employee Retirement
Income Security Act of 1974. The Plan and related trust fund are established and
maintained for the exclusive benefit of participating employees of NGC. The
Company makes periodic contributions to the Plan as determined by resolution of
the Compensation Committee. During the years ended December 31, 1995, 1994 and
1993, NGC (or its accounting predecessor, Clearinghouse) recognized costs
related to the Plan of $2.4 million, $2.4 million, and $1.9 million,
respectively.
PENSION PLAN. Prior to the Combination, Holding had adopted a
noncontributory defined benefit pension plan and such plan remains in existence
at December 31, 1995. The Trident NGL, Inc. Retirement Plan ("Retirement Plan")
is a qualified plan under the Internal Revenue Service regulations, and all
full-time hourly employees of Trident were eligible for participation in the
Retirement Plan. Benefits are based on years of service and final average pay,
as defined in the Retirement Plan document. Contributions to the Retirement Plan
in 1995 totaled $1.1 million, representing the minimum amount required by
federal law and regulation. The Retirement Plan's funded status and amount
recognized in NGC's balance sheet at December 31, 1995, were:
DECEMBER 31,
1995
---------------
($ IN THOUSANDS)
Accumulated benefit obligation, including
vested benefits of $3.9 million ............................... $ 4,381
=======
Projected benefit obligation .................................. $ 7,773
Plan assets ................................................... (4,395)
-------
Projected benefit obligation in excess of plan assets ......... 3,378
Unrecognized net gain from past experience
different from that assumed ................................ 2,825
-------
Pension liability ............................................. $ 6,203
=======
Current year pension expense is based on measurements of the projected
benefit obligation and the market related value of the Retirement Plan assets as
of the end of the year. The projected benefit obligation at December 31, 1995,
was based on
F-19
a discount rate of 7.75 percent and an average long-term rate of compensation
growth of 3.5 percent. The expected long-term rate of return on the Retirement
Plan assets was estimated at 8 percent.
The components of net pension expense for the Retirement Plan were:
YEAR ENDED
DECEMBER 31,
1995
-------
($ IN THOUSANDS)
Service cost - benefits earned during period $ 712
Interest cost on projected benefit obligation 523
Expected return on plan assets .............. (144)
Termination benefits ........................ 433
Amortization of unrecognized gain ........... (55)
-------
Net periodic pension cost ................... $ 1,469
=======
NOTE 12 -- RELATED PARTY TRANSACTIONS
The Company is a leading North American marketer of natural gas, natural
gas liquids, crude oil and electric power. NGC is also engaged in natural gas
gathering, processing and transportation activities and has joint ventures in
Canada and the United Kingdom which expand NGC's operations geographically. The
Company has partnered with two of its significant shareholders in the
aforementioned joint ventures. Accord is a natural gas and crude oil marketing
operation in the United Kingdom and a wholly owned subsidiary of British Gas plc
("British Gas"), a United Kingdom company, owns 51 percent of this venture. NCL
markets, exchanges, gathers, processes, purchases, sells, transports and stores
natural gas and natural gas liquids in Canada. NCL is a joint venture between
the Company and a wholly owned subsidiary of NOVA Corporation ("NOVA"), an
Alberta, Canada company, which owns 50.1 percent of the venture. British Gas and
NOVA each indirectly own approximately 33 percent of the outstanding shares of
common stock of the Company.
NGC, through one or more of its subsidiaries, routinely acquires natural
gas and natural gas liquids from subsidiaries of NOVA. In addition, NGC or its
affiliates routinely enter into transactions with NCL for the purchase and sale
of natural gas and natural gas liquids. Accord routinely enters into
transactions with subsidiaries of British Gas for the purchase and sale of
natural gas and crude oil. In management's opinion, such transactions are
executed at prevailing market rates.
Effective June 1, 1995, NGC entered into a service agreement with NCL
whereby NGC Futures, Inc. ("NGCF") a wholly owned subsidiary of NGC, provides
NCL and its affiliates natural gas marketing and risk management services. As a
result, NGC shares disproportionately in NCL's economic returns resulting from
the services provided. For the year ended December 31, 1995, NGC, in addition to
its share of equity in the earnings of NCL, recognized $6.8 million of pretax
earnings related to services rendered NCL by NGCF.
During 1994, Clearinghouse received notes from several employees totaling
$1.5 million. At December 31, 1994, $0.3 million of the original notes issued
remained outstanding. The notes were paid in full during 1995.
NOTE 13 -- SEGMENT INFORMATION
Operating segment information for 1995, 1994 and 1993 is presented below.
NGC's activities outside the United States include the operations of NCL and
Accord, which are discussed in Note 6 -- UNCONSOLIDATED AFFILIATES:
F-20
NATURAL NATURAL
GAS AND GAS LIQUIDS,
ELECTRIC CRUDE OIL CORPORATE
POWER AND GAS AND
MARKETING TRANSMISSION ELIMINATION TOTAL
---------- ---------- --------- ----------
($ IN THOUSANDS)
1995 SUMMARY DATA:
Unaffiliated revenues .... $2,423,136 $1,242,810 $ -- $3,665,946
Intersegment revenues .... 36,629 81,472 (118,101) --
---------- ---------- --------- ----------
Total revenues ......... 2,459,765 1,324,282 (118,101) 3,665,946
---------- ---------- --------- ----------
Operating margin ......... 63,746 130,914 -- 194,660
---------- ---------- --------- ----------
Depreciation and
amortization ........... 2,092 42,625 196 44,913
---------- ---------- --------- ----------
Equity in earnings of
unconsolidated
affiliates ............. 19,164 1,896 -- 21,060
---------- ---------- --------- ----------
Identifiable assets ...... 915,972 1,460,204 (500,924) 1,875,252
---------- ---------- --------- ----------
Capital expenditures ..... 18,664 123,726 168,233 310,623
---------- ---------- --------- ----------
NATURAL NATURAL
GAS AND GAS LIQUIDS,
ELECTRIC CRUDE OIL CORPORATE
POWER AND GAS AND
MARKETING TRANSMISSION ELIMINATION TOTAL
---------- -------- --------- ---------
($ IN THOUSANDS)
1994 SUMMARY DATA:
Unaffiliated revenues ....... $3,231,343 $ 6,500 $ -- $3,237,843
Intersegment revenues ....... 3,502 80,284 (83,786) --
---------- -------- -------- ----------
Total revenues ............ 3,234,845 86,784 (83,786) 3,237,843
---------- -------- -------- ----------
Operating margin ............ 78,410 20,716 -- 99,126
---------- -------- -------- ----------
Depreciation and amortization 2,570 5,808 -- 8,378
---------- -------- -------- ----------
Equity in earnings of
unconsolidated
affiliates ................ 3,803 -- -- 3,803
---------- -------- -------- ----------
Identifiable assets ......... 527,353 118,118 -- 645,471
---------- -------- -------- ----------
Capital expenditures ........ 4,055 32,397 -- 36,452
---------- -------- -------- ----------
F-21
NATURAL NATURAL
GAS AND GAS LIQUIDS,
ELECTRIC CRUDE OIL CORPORATE
POWER AND GAS AND
MARKETING TRANSMISSION ELIMINATION TOTAL
---------- ------- -------- ----------
($ IN THOUSANDS)
1993 SUMMARY DATA:
Unaffiliated revenues ........ $2,784,524 $ 6,453 $ -- $2,790,977
Intersegment revenues ........ -- 79,172 (79,172) --
---------- ------- -------- ----------
Total revenues ............. 2,784,524 85,625 (79,172) 2,790,977
---------- ------- -------- ----------
Operating margin ............. 68,494 23,356 -- 91,850
---------- ------- -------- ----------
Depreciation and amortization 2,565 5,029 -- 7,594
---------- ------- -------- ----------
Equity in earnings of
unconsolidated
affiliates ................. -- -- -- --
---------- ------- -------- ----------
Identifiable assets .......... 421,254 91,280 -- 512,534
---------- ------- -------- ----------
Capital expenditures ......... 2,544 13,920 -- 16,464
---------- ------- -------- ----------
NOTE 14 -- SUBSEQUENT EVENTS
On January 22, 1996, NGC and Chevron Corporation ("Chevron") jointly
announced they had entered into exclusive negotiations to merge substantially
all of Chevron's gas gathering, processing and marketing operations with NGC.
The combined company, which may retain the name NGC Corporation, will include
all of NGC and most of two Chevron business units: the Houston-based Natural Gas
Business Unit and Tulsa-based Warren Petroleum Company. As part of the proposed
transaction, NGC will market virtually all of Chevron's North American natural
gas production, NGLs and electricity as well as supply energy and feedstock to
virtually all of Chevron's refineries, chemical plants and other North American
facilities. For its contribution, Chevron will receive a total of 45.8 million
shares in the new company, in a combination of common and preferred stock, and
$300 million in cash and notes. Following consummation of the transaction,
Chevron, British Gas and NOVA will each own approximately 25 percent of the
outstanding common stock of the new company. The proposed transaction is
expected to be finalized in the second quarter of 1996.
In February 1996, the Company consummated the acquisition of LPG Services
Group, Inc. ("LPG"), a Kansas City-based propane gas marketing and distribution
company for $2 million in cash and up to an additional $6.25 million in
conditional payments based primarily on LPG's financial performance. The
acquisition of LPG provides the Company with a developed wholesale propane
marketing infrastructure.
NOTE 15 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the Company's unaudited quarterly financial
information for the years ended December 31, 1995, and 1994.
F-22
Quarter Ended
-------------------------------------------
March June September December
1995 1995 1995 1995
-------- -------- -------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues ......................... $802,944 $841,028 $944,229 $1,077,745
Operating margin ................. 31,486 43,399 56,963 62,812
Income before income taxes ....... 11,747 6,162 22,386 24,939
Net income ....................... 55,274 4,873 14,608 17,950
Pro forma net income per share (a) 0.07 0.04 0.13 0.16
Quarter Ended
-------------------------------------------
March June September December
1994 1994 1994 1994
-------- -------- -------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues ......................... $890,412 $746,452 $765,067 $ 835,912
Operating margin ................. 32,153 14,688 26,086 26,199
Income before income taxes ....... 19,601 4,039 10,441 10,024
Net income ....................... 19,268 3,885 9,768 9,180
Pro forma net income per share (a) 0.13 0.03 0.07 0.05
- --------------------
(a) Quarterly net income per share is based on the weighted average number of
shares of common stock outstanding plus the common stock equivalents that
would arise from the exercise of outstanding options or warrants, when
dilutive. For the year ended December 31, 1994, a pro forma amount of 97.8
million shares outstanding was used to compute the pro forma earnings per
share for all quarters. Such amount represents the equivalent number of
shares obtained in the Combination by the Clearinghouse Owners plus the
equivalent number of shares that would arise from the exercise of
outstanding options existing as of the effective date of the Combination
assuming a market value of $12 per share.
Pro forma net income used to compute pro forma earnings per share for the
first quarter of 1995 and for each of the four quarters in the year ended
December 31, 1994, reflect incremental statutory federal and state income
tax provisions applied to Clearinghouse's partnership income. The
incremental tax provision represents an estimate of the aggregate federal
and state income taxes that would have been provided had Clearinghouse been
a taxpaying entity during the respective accounting periods.
F-23
<PAGE>
SCHEDULE I
NGC CORPORATION
CONDENSED BALANCE SHEET OF REGISTRANT
(in thousands, except share data)
DECEMBER 31,
1995
---------
ASSETS
CURRENT ASSETS
Cash .......................................................... $ 6
INTERCOMPANY ACOUNTS RECEIVABLE ............................... 450,631
Prepayments and other assets .................................. 5,053
---------
455,690
---------
PROPERTY, PLANT AND EQUIPMENT ................................. 1,287
Less: accumulated depreciation ................................ (196)
---------
1,091
---------
OTHER ASSETS
Investments in affiliates ..................................... 547,866
Intercompany note receivable .................................. 237,000
Deferred income taxes and other assets ........................ 36,393
---------
$1,278,040
=========
LIABILITIES AND EQUITY
CURRENT ACCRUED LIABILITIES ................................... $ 2,427
INTERCOMPANY ACCOUNTS PAYABLE ................................. 390,233
LONG-TERM DEBT ................................................ 333,000
---------
725,660
---------
COMMITMENTS AND CONTINGENCIES
EQUITY:
Preferred stock, $0.01 par value, 50,000,000 shares
authorized ............................................... --
Common stock, $0.01 par value, 300,000,000 shares
authorized; 110,493,411 shares issued and
105,031,874 shares outstanding at December
31, 1995 ................................................. 1,105
Additional paid-in capital .................................... 515,785
Retained earnings ............................................. 35,490
----------
552,380
----------
$1,278,040
==========
See Note to Registrant's Financial Statements.
F-24
SCHEDULE I
NGC CORPORATION
STATEMENTS OF OPERATIONS OF THE REGISTRANT
For the Ten Months Ended From Inception (March 1, 1995)
Through December 31, 1995
(in thousands)
1995
--------
Depreciation and amortization .............................. $ (196)
General and administrative expenses ........................ --
--------
Operating loss ........................................ (196)
Equity in earnings of affiliates ........................... 60,744
Interest and other income .................................. 13,570
Interest expense ........................................... (18,152)
Other expenses ............................................. (135)
--------
Income before income taxes ................................. 55,831
Income tax provision ....................................... 16,056
--------
NET INCOME ................................................. $ 39,775
========
See Note to Registrant's Financial Statements.
F-25
SCHEDULE I
NGC CORPORATION
STATEMENT OF CASH FLOWS OF THE REGISTRANT
For the Ten Month Period From Inception (March 1, 1995)
Through December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .......................................................... $ 39,775
Items not affecting cash flows from operating activities:
Depreciation and amortization ...................................... 196
Equity in earnings of affiliates, net of cash distributions ........ (60,744)
Deferred income taxes .............................................. 17,303
Other .............................................................. 1,475
Change in assets and liabilities resulting from operating activities:
Intercompany transactions .......................................... (60,398)
Prepayments and other assets ....................................... (5,053)
Accrued liabilities ................................................ 2,427
Other, net .......................................................... 4,150
-----------
Net cash used in operating activities ............................... (60,869)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Trident NGL, Inc. .................................... (166,900)
Other ............................................................... (1,333)
-----------
Net cash (used in) provided by investing activities ................. (168,233)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings .................................. 1,224,039
Repayments of long-term borrowings .................................. (891,039)
Intercompany advances ............................................... (237,000)
Proceeds from sale of capital stock, options and warrants ........... 725
Capital contributions ............................................... 135,000
Dividends and other distributions ................................... (2,617)
-----------
Net cash provided by (used in) financing activities ................. 229,108
-----------
Net increase in cash and cash equivalents ........................... 6
Cash and cash equivalents, beginning of year ........................ --
-----------
Cash and cash equivalents, end of year .............................. $ 6
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash dividends paid to parent by consolidated or
unconsolidated subsidiaries ...................................... $ --
===========
Interest paid (net of amount capitalized) $ 16, 339
===========
Taxes paid (net of refunds) $ --
===========
</TABLE>
See Note to Registrant's Financial Statements.
F-26
Schedule I
NGC CORPORATION
NOTE TO REGISTRANT'S FINANCIAL STATMENTS
NOTE 1 -- BASIS OF PRESENTATION
NGC Corporation ("NGC" or the "Company") is a holding company that operates
principally through two subsidiaries, Natural Gas Clearinghouse
("Clearinghouse") and Trident NGL, Inc. The Company is the result of a strategic
business combination ("Combination") between Clearinghouse and Trident NGL
Holding, Inc. ("Holding"), under which Holding was renamed NGC Corporation.
Pursuant to the terms of the Combination, Holding was the legally surviving
corporation and Clearinghouse was considered the acquiring company for
accounting purposes resulting in a new historical cost basis for Holding
beginning March 1, 1995, the effective date of the Combination for accounting
purposes. The accompanying condensed Registrant Financial Statements were
prepared pursuant to rules promulgated by the Securities and Exchange
Commission. In accordance with these rules, the accompanying statements reflect
the financial position, results of operations and cash flows of NGC, the holding
company of NGC Corporation, for the period from the effective date of the
Combination through December 31, 1995. These statements should be read in
conjunction with the Consolidated Financial Statements and notes thereto of NGC
Corporation contained elsewhere in this Form 10-K.
F-27
ACCORD ENERGY LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 1995
REGISTERED NO: 2877398
ACCORD ENERGY LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 1995
PAGES
------
Director's Report ...................................................... 1-4
Statement of Directors'
Responsibilities ....................................................... 5
Report of the Auditors ................................................. 6
Consolidated Profit and Loss Account ................................... 7
Balance Sheet .......................................................... 8
Consolidated Cash Flow Statement ....................................... 9
Notes to the Financial Statements ...................................... 10-18
ACCORD ENERGY LIMITED
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1995
The Directors present their report and audited financial statements for the year
ended 31 December 1995.
PRINCIPAL ACTIVITIES
The principal activity of the Group was wholesale energy trading comprising the
purchase and sale of natural gas, crude oil packages and electricity.
REVIEW OF BUSINESS
The year to 31 December 1995 was the Group's first full financial year of
operations. During the year Accord Energy has successfully established itself as
a major player in the energy trading markets. Its performance in terms of
physical volumes of gas and oil traded and overall financial results achieved
represents a significant improvement on the 1994 six month's results. The 1995
results have been achieved in the face of fierce competition from the increasing
number of entrants into the market and during a period which experienced the
collapse of gas prices in the UK. The Directors are pleased to announce that
despite these factors, the company has exceeded the targets set by the Board.
Since the completion of the contract to supply electricity over the period April
1994 to March 1995 to customers in the non-franchise market, no electricity was
traded for the rest of the year. The Company sees electricity trading as an
integral part of the company's trading activities and therefore will continue to
pursue opportunities in this area.
Sustaining the current level of performance in the future will become
increasingly difficult on account of the development of competition, uncertainty
and volatility in the gas trading market, and the major changes taking place
within the UK gas industry. However, the Directors envisage that the company
will continue to maintain its position as a major player in the markets, that
the company will continue to exploit new opportunities and products within and
outside the UK and endeavor to optimize performance and returns within the
constraints of prevailing market conditions.
FINANCIAL RESULTS AND DIVIDENDS
The financial results are set out on pages 7 to 18. Three interim dividends
totalling L 15.4 million were approved by the Board and paid during the year.
The Directors do not recommend the payment of a final dividend and retained
profits have been transferred to reserves.
1
DIRECTORS
The Directors who served during the period covered by this report are:
NAME DATE APPOINTED DATE RESIGNED
- ------------------------------------- ------------------- ------------------
N Blacker (Chairman) 10 November 1995
AW Burgess
MS Clare
DH Ebdon (Alternate to Mr N Blacker) 28 March 1995
CD Friedlander 12 February 1996
RA Gardner (Chairman) 01 December 1995
JT Hackett 21 June 1995
P Jungels 12 February 1996
HK Kaelber 21 June 1995
PJ Lehmann (Alternate to Mr N
Blacker) 28 March 1995 10 November 1995
KE Randolph
JS Ulrich (Managing Director) 21 June 1995
CL Watson
Mr N Blacker resigned as a Director and Chairman on 10 November 1995 and Mr P
Lehmann's appointment as alternate Director to Mr N Blacker was revoked on the
same date. Mr R A Gardner was appointed Director and Chairman on 1 December
1995.
DIRECTORS' INTERESTS
At no time during the year did any Director still holding office on 31 December
1995 have any beneficial interest in the shares of the Company or any other
company within the Group except for the interests in the shares of the ultimate
parent company, British Gas plc, as stated below:
BENEFICIAL HOLDINGS
1 JANUARY 1995 31 DECEMBER 1995
--------------- -----------------
AW Burgess ............................... 10,052 13,052
CD Friedlander ........................... 1,010 1,842
Mr Gardner is also a Director of the ultimate parent company, British Gas plc.
His interests in the shares of British Gas plc and its subsidiary undertaking
are shown in the accounts of that company.
2
Details of options to purchase fully paid ordinary shares that were granted
under the parent company's Savings Related and Executive Share Option Schemes
and the awards of notional allocations of restricted shares under the parent
company's Long Term Incentive Scheme for Directors and other senior executives
are as follows:
SAVINGS RELATED OPTION SCHEME
<TABLE>
<CAPTION>
AT 1 JANUARY 1995 GRANTED EXERCISED AT 31 DECEMBER 1995
----------------- -------- ---------- --------------------
<S> <C> <C> <C> <C>
AW Burgess................................. 6,712 3,531 2,168 8,075
MS Clare................................... -- -- -- --
CD Friedlander............................. 9,469 -- -- 9,469
</TABLE>
The options were exercised at L 1.66 per ordinary share.
EXECUTIVE OPTION SCHEME
AT 1 JANUARY 1995 GRANTED EXERCISED AT 31 DECEMBER 1995
----------------- ------- --------- -------------------
AW Burgess ............ 108,962 -- -- 108,962
MS Clare .............. 49,063 -- -- 49,063
CD Friedlander ........ 77,735 -- -- 77,735
LONG TERM INCENTIVE PLAN
AWARDS
AT JANUARY 1995 IN YEAR AT 31 DECEMBER 1995
--------------- ------- -------------------
AW Burgess ............... 10,936 10,936
MS Clare ................. -- 12,833 12,833
CD Friedlander ........... -- 12,543 12,543
The awards represent the maximum award possible if performance criteria are met
at the end of the performance and retention period of five or six years.
All options and awards were granted under the terms of the parent company's
Savings Related Share Option Scheme, Executive Share Option Scheme or Long Term
Incentive Scheme, details of which are given in that company's report and
accounts for the year ended 31 December 1995.
3
DIRECTORS' INSURANCE
The Company has through its ultimate parent company, British Gas plc, maintained
insurance for the Directors in respect of their duties as Directors of the
Company.
DONATIONS
Provision has been made in the accounts for a net contribution of L 75,000 for
charitable purposes, which will be paid in 1996. No donations to political
organisations were provided for or made during the period.
SHARE CAPITAL
The issued share capital is owned 51% by British Gas plc and 49% by NGC UK
Limited. The share capital is divided into 51 "A" shares and 49 "B" shares
which were allotted to British Gas plc and NGC UK Limited respectively on 18
July 1994.
TAXATION STATUS
The close company provisions of the Income and Corporation Taxes Act 1988 do not
apply to the Company.
AUDITORS
Price Waterhouse have expressed their willingness to be re-appointed as Auditors
of the Company.
A resolution proposing the re-appointment of Price Waterhouse as Auditors to the
Company and to authorise the Directors to fix their remuneration will be put to
the Annual General Meeting.
BY ORDER OF THE BOARD Registered Office:
Rivermill House
152 Grosvenor Road
London SW1V 3JL
SANDRA SCOTT Registered in England
COMPANY SECRETARY No 2877398
DATE: 14 March 1996
4
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are required by the Companies Act 1985 to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the Company and of the Group as at the end of the financial year
and of the profit or loss for that period.
The Directors consider that in preparing the financial statements,
appropriate accounting policies have been used and applied consistently. The
Directors also consider that reasonable and prudent judgements and estimates
have been made and applicable accounting standards have been followed.
The Directors are responsible for maintaining adequate accounting records,
for safeguarding the assets of the Group and for preventing and detecting fraud
and other irregularities.
The Directors, having prepared the financial statements, have requested the
Auditors to take whatever steps and undertake whatever inspections they consider
to be appropriate for the purposes of enabling them to give their audit report.
5
REPORT OF THE AUDITORS TO THE MEMBERS OF ACCORD ENERGY LIMITED
We have audited the financial statements on pages 7 to 18 which have been
prepared under the historic cost principles and other accounting policies
described on page 10.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 5, the Company's Directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes assessment of the significant estimates and judgements made by the
Directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary, in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the Group as at 31 December 1995 and of
the profit and cash flows of the Group for the period then ended and have been
properly prepared in accordance with the Companies Act 1985.
Price Waterhouse
Chartered Accountants and Registered Auditors
Southwark Towers
32 London Bridge Street
London SE1 9SY
Date: 14 March 1996
6
ACCORD ENERGY LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 1995
YEAR 02 DEC 93
TO 31 DEC TO 31 DEC
1995 1994
---------- ---------
Notes (Pounds Sterling 000)
Turnover............................. 2 289,619 69,766
Cost of sales........................ (270,710) (68,461)
---------- ---------
Gross profit......................... 27,909 1,305
Administration expenses.............. (5,689) (671)
---------- ---------
Operating profit..................... 3 22,220 634
Net interest......................... 5 1,063 89
---------- ---------
Profit on ordinary activities before
taxation............................. 23,283 723
Tax on profit on ordinary
activities........................... 6 (7,708) (229)
---------- ---------
Profit for the financial year........ 15,575 494
Dividends............................ 7 (15,400) --
---------- ---------
Retained profit...................... 175 494
========== =========
All gains or losses for the year have been derived from continuing operations.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 1995
There are no recognised gains or losses for the period other than those stated
in the profit and loss account.
The accompanying notes on pages 10 to 18 from part of these accounts.
7
ACCORD ENERGY LIMITED
BALANCE SHEETS AS AT 31 DECEMBER 1995
<TABLE>
<CAPTION>
GROUP COMPANY
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Notes (Pounds Sterling 000) (Pounds Sterling 000)
<S> <C> <C> <C> <C> <C>
Fixed assets
Tangible fixed assets................ 8 100 -- 100 --
Investments.......................... 9 -- -- -- --
--------- --------- --------- ---------
100 -- 100 --
--------- --------- --------- ---------
Current assets
Stock................................ 10 3,838 887 3,838 887
Debtors.............................. 11 38,453 25,106 38,453 28,452
(amounts falling due within one year)
Cash at bank and in hand............. 10,184 1,249 10,184 1,249
--------- --------- --------- ---------
52,475 27,242 52,475 30,588
Creditors............................ 12 (51,941) (21,783) (51,941) (25,129)
(amounts falling due within one year)
--------- --------- --------- ---------
Net current assets................... 534 5,459 534 5,459
--------- --------- --------- ---------
Total assets less current
liabilities.......................... 634 5,459 634 5,459
Creditors............................ 12 -- (5,000) (414) (5,414)
(amounts falling due within one year)
--------- --------- --------- ---------
Net Assets........................... 634 459 220 45
========= ========= ========= =========
Capital and reserves
Called up share capital.............. 13 -- -- -- --
Profit and loss account.............. 14 634 459 220 45
--------- --------- --------- ---------
Shareholders' funds.................. 15 634 459 220 45
========= ========= ========= =========
</TABLE>
The financial statements on pages 7 to 18 were approved by the Board of
Directors on 14 March 1996 and were signed on its behalf by:
MS Clare
Director
The accompanying notes on pages 10 to 18 form part of these accounts.
8
ACCORD ENERGY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1995
YEAR 02 DEC 93
TO 31 DEC TO 31 DEC
1995 1994
--------- ---------
Notes (Pounds Sterling 000)
Net cash inflow from operating
activities........................... 16 26,304 1,234
Returns on investments and servicing
of finance
Interest received.................... 1,105 89
Interest paid........................ (42) --
Dividends............................ (15,400) --
Taxation............................. (2,932) --
Investing activities
Additions to fixed assets............ (100) --
Purchase of subsidiary undertaking
(net of cash and cash equivalents
acquired).......................... -- (74)
--------- ---------
Net cash flow before financing
activities........................... 8,935 1,249
Financing activities
Issue of ordinary share capital...... 16 -- --
--------- ---------
Net increase in cash and cash
equivalents.......................... 8,935 1,249
========= =========
9
ACCORD ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable
Accounting Standards in the United Kingdom. A summary of the more important
accounting policies which have been applied consistently is set out below.
BASIS OF ACCOUNTING
The financial statements are prepared in accordance with the historical
cost convention.
BASIS OF CONSOLIDATION
The consolidated profit and loss account, balance sheet and cash flow
statement include the financial statements of the Company and its subsidiary
undertakings made up to 31 December 1995.
GOODWILL
On the acquisition of a subsidiary or associated undertaking, fair values
are attributed to the net assets acquired. Goodwill which represents the
difference between the purchase consideration and the fair values, is taken to
reserves.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at purchase cost together with any
incidental costs of acquisition less depreciation.
Depreciation, which is charged in the year following the year of
acquisition, is calculated on a straight-line basis sufficient to write off the
cost of individual assets over their estimated useful lives. The depreciation
periods for the principal categories of assets are:
Fixtures and fittings................ : 5 years
Computer and office equipment........ : 5 years
INVESTMENTS
Investments are stated at cost less any permanent diminutive in value.
STOCK
Stocks are valued at the lower of cost and net realisable value.
10
TURNOVER
Turnover, which excludes value added tax, represents the invoiced value of
sales of energy products including gas, oil and electricity to customers plus an
estimate of sales not yet invoiced.
FORWARD COMMITMENTS
There is an exposure to price movements on open contracts and an accrual is
made for any potential losses on these contracts. Matched gains on open
contracts are recognised at time of delivery.
DEFERRED TAXATION
Provision is made for deferred taxation on all material timing differences
to the extent that it is probable that a liability or asset will crystallise.
2. TURNOVER
Turnover of L298.6 million (1994 - L 69.8 million) comprises sales of
energy products.
3. OPERATING PROFIT
The operating profit is stated after charging:
1995 1994
---- ----
(Pounds Sterling 000)
Auditor's fees (statutory audit)..... 12 11
Auditor's fees (other non-audit
services)............................ 11 4
---- ----
23 15
---- ----
4. DIRECTORS AND EMPLOYEES
(a) DIRECTORS' REMUNERATION
The total emoluments of the highest paid director for the period of his
directorship were L482,588 (1994 - L199,525), which includes salary, allowances
and incentive payments relating to the Company's performance in the same period.
11
The emoluments of Directors, excluding pension contributions, were in the
following bands:
NUMBER
------------
1995 1994
---- ----
L195,001 to L200,000................. -- 1
L480,001 to L485,000................. 1 --
None of the other Directors, including the Chairman, received any
remuneration in respect of their services to the Company.
(b) EMPLOYEE INFORMATION
The average number of personnel employed by the Group, including executive
directors and secondees from the shareholder companies, during the period was 20
(1994 - 4(Direct)) who were all based in the United Kingdom. Staff costs for
these persons were as follows:
1995 1994
---- ----
(Pounds Sterling 000)
Salaries & wages..................... 853 26
Social Security...................... 69 3
Pensions............................. 43 1
---- ----
965 30
==== ====
In addition, provisions amounting to L3.9 million (1994 - L0.2 million)
were made in the year for incentive payments relating to company performance.
5. NET INTEREST
1995 1994
----- ----
(Pounds Sterling 000)
Interest receivable from Group
undertakings......................... 1,081 85
Interest receivable from third
parties.............................. 24 4
Interest payable to Group
undertakings......................... (31) --
Interest payable to third parties.... (11) --
----- ----
Net interest receivable.............. 1,063 89
===== ====
Interest payable is on loans and overdrafts wholly repayable within five years.
12
6. TAXATION
1995 1994
------ -----
(Pounds Sterling 000)
UK -corporation tax @ 33%........... 8,846 1,032
-deferred corporation tax....... (1,138) (787)
Group relief from parent
undertaking.......................... -- (16)
------ -----
Taxation charge...................... 7,708 229
------ -----
There is no unprovided deferred taxation.
7. DIVIDENDS
1995 1994
------ -----
(Pounds Sterling 000)
Interim dividends.................... 15,400 --
====== =====
Three interim dividends totalling L15.4 million (1994 - L nil) were paid in
July, September, and December 1995. No final dividend is proposed.
8. TANGIBLE FIXED ASSETS
GROUP COMPANY
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
(Pounds Sterling 000)
Cost and net book value
Balance at 1 January 1995............ -- -- -- --
Additions............................ 100 -- 100 --
Disposals............................ -- -- -- --
---- ---- ---- ----
Balance at 31 December 1995.......... 100 -- 100 --
==== ==== ==== ====
The additions to tangible fixed assets in the year are computer and office
equipment type assets.
In accordance with the Company's accounting policy, assets are depreciated
in the year following the year of acquisition and consequently no depreciation
has been charged in the year.
13
9. FIXED ASSET INVESTMENTS
Fixed assset investments represent shares in wholly owned subsidiaries and
are shown below at cost.
COMPANY
--------------------
1995 1994
(Pounds Sterling)
--------- ---------
Balance at 1 January 1995 5 --
Additions -- 5
--------- ---------
Balance at 31 December 1995 5 5
--------- ---------
SUBSIDIARY UNDERTAKINGS
COUNTRY OF COMPANY
REGISTRATION OR CLASS OF HOLDING
INCORPORATION SHARES HELD (%)
----------------- ------------- ---------
Accord Electric Limited England Ordinary 100
Accord Gas Limited England Ordinary 100
Accord Oil Limited England Ordinary 100
Accord Power Limited England Ordinary 100
Accord Power Limited has been a dormant company since its incorporation.
The other three subsidiary companies operated in the United Kingdom and were
engaged in the wholesale trading of electricity (Accord Electricity
Limited), natural gas (Accord Gas Limited), and crude oil packages (Accord
Oil Limited) up to 31 December 1994 at which date all trading activities of
these subsidiaries were transferred to Accord Energy Limited. Therefore, as
of 31 December 1995, these subsidiaries were declared dormant.
10. STOCK
GROUP COMPANY
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Pounds Sterling 000)(Pounds Sterling 000)
Gas in storage 3,838 887 3,838 887
--------- --------- --------- ---------
14
11. DEBTORS
GROUP COMPANY
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Pounds Sterling 000)(Pounds Sterling 000)
Trade debtors 56 118 56 118
Accrued income 36,240 19,979 36,240 19,979
Amounts owed by parent undertaking 246 2,291 246 2,291
Amounts owed by subsidiary
undertakings -- -- -- 3,346
Other debtors 12 1,915 12 1,915
Deferred corporation tax 1,899 803 1,899 803
--------- --------- --------- ---------
38,453 25,106 38,453 28,452
--------- --------- --------- ---------
12. CREDITORS
GROUP COMPANY
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Pounds Sterling 000)(Pounds Sterling 000)
Amounts falling due within one year:
- Trade creditors 247 134 247 134
- Amounts owed to parent
undertaking 16,843 -- 16,843 --
- Amounts owed to subsidiary
undertakings -- -- -- 3,346
- Taxation and social security 6,904 1,033 6,904 1,033
- Other creditors 1,826 743 1,826 743
- Accruals and deferred income 26,121 19,873 26,121 19,873
--------- --------- --------- ---------
51,941 21,783 51,941 25,129
--------- --------- --------- ---------
AMOUNTS FALLING DUE AFTER MORE THAN
ONE YEAR:
- - Amounts owed to parent undertaking -- 2,500 -- 2,550
- - Amounts owed to subsidiary
undertakings -- -- 414 414
- - Other creditors -- 2,450 -- 2,450
--------- --------- --------- ---------
-- 5,000 414 5,414
--------- --------- --------- ---------
As part of its normal trading operations the company has entered into forward
purchase and sales contracts totalling L 634 million at 31 December 1995 (1994
- -- L 241 million). It is exposed to market risk of price movements in relation
to any unmatched element of the above commitments and included in the accrual
amounts shown above is an accrual of L 5.6 million (1994 - L 2.3 million)
against potential losses arising out of these contracts.
15
13. CALLED UP SHARE CAPITAL
1995 1994
---- ----
AUTHORISED (Pounds Sterling 000)
51 ordinary "A" shares of L1
each................................. 51 51
49 ordinary "B" shares of L1
each................................. 49 49
---- ----
100 100
==== ====
ALLOTTED AND FULLY PAID
51 ordinary "A" shares of L1
each................................. 51 51
49 ordinary "B" shares of L1
each................................. 49 49
---- ----
100 100
==== ====
With the exception of voting rights which on aggregate are shared equally
by the two categories of shares, the amounts payable on a winding up and the
rights to dividends are on the basis of the percentage interests in each
category of shares.
14. RESERVES
GROUP COMPANY
(Pounds Sterling 000)
PROFIT AND LOSS ACCOUNT:
Balance at 1 January 1995............ 459 45
Transfer from profit and loss account
during the period.................. 175 175
----- -------
Balance at 31 December 1995 634 220
===== =======
The Company's profit for the year was L15.575 million (1994 - L 0.045
million).
As permitted by Section 230(3) of the companies Act 1985, no profit and
loss account is presented for the Company.
16
15. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
GROUP COMPANY
--------------- ---------------
1995 1994 1995 1994
------- ---- ------- ----
(Pounds Sterling 000)(Pounds Sterling 000)
Profit for the period................ 15,575 494 15,575 45
Dividends............................ (15,400) -- (15,400) --
Share capital issued................. -- -- -- --
Goodwill on acquisition of a
subsidiary........................... -- (35 ) -- --
------- ---- ------- ----
Net addition to shareholders'
funds................................ 175 459 175 45
Shareholders' funds at 1 January
1995................................. 459 -- 45 --
------- ---- ------- ----
Shareholders' funds at 31 December
1995................................. 634 459 220 45
======= ==== ======= ====
16. CASH FLOW STATEMENT
(a) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW
1995 1994
------- -------
(Pounds Sterling 000)
Operating profit..................... 22,220 634
(Increase)/decrease in stock......... (2,951) (887)
(Increase)/decrease in debtors....... (12,254) (23,013)
(Increase)/decrease in creditors..... 19,289 24,500
------- -------
26,304 1,234
======= =======
(b) ANALYSIS OF CHANGES IN FINANCING DURING THE PERIOD
1995 1994
---- ----
(Pounds Sterling)
Balance at 1 January 1995............ 100 --
Issue of ordinary shares............. -- 100
---- ----
Balance at 31 December 1995.......... 100 100
==== ====
17
(c) ANALYSIS OF CASH AND CASH EQUIVALENTS
1995 1994
------ -----
Balance at 1 January 1995 1,249 --
Net increase in cash flow 8,935 1,249
------ -----
Balance at 31 December 1995 10,184 1,249
------ -----
Cash at bank and in hand 10,184 1,249
====== =====
17. PENSIONS
The company's own defined contribution pension scheme commenced on 1
December 1995. Under the scheme, defined contributions are made by the employer
to an independently administered fund and in the case of certain employees, who
are not members of the company scheme, to their personal pensions arrangements.
The assets of the schemes are held separately from those of the company and
managed by an external pension fund management organisation appointed by the
Trustees. The pension cost charge for the year includes contributions payable by
the company under this scheme amounting to L 31,000 (1994 - nil), of which L
26,000 was payable at year end and is included in creditors.
Prior to the commencement of the above scheme, the company made
contributions for those employees seconded from the parent company, British Gas
plc., in accordance with the pension scheme operated by that company. The
details of the scheme are given in that company's report and accounts for the
year ended 31 December 1995. The total contributions made by the company for the
year under these arrangements amounted to L 12,000 (1994 - L 1,000).
18. ULTIMATE PARENT COMPANY
The Directors regard British Gas plc, a company registered in England, as
the ultimate parent company and British Gas plc is the only company to
consolidate the accounts of this Company. Copies of the parent company's
consolidated financial statements may be obtained from British Gas plc,
Rivermill House, 152 Grosvenor Road, London SW1V 3JL.
18
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated March 15, 1996, included in this Form 10-K/A into
NGC Corporation's previously filed registration statements on Form S-8 (File
Nos. 33-75044 and 33-96394) and on Form S-3 (File Nos. 33-89546 and 33-97368).
ARTHUR ANDERSEN LLP
Houston, Texas
July 26, 1996
EXHIBIT 13.2(ii)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-11156
NGC CORPORATION
(Exact name of registrant as specified in its charter)
AND EACH OF THE SUBSIDIARY GUARANTORS OF $250 MILLION OF DEBT SECURITIES
DELAWARE 75-2386657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13430 NORTHWEST FREEWAY
HOUSTON, TEXAS 77040
(Address of principal executive offices)
(Zip Code)
(713) 507-6400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date: Common stock, $.01 par value per share,
110,972,191 shares outstanding as of May 13, 1996.
Page 1 of 18
<PAGE>
NGC CORPORATION
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets:
March 31, 1996 and December 31, 1995 ......................... 3
Condensed Consolidated Statements of Operations:
For the three months ended March 31, 1996, and 1995 .......... 4
Condensed Consolidated Statements of Cash Flows:
For the three months ended March 31, 1996 and 1995 ........... 5
Notes to Condensed Consolidated Financial Statements ................ 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ......................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 17
Item 2. Not Applicable .............................................. --
Item 3. Not Applicable .............................................. --
Item 4. Not Applicable .............................................. --
Item 5. Not Applicable .............................................. --
Item 6. Exhibits and Reports on Form 8-K ............................ 17
Page 2 of 18
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- -----------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................. $ 57,745 $ 16,266
Accounts receivable, net .............................................. 611,077 562,278
Accounts receivable, affiliates ....................................... 1,584 1,624
Inventories ........................................................... 61,952 74,263
Assets from risk management activities ................................ 77,075 88,093
Prepayments and other assets .......................................... 10,088 20,415
----------- -----------
819,521 762,939
----------- -----------
PROPERTY, PLANT AND EQUIPMENT ......................................... 1,023,286 1,013,354
Less: accumulated depreciation ........................................ (78,089) (64,843)
----------- -----------
945,197 948,511
----------- -----------
OTHER ASSETS:
Investments in unconsolidated affiliates .............................. 64,773 62,370
Assets from risk management activities ................................ 20,209 26,380
Other assets .......................................................... 84,474 75,052
----------- -----------
$ 1,934,174 $ 1,875,252
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ...................................................... $ 607,450 $ 543,108
Accounts payable, affiliates .......................................... 2,555 22,547
Accrued liabilities ................................................... 60,405 58,736
Liabilities from risk management activities ........................... 63,977 81,283
----------- -----------
734,387 705,674
LONG-TERM DEBT ........................................................ 503,747 522,764
OTHER LIABILITIES:
Liabilities from risk management activities ........................... 16,106 22,570
Deferred income taxes ................................................. 59,520 43,227
Other long-term liabilities ........................................... 36,395 28,637
----------- -----------
1,350,155 1,322,872
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 50,000,000 shares authorized ......... -- --
Common stock, $.01 par value, 300,000,000 shares authorized;
110,725,647 shares issued and outstanding at March 31, 1996;
110,493,411 shares issued and 105,031,874 shares outstanding at
December 31, 1995 ............................................. 1,107 1,105
Additional paid-in capital ............................................ 518,034 515,785
Retained earnings ..................................................... 64,878 35,490
----------- -----------
584,019 552,380
----------- -----------
$1,934,174 $1,875,252
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 18
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------
1996 1995
----------- ---------
<S> <C> <C>
Revenues ....................................... $ 1,647,123 $ 802,944
Cost of sales .................................. 1,557,041 771,458
----------- ---------
Operating margin ............................... 90,082 31,486
Depreciation and amortization .................. 14,170 5,626
General and administrative expenses ............ 22,276 14,471
----------- ---------
Operating income ............................... 53,636 11,389
Equity in earnings of unconsolidated
affiliates ................................... 4,510 4,858
Other income ................................... 1,621 598
Interest expense ............................... (10,653) (3,732)
Other expenses ................................. (2,493) (1,366)
----------- ---------
Income before income taxes ..................... 46,621 11,747
Income tax provision ........................... 16,293 (43,527)
----------- ---------
NET INCOME ..................................... $ 30,328 $ 55,274
=========== =========
NET INCOME PER SHARE: PRO FORMA
Income before income taxes ..................... $ 46,621 $ 11,747
Income tax provision ........................... 16,293 4,346
----------- ---------
Net income ..................................... $ 30,328 $ 7,401
=========== =========
Net income per common and
common equivalent share .................. $ 0.26 $ 0.07
=========== =========
Weighted average number of common
and common equivalent shares outstanding . 118,923 104,546
=========== =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 18
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................... $ 30,328 $ 55,274
Items not affecting cash flows from operating activities:
Depreciation and amortization ........................................ 14,170 5,626
Equity in earnings of affiliates, net of cash distributions .......... (4,510) (4,858)
Risk management activities ........................................... (6,581) (441)
Deferred income taxes ................................................ 16,406 (43,527)
Amortization of bond premium ......................................... (1,017) (200)
Changes in assets and liabilities resulting from operating activities:
Accounts receivable .................................................. (33,192) 83,963
Inventories .......................................................... 16,921 5,432
Prepayments and other assets ......................................... 11,905 (3,267)
Accounts payable ..................................................... 29,378 (77,648)
Accrued liabilities .................................................. (4,109) 2,629
Other, net ................................................................... 368 4,177
--------- ---------
Net cash provided by operating activities .................................... 70,067 27,160
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ......................................................... (13,788) (4,285)
Acquisition of Trident NGL Holding, Inc., net of cash acquired ............... -- (165,267)
Investment in unconsolidated affiliates, net ................................. 4,040 --
--------- ---------
Net cash used in investing activities ........................................ (9,748) (169,552)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings ................................... 369,000 309,000
Repayments of long-term borrowings ................................... (387,000) (288,250)
Proceeds from sale of capital stock, options and warrants ............ 29 --
Capital contributions ........................................................ -- 135,000
Dividends and other distributions ............................................ (869) (5,582)
--------- ---------
Net cash provided by (used in) financing activities .......................... (18,840) 150,168
--------- ---------
Net change in cash and cash equivalents ...................................... 41,479 7,776
Cash and cash equivalents, beginning of period ............................... 16,266 15,219
--------- ---------
Cash and cash equivalents, end of period ..................................... $ 57,745 $ 22,995
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 18
NGC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Interim Periods Ended March 31, 1996 and 1995
(unaudited)
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission ("SEC"). These interim
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, filed with the SEC.
The financial statements include all material adjustments consisting only of
normal recurring adjustments which, in the opinion of management, were necessary
for a fair presentation of the results for the interim periods. Interim period
results are not necessarily indicative of the results for the full year. The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to develop
estimates and make assumptions that affect reported financial position and
results of operations and that impact the nature and extent of disclosure, if
any, of contingent assets and liabilities. Actual results could differ from
those estimates.
NOTE 2 -- ACQUISITION OF GAS MARKETING AND MIDSTREAM ASSETS
NGC Corporation ("NGC" or the "Company") and Chevron Corporation ("Chevron")
announced on January 22, 1996, a proposed merger that would create a new company
comprised of all of NGC and substantially all of Chevron's gas gathering,
processing and marketing operations as well as establish certain strategic
alliances between the two companies. The companies anticipate that the
Combination Agreement and Plan of Merger will be executed by the end of May 1996
and that closing of the transaction will occur during the third quarter. Closing
of the merger is contingent on regulatory approval which is expected to be
obtained in the third quarter. The combined company, which will retain the name
NGC Corporation, will include all of NGC and most of two Chevron business units:
the Houston-based Natural Gas Business Unit and Tulsa-based Warren Petroleum
Company. For its contribution, Chevron will receive approximately 46 million
shares in the new company, in a combination of common and preferred shares, and
approximately $300 million in a combination of cash and debt assumption.
NOTE 3 -- BUSINESS COMBINATION WITH TRIDENT NGL HOLDING, INC. ("TRIDENT")
On March 14, 1995, Natural Gas Clearinghouse ("Clearinghouse") consummated a
strategic business combination ("Combination") with Trident and the combined
entities were renamed NGC Corporation ("NGC" or the "Company"). The purchase
price of approximately $350 million, excluding transaction costs and liabilities
assumed, was allocated to the assets acquired and liabilities assumed based on
their estimated fair values as of March 1, 1995, the effective date of the
Combination for accounting purposes. The Combination was accounted for under the
purchase method of accounting and the results of operations of Trident are
included in the accompanying financial statements effective March 1, 1995.
On March 22, 1996, the 5,461,538 contingent shares, representing shares of NGC
stock to be issued to the former owners of the partners of Clearinghouse
("Clearinghouse Owners") and the former shareholders of Trident ("Trident
Shareholders") in accordance with terms of the Combination, were allocated in a
ratio of 17 percent to the Trident Shareholders and 83 percent to the
Clearinghouse Owners.
Page 6 of 18
The following table reflects certain unaudited pro forma information for the
period presented as if the Combination took place at the beginning of 1995 (in
thousands, except per share data):
THREE MONTHS
ENDED
MARCH 31, 1995
Pro forma revenues .................................. $891,868
========
Pro forma net income ................................ $ 7,910
========
Pro forma net income per share ...................... $ 0.07
========
NOTE 4 -- EARNINGS PER SHARE
Net income per share is based on the weighted average number of common stock
shares outstanding plus the common stock equivalents that would arise from the
exercise of outstanding options or warrants, when dilutive. Primary and fully
diluted earnings per share are the same for all periods presented.
Pro forma income taxes reflected in the Condensed Consolidated Statement of
Operations for the three-month period ended March 31, 1995, reflect the
incremental statutory federal and state income taxes that would have been
provided had Clearinghouse been a taxpaying entity during that period. Pro forma
net income per share is based on the weighted average number of shares of common
stock outstanding plus the common stock equivalents that would arise from the
exercise of outstanding options or warrants, when dilutive. The computations
assume the Company was incorporated during the period presented and gives effect
to the terms of the Combination.
Net income per common and common equivalent share based on reported net income
of $55.3 million for the three-month period ended March 31, 1995, computed using
the weighted average shares outstanding for the period was $0.53 per share. The
pro forma net income per share amount of $0.07 reported in the Condensed
Consolidated Statement of Operations for the three-months ended March 31, 1995,
reflects adjustments to reported net income for a non-recurring deferred income
tax benefit of $45.7 million recognized as a result of the Combination and the
incremental pro forma statutory income tax provision on Clearinghouse's
pre-combination partnership income.
NOTE 5 -- UNCONSOLIDATED AFFILIATES
At March 31, 1996, NGC's investment in unconsolidated affiliates accounted for
by the equity method included a 49.9 percent aggregate partnership interest in
Novagas Clearinghouse Ltd. ("NCL"), a Canadian limited partnership, a 49 percent
interest in Accord Energy Limited ("Accord"), a U.K. limited company, a 38.75
percent partnership interest in Gulf Coast Fractionators ("GCF") an approximate
28 percent interest in Avoca Natural Gas Storage ("Avoca"), a 50 percent
interest in Quicktrade L.L.C. and a 25 percent interest in Cayuta Natural Gas
Storage. Summarized unaudited combined income statement information for these
unconsolidated affiliates is presented in the table below:
Page 7 of 18
THREE MONTHS ENDED MARCH 31,
----------------------------------------------
1996 1995
--------------------- --------------------
EQUITY EQUITY
TOTAL SHARE TOTAL SHARE
-------- -------- -------- -------
($US IN THOUSANDS)
Revenues (1) ................ $550,226 272,352 187,679 92,373
======== ======== ======== =======
Operating margin (1) ........ $ 24,487 $ 11,503 $ 21,286 $10,390
======== ======== ======== =======
Net income (1) .............. $ 10,192 $ 4,510 $ 9,909 $ 4,858
======== ======== ======== =======
(1) Includes GCF's operations from March 1, 1995 (effective date of the
Combination) forward.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
On February 12, 1996, Apache Corporation ("Apache") requested arbitration to
resolve issues arising under a gas marketing contract ("Contract") with
Clearinghouse pursuant to the arbitration provisions of such Contract. On
February 26, 1996, Clearinghouse responded by denying Apache's claims and by
alleging several counterclaims of its own with respect to Apache's performance
under the Contract. In connection with the arbitration proceedings, on April 9,
1996, Apache filed a lawsuit against Clearinghouse in the 55th Judicial District
Court of Harris County, Texas ("Court"). In that lawsuit, Apache alleges that
Clearinghouse is intentionally delaying the progress of the arbitration, and it
requests relief, pursuant to the Texas General Arbitration Act, in the form of
an order appointing a third arbitrator, compelling discovery and requiring
Clearinghouse to assign certain contracts allegedly belonging to Apache.
Clearinghouse filed a response to the lawsuit on May 6, 1996, asking that the
Court dismiss Apache's application for relief or abate the suit pending
resolution of all matters by the arbitration panel according to the terms of the
Contract. Clearinghouse has also requested payment of all attorneys' fees and
other litigation expenses incurred in responding to and defending the suit.
Clearinghouse intends to vigorously defend the Apache suit and the arbitration.
In the arbitration and again in the lawsuit, Apache claims that it is entitled
to actual damages in an undetermined amount in excess of $8 million, and
punitive damages calculated by tripling the amount of actual damages. NGC
management believes, based on its review of the facts and consultation with
outside counsel, that the ultimate resolution of the Apache suit will not have
an adverse impact on the Company's financial position or results of operations,
and that any payments eventually made in connection with the arbitration and/or
the lawsuit will be substantially less than the amount claimed.
Page 8 of 18
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements of NGC Corporation
included elsewhere herein and with the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
GENERAL
COMPANY PROFILE
NGC is a leading North American marketer of natural gas, natural gas liquids,
crude oil and electric power and is engaged in natural gas gathering, processing
and transportation through ownership and operation of natural gas processing
plants, storage facilities and pipelines. Through joint ventures in both Canada
and the United Kingdom, the Company has expanded geographically its vision of
providing customers having multiple energy commodity needs with cost-effective
products and value added services. Acting in the role of a large-scale
aggregator, processor, marketer and reliable supplier of multiple energy
products and services, NGC has evolved into a 'one-stop' energy commodity and
service provider.
NGC is a holding company that operates principally through two subsidiaries,
Clearinghouse, a Colorado partnership, and Trident NGL, Inc., a Delaware
corporation ("Trident NGL"). The Company has two primary business segments: the
natural gas and electric power marketing segment ("Marketing") and the natural
gas liquids, crude oil and gas transmission segment ("Liquids").
RECENT DEVELOPMENTS
NGC Corporation ("NGC" or the "Company") and Chevron Corporation ("Chevron")
announced on January 22, 1996, a proposed merger that would create a new company
comprised of all of NGC and substantially all of Chevron's gas gathering,
processing and marketing operations as well as establish certain strategic
alliances between the two companies. The companies anticipate that the
Combination Agreement and Plan of Merger will be executed by the end of May 1996
and that closing of the transaction will occur during the third quarter. Closing
of the merger is contingent on regulatory approval which is expected to be
obtained in the third quarter. The combined company, which will retain the name
NGC Corporation, will include all of NGC and most of two Chevron business units:
the Houston-based Natural Gas Business Unit and Tulsa-based Warren Petroleum
Company. For its contribution, Chevron will receive approximately 46 million
shares in the new company, in a combination of common and preferred shares, and
approximately $300 million in a combination of cash and debt assumption.
The combination of NGC and the two Chevron business units will make the combined
company the leading marketer of natural gas in North America, with average daily
sales in excess of 10 billion cubic feet, or an estimated 14 percent of total
North American gas consumption. The proposed transaction will establish NGC as
the second largest producer and largest marketer of natural gas liquids ("NGL")
in North America, with production of approximately 140,000 barrels per day and
sales of approximately 470,000 barrels per day.
In February 1996, NGC Liquids Marketing, Inc., a wholly-owned subsidiary of NGC,
acquired 100 percent of the outstanding stock of LPG Services Group, Inc.
("LPG"), a Kansas City-based propane gas marketing and distribution company for
$6.1 million. LPG's well-developed wholesale propane marketing infrastructure
integrates well with NGC's established production base and reliable supply
system and with the wholesale propane marketing operations obtained in the
Chevron acquisition. The synergies to be obtained from the combination of these
three operations will provide NGC with a strong nationwide wholesale propane
distribution business.
Page 9 of 18
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Provided below is a tabular presentation of certain domestic and international
operating and financial statistics for the Company's segments and subsegments
for the three-month periods ended March 31, 1996 and 1995, respectively.
THREE MONTHS ENDED MARCH 31,
----------------------
1996 1995 (1)
---------- ---------
($ IN MILLIONS)
Natural Gas and Electric Power Marketing Segment:
Operating margin .................................. $ 46.1 $ 15.2
Natural Gas Marketing -
Average sales volume per day (Bcf/d)(2) ........... 3.9 3.7
Operations of unconsolidated foreign equity
affiliates(3)
Average gross sales volume per day (Bcf/d)(4) ..... 3.6 1.5
Average net sales volume per day (Bcf/d)(5) ....... 1.8 0.7
Electric Power Marketing -
Gross sales volumes (gigawatt hours) .............. 2,380.0 245.0
Average megawatts per hour ........................ 1,090.0 114.0
Natural Gas Liquids, Crude Oil and Gas
Transmission
Segment:
Operating margin .................................. $ 44.0 $ 16.3
Natural Gas Processing -
Operating margin .................................. $ 22.0 $ 9.4
Gross gallons processed (MMGals) .................. 240.0 165.4
Net gallons processed (MMGals) .................... 184.7 120.9
Fractionation (6) -
Operating margin .................................. $ 2.1 $ 2.1
Gallons received for fractionation (MMGals) ....... 451.9 180.5
Liquids and Crude Oil Marketing and Other -
Operating margin .................................. $ 19.9 $ 4.8
NGL Marketing - sales volumes (MMGals) ............ 603.1 258.8
Crude Oil Marketing - sales volumes (MMBbls) ...... 102.2 46.0
(1) The Combination was accounted for under the purchase method of
accounting and the results of operations of Trident are included in
the accompanying financial statements and in these operating
statistics effective March 1, 1995.
(2) Includes 0.03 Bcf/d in intercompany gas sales for the three-month
periods ended March 31, 1996 and 1995, respectively.
(3) Includes NCL and Accord.
(4) Includes 0.3 Bcf/d of inter-affiliate gas sales for both the 1996 and
1995 three-month periods, respectively.
(5) Represents NGC's aggregate equity interest in the sales volumes of its
unconsolidated foreign equity affiliates.
(6) Information excludes the Company's proportionate share of GCF's margin
and fractionation volumes.
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
For the quarter ended March 31, 1996, NGC realized net income of $30.3 million,
or $0.26 per share, on total revenue of $1.6 billion compared with normalized
first quarter 1995 net income of $9.5 million, or $0.09 per share, on total
revenue of $802.9 million. Normalized results for 1995 are exclusive of a
non-recurring income tax benefit of $45.7 million, or $0.44 per share, related
to the Combination. NGC's first quarter 1995 reported net income, which included
the non-recurring benefit, was $55.3 million, or $0.53 per share. Income before
income taxes
Page 10 of 18
totaled $46.6 million for the three-months ended March 31, 1996, a $34.9 million
increase over the comparable 1995 period. Cash flows from operating activities
increased to $70.1 million in the first quarter of 1996 compared with $27.2
million reported in the first quarter of 1995. Increases in both income and
operating cash flow are largely a result of the extremely cold temperatures
during 1996 which increased the demand for energy products allowing NGC to
market record volumes of natural gas, NGLs and crude oil and to realize improved
margins over the 1995 period.
Operating margin for the first quarter of 1996 totaled $90.1 million compared
with $31.5 million in the corresponding 1995 period, reflecting improved margins
in both the Marketing and Liquids segments. Marketing contributed $46.1 million
to the consolidated margin, an improvement of $30.9 million over the first
quarter 1995 margin of $15.2 million; whereas, Liquids contributed $44.0 million
to the consolidated margin compared with $16.3 million in the comparable 1995
quarter. Operating income was $53.6 million in the first quarter of 1996
compared with $11.4 million for the first quarter of 1995, an increase of $42.2
million, reflecting the aforementioned increase in operating margin offset by
increases in depreciation and amortization and general and administrative
expenses. Increased depreciation and amortization expense in 1996 results
principally from the inclusion of Trident's operations for the entire 1996
quarter as opposed to only one month in 1995 combined with increased asset
capitalization resulting from other acquisitions completed during the four
quarters in the period ended March 31, 1996. Higher general and administrative
expenses resulted from the previously discussed incremental effect of Trident's
operations, increased overhead required to support NGC's growth and higher
variable compensation costs in 1996 as opposed to the comparable 1995 period.
NGC's quarterly results include the Company's equity share in the earnings of
its unconsolidated affiliates which contributed an aggregate $4.5 million to
first quarter 1996 pre-tax income compared with $4.9 million in the 1995 period.
NGC's investment in its foreign joint venture affiliates, NCL and Accord,
contributed $3.5 million to equity earnings compared with $4.9 million in 1995.
Combined, the foreign joint venture affiliates averaged 3.6 Bcf/d of gross gas
sales during the 1996 quarter, an increase of 2.1 Bcf/d over the average gross
sales volume reported in the first quarter of 1995. The significant increase in
volumes sold is primarily attributed to NCL and Accord's substantial growth over
the past year and NCL's acquisition of Pan-Alberta Gas Limited Partnership
("Pan-Alberta") in June 1995. The remaining $1.0 million of 1996 quarterly
equity earnings result from the Company's investment in GCF, which was acquired
by NGC in the Combination.
Interest expense increased $7.0 million to $10.7 million in the quarter ended
March 31, 1996, compared with $3.7 million in the equivalent 1995 period. The
increase is reflective of higher outstanding debt balances resulting principally
from debt assumed in conjunction with the Combination, which amounts were
outstanding for the entire 1996 quarter as opposed to only one-month in 1995,
and borrowings for capital expenditures and investments in unconsolidated
affiliates. The Company benefitted in 1996 from lower average interest rates
applicable to its revolving credit facility.
The Company reported an income tax provision of $16.3 million for the
three-month period ended March 31, 1996, an effective rate of 35 percent. This
compares with an income tax provision of $2.2 million for the equivalent 1995
period, an effective rate of 19 percent. The 1995 amount does not include a
provision for federal income tax attributed to pre-combination earnings of
Clearinghouse which were predominantly taxed as partnership income. The
remaining differences between the effective rates and the statutory rate of 37
percent for each of the three-month periods ended March 31, 1996 and 1995,
respectively, are principally attributed to permanent differences and certain
foreign equity investments.
Page 11 of 18
NATURAL GAS AND ELECTRIC POWER MARKETING
Marketing's operating margin of $46.1 million for the first quarter of 1996
reflected both higher sales volumes and improved physical gas sales margins as
compared with the equivalent 1995 period. The improved natural gas marketing
operating results were primarily a result of the extremely cold temperatures
that blanketed much of North America during the first quarter of 1996 which
created high energy demand and a volatile pricing environment resulting in
increased demand for premium services provided by the Company. Domestic gas
volumes sold increased 0.2 Bcf/d to 3.9 Bcf/d in 1996 as compared with 3.7 Bcf/d
in 1995. Marketing margins were also improved by the Company's hubbing
operations which contributed $1.7 million of operating margin in the first
three-months of 1996 as compared with $0.4 million in the comparable 1995
period.
NGC's electric power marketing business operates through Electric Clearinghouse,
Inc. ("ECI") which began marketing electric power in January 1995. For the
quarter ended March 31, 1996, ECI reported sales volumes of 2.4 million megawatt
hours which compares with total 1995 annual sales of 3.5 million megawatt hours.
Daily volumes increased almost tenfold, totaling 1,090 megawatts per hour,
compared with the first quarter of 1995 daily volumes of 114 megawatts per hour.
ECI is continuing to pursue opportunities to broaden its domestic marketing of
electric power and is introducing a variety of services to this burgeoning
industry.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
Liquids reported a first quarter 1996 operating margin of $44.0 million
reflecting improvement in all of the segment's businesses. The earnings
improvement is attributed to a number of factors including: (i) the acquisition
of Trident and the synergies realized from that merger; (ii) the acquisition and
efficient utilization of other assets such as the Ozark Gas Transmission System,
a crude oil pipeline acquired from Kerr-McGee and the operations of LPG
Services, Inc.; (iii) improved liquids processing margins; (iv) higher crude oil
sales volumes and margins; (v) significantly higher NGL Marketing sales volumes
partly as a result of the LPG Services, Inc. acquisition; and (vi) increased
volumes received for fractionation offset by higher third-party fractionation
fees resulting principally from the third quarter 1995 closure of the Lake
Charles, Louisiana fractionator.
PRO FORMA THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
The pro forma information provided gives effect to the Combination as if it had
occurred on January 1, 1994 and, accordingly, combines the activities of both
Clearinghouse and Trident for the three-month period ended March 31, 1995. The
information for the three-months ended March 31, 1996, reflects the historical
operating results described previously herein. The pro forma results do not give
effect to any cost savings expected as a result of the Combination. The pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of what the actual results of operations would have been
had the Combination occurred at the beginning of the periods presented nor does
it purport to indicate the future results of the Company.
Page 12 of 18
THREE MONTHS ENDED MARCH 31,
----------------------
1996 1995(1)
---------- ---------
($ IN MILLIONS)
Natural Gas and Electric Power Marketing Segment:
Operating margin .................................... $ 46.1 $ 15.2
Natural Gas Marketing -
Average sales volume per day (Bcf/d) (2) ............ 3.9 3.7
Operations of unconsolidated foreign equity
affiliates(3)
Average gross sales volume per day (Bcf/d)(4) ....... 3.6 1.5
Average net sales volume per day (Bcf/d)(5) ......... 1.8 0.7
Electric Power Marketing -
Gross sales volumes (gigawatt hours) ................ 2,380.0 245.0
Average megawatts per hour .......................... 1,090.0 114.0
Natural Gas Liquids, Crude Oil and Gas Transmission
Segment:
Operating margin .................................... $ 44.0 $ 30.0
Natural Gas Processing -
Operating margin .................................... $ 22.0 $ 18.5
Gross gallons processed (MMGals) .................... 240.0 336.4
Net gallons processed (MMGals) ...................... 184.7 260.0
Fractionation(6) -
Operating margin .................................... $ 2.1 $ 3.9
Gallons received for fractionation (MMGals) ......... 451.9 485.7
Liquids and Crude Oil Marketing and Other -
Operating margin .................................... $ 19.9 $ 7.6
NGL Marketing - sales volumes (MMGals) .............. 603.1 495.8
Crude Oil Marketing - sales volumes (MMBbls) ........ 102.2 46.0
(1) The pro forma information assumes that Trident and NGC were combined
for the three-month period ended March 31, 1995.
(2) Includes 0.03 Bcf/d in intercompany gas sales for the quarters ended
March 31, 1996 and 1995, respectively.
(3) Includes NCL and Accord.
(4) Includes 0.3 Bcf/d of inter-affiliate gas sales for the three-month
periods ended March 31,1996 and 1995, respectively.
(5) Represents NGC's aggregate equity interest in the sales volumes of its
unconsolidated foreign equity affiliates.
(6) Information excludes the Company's proportionate share of GCF's margin
and fractionation volumes.
Net income for the three-months ended March 31, 1996, was $30.3 million, or
$0.26 per share, compared with pro forma net income of $7.9 million, or $0.07
per share, for the same period in 1995. Pro forma 1995 net income excludes the
aforementioned non-recurring income tax benefit of $45.7 million and an
incremental pro forma tax provision related to Clearinghouse's pre-combination
earnings. Operating margin for the quarter ended March 31, 1996, increased $44.9
million over the pro forma operating margin of $45.2 million for the equivalent
1995 period. The increase in 1996's historical operating margin as compared with
the pro forma 1995 operating margin reflects significantly improved Marketing
operating margins resulting principally from the extremely colder temperatures
in the first quarter of 1996. Liquids operating margins were $11.9 million
higher in 1996 as compared with the pro forma 1995 period principally as a
result of increased operating margins associated with the Company's NGL
Marketing, crude oil marketing and transmission businesses. Operating income
increased in 1996 as compared with the pro forma 1995 period by $37.2 million as
a result of the aforementioned improved operating margins offset by higher
depreciation and amortization and general and administrative expenses. After
adjusting for the impact of the Combination, the higher 1996 expenses were
generally attributable to the same factors which affected actual results, as
described previously.
Page 13 of 18
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
NGC has historically relied upon operating cash flow and borrowings under its
credit facilities for its liquidity and capital resource requirements. As a
result of the Company's continued positive operating results, combined with the
liquidity and flexibility provided by available funds under its credit
facilities, the Company believes it will be able to meet all foreseeable cash
requirements, including working capital, capital expenditures, debt service and
costs associated with the Chevron transaction.
OPERATING CASH FLOW
The Company's cash flow from operating activities differs from reported net
income principally as a result of adjustments for non-cash items and changes in
working capital resulting from operating activities. The significant increase in
operating cash flow in the first quarter of 1996 as compared with the comparable
1995 period is principally a result of improved earnings in 1996, increased cash
flow in 1996 as compared with 1995 resulting from inventory reductions required
to meet the market demands created by the extremely cold temperatures prevalent
in 1996 and the effect the non-cash adjustments had on operating cash flow
between periods. The following describes generally the impact working capital
changes may have on the Company's operating cash flow from period to period.
ACCOUNTS RECEIVABLE. Generally, the level of NGC's accounts receivable is
impacted primarily by sales volumes and prices. Given the impact of seasonal
demand factors on the Company's sales volumes and the prices of natural gas,
NGLs and crude oil, NGC's accounts receivable are typically higher in the winter
months than during the balance of the year.
INVENTORIES. The Company maintains varying levels of natural gas, NGL and crude
oil inventories. Due to seasonal demand factors, natural gas and NGL inventories
are typically purchased during the summer months and sold during the winter
months. Inventory volumes include product in pipelines, referred to as "line
fill", which represents perpetual inventory volumes. Otherwise, a large part of
the Company's product inventories held as of a year-end are expected to be sold
during the first quarter of the following year. Inventory purchases are
generally discretionary and not a prerequisite to maintaining deliveries or
sales due to the availability of supplies through term contracts and spot market
purchasing activities. However, periodic inventory accumulations allow the
Company to capture peak deliverability opportunities and to take advantage of
expected seasonal price differentials. Material and supplies inventory, used
primarily at the Company's processing plants and fractionation facilities,
typically turnover more slowly than product inventory volumes.
ACCOUNTS PAYABLE. The level of the Company's trade accounts payable will
generally follow in tandem with the level of trade accounts receivable because
purchased volumes and product prices will typically fluctuate directionally with
sales volumes and prices.
OTHER WORKING CAPITAL ACCOUNTS. Other working capital accounts, which include
prepayments, other current assets and accrued liabilities, reflect expenditures
or recognition of liabilities for insurance costs, certain deposits, salaries,
taxes other than on income, certain deferred revenue accounts and other similar
items. Fluctuations in these accounts from period to period reflect changes in
facts or changes in the timing of payments or recognition of liabilities and are
not directly impacted by seasonal factors.
Page 14 of 18
CAPITAL EXPENDITURES, COMMITMENTS AND DIVIDEND REQUIREMENTS
The Company's business strategy has been to grow horizontally across all sectors
of the midstream energy business segment through strategic acquisitions or
construction of core operating facilities in order to capture the significant
synergies which management believes exist among these types of assets and NGC's
natural gas and NGL marketing businesses. In the first quarter of 1996, the
Company spent $13.8 million principally for the acquisition of LPG Services,
Inc. and capital improvements at existing facilities and $0.6 million in
additional investment in its unconsolidated affiliates. The Company received a
payment of $4.6 million from Avoca representing a return of capital. During the
first quarter of 1995, the Company spent $4.3 million principally for capital
improvements.
In the first quarter of 1995, approximately $166.9 million, exclusive of
transaction related costs, was required to consummate the tender offer related
to the Combination. These funds were provided by British Gas, NOVA and
Clearinghouse. Specifically, British Gas and NOVA each contributed $67.5 million
to their respective subsidiaries that participated in the Combination and
Clearinghouse provided $31.9 million to fund the balance. Clearinghouse funded
the $31.9 million and certain other costs associated with the Combination
through a combination of cash on hand and $25.0 million in borrowings under its
then existing credit agreement.
NGC currently declares an annual dividend of $0.05 per common share payable in
quarterly installments. During the quarter ended March 31, 1996, the Company
paid $1.3 million in cash dividends and the Company's Board of Directors
declared a $1.4 million dividend payable to holders of record on March 25, 1996.
Such amount was paid on April 9, 1996. Prior to the Combination, Clearinghouse
made distributions primarily to enable Clearinghouse's partners to pay tax
liabilities incurred as a result of Clearinghouse generated income which was
taken into account by the Clearinghouse Owners in computing their separate
income tax liabilities. During the first quarter of 1996, the Company received
$0.4 million from the Clearinghouse Owners related to tax advances made by the
Company prior to the Combination in amounts in excess of actual tax liabilities.
During the first quarter of 1995, NGC paid $5.6 million in dividends and
distributions, principally to the Clearinghouse Owners.
REVOLVING CREDIT FACILITY
On March 14, 1995, the Company entered into the NGC Corporation Credit Agreement
("Credit Agreement"), which established a five-year $550 million revolving
credit facility. The Credit Agreement provides for letters of credit (up to $150
million) and borrowings for working capital, capital expenditures and general
corporate purposes of up to $550 million in the aggregate. The $550 million
commitment under the revolving credit facility reduces by $22.5 million each
quarter beginning in March 1998 and continuing through maturity. Generally,
borrowings under the Credit Agreement bear interest at a Eurodollar rate plus a
margin that is determined based on the Company's debt to capitalization ratio.
The margin at March 31, 1996, was 0.5 percent and the average interest rate
applicable to borrowings under the Credit Agreement approximated 5.7 percent.
During the first quarter of 1995, NGC entered into arrangements with financial
institutions that effectively capped the base Eurodollar rate on $100 million of
borrowings at rates between 8.5 percent and 9.1 percent through January 1998.
The Credit Agreement contains certain financial covenants which require the
Company to meet certain financial position and performance tests. At March 31,
1996, letters of credit and borrowings outstanding under the Credit Agreement
aggregated $186.5 million and unused borrowing capacity under the revolving
credit facility approximated $363.5 million. Certain amendments will be made to
the Credit
Page 15 of 18
Agreement to accommodate the Chevron transaction. In management's opinion, such
amendments are of an immaterial nature.
SHELF REGISTRATION OF $250 MILLION OF SENIOR NOTES
The Company has issued $150 million of 6.75 percent Senior Notes ("Notes")
pursuant to a $250 million shelf registration. Interest on the Notes is payable
semiannually on June 15 and December 15 of each year, beginning June 15, 1996.
The Notes represent general unsecured obligations of the Company and are
guaranteed by certain of the Company's wholly-owned subsidiaries ("Subsidiary
Guarantors"). Upon issuance, the Notes were priced based on the then existing
yield for 10-year U.S. Treasury Notes ("Base Treasury Rate") plus a spread based
principally on the Company's credit rating. Prior to issuing the Notes, the
Company entered into two separate transactions with two separate financial
institutions, the effect of which was to lock in the Base Treasury Rate at
approximately 6.2 percent on the full $150 million face value of the Notes.
Separate financial statements of each Subsidiary Guarantor have not been
provided herein because management has determined that such information would
not be material to investors. The Company also has direct and indirect
subsidiaries that are not Subsidiary Guarantors (collectively "Non-guarantor
Subsidiaries"). These Non-guarantor Subsidiaries, both individually and in the
aggregate, are inconsequential to NGC as of and for each of the quarterly
periods contained in this document.
TRIDENT NOTES
At March 31, 1996, Trident had outstanding $105 million principal amount of
10.25% Subordinated Notes due 2003 and $65 million principal amount of 14%
Senior Subordinated Notes due 2001 with interest payable semi-annually on both
notes. Beginning in 1998, corresponding with the first call dates, the Company
may repurchase the Subordinated Notes and Senior Subordinated Notes at 104.5
percent and 107 percent of the principal amount, respectively, with such
reacquisition prices reducing as the notes mature. The indentures covering the
Subordinated Notes and Senior Subordinated Notes contain covenants that, among
other things, require Trident to meet certain financial tests; limit the amount
of capital expenditures, dividend payments and asset sales that can be made by
Trident; and restrict the ability of Trident and its subsidiaries to incur
additional indebtedness, create or permit liens and engage in certain
transactions. The unamortized premium balance associated with each of the
Subordinated Notes and Senior Subordinated Notes represents a fair value
adjustment to the aggregate principal balance of the notes recognized as part of
the Combination. The unamortized premium balance of $17.9 million at March 31,
1996, is being amortized using the interest method.
Page 16 of 18
NGC CORPORATION
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On February 12, 1996, Apache Corporation ("Apache") requested arbitration to
resolve issues arising under a gas marketing contract ("Contract") with
Clearinghouse pursuant to the arbitration provisions of such Contract. On
February 26, 1996, Clearinghouse responded by denying Apache's claims and by
alleging several counterclaims of its own with respect to Apache's performance
under the Contract. In connection with the arbitration proceedings, on April 9,
1996, Apache filed a lawsuit against Clearinghouse in the 55th Judicial District
Court of Harris County, Texas ("Court"). In that lawsuit, Apache alleges that
Clearinghouse is intentionally delaying the progress of the arbitration, and it
requests relief, pursuant to the Texas General Arbitration Act, in the form of
an order appointing a third arbitrator, compelling discovery and requiring
Clearinghouse to assign certain contracts allegedly belonging to Apache.
Clearinghouse filed a response to the lawsuit on May 6, 1996, asking that the
Court dismiss Apache's application for relief or abate the suit pending
resolution of all matters by the arbitration panel according to the terms of the
Contract. Clearinghouse has also requested payment of all attorneys' fees and
other litigation expenses incurred in responding to and defending the suit.
Clearinghouse intends to vigorously defend the Apache suit and the arbitration.
In the arbitration and again in the lawsuit, Apache claims that it is entitled
to actual damages in an undetermined amount in excess of $8 million, and
punitive damages calculated by tripling the amount of actual damages. NGC
management believes, based on its review of the facts and consultation with
outside counsel, that the ultimate resolution of the Apache suit will not have
an adverse impact on the Company's financial position or results of operations,
and that any payments eventually made in connection with the arbitration and/or
the lawsuit will be substantially less than the amount claimed.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following instruments and documents are included as exhibits to this
Form 10-Q.
EXHIBIT
NUMBER DESCRIPTION
2.1 Combination Agreement and Plan of Merger, dated October 21, 1994,
among Trident NGL Holding, Inc., Natural Gas Clearinghouse, British
Gas General Partner Inc., British Gas Limited Partner Inc., British
Gas NGC L.P., NOVA NGC, Inc., Participating Employee Partners, C.L.
Watson, Inc., Stephen W. Bergstrom, Inc., Gilbert Burciaga, Inc., A.R.
Cipriani, Jr., Inc., David C. Feldman, Inc., James T. Hackett, Inc.,
H. Keith Kaelber, Inc., Kenneth E. Randolph, Inc., Donald R. Sinclair,
Inc. and Jacob S. Ulrich, Inc. (1)
3.1 Amended and Restated Certificate of Incorporation of NGC
Corporation (2)
3.2 Amended and Restated ByLaws of NGC Corporation (3)
(1) Incorporated by reference to exhibits to the Current Report on
Form 8-K of Trident NGL Holding, Inc., Commission File No.
1-11156, dated October 21, 1994.
(2) Incorporated by reference to exhibits to the Annual Report on
Form 10-K of NGC Corporation for the Fiscal Year Ended December
31, 1994, Commission File No. 1-11156.
(3) Incorporated by reference to exhibits to the Annual Report on
Form 10-K of NGC Corporation for the Fiscal Year Ended December
31, 1995, Commission File No. 1-11156.
b. Reports on Form 8-K
Current Report on Form 8-K, Commission File No. 1-11156, dated January
21, 1996, relating to the signing of the Exclusivity Agreement with
Chevron U.S.A. Inc. regarding the Combination.
Page 17 of 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
NGC CORPORATION
Date: MAY 14, 1996 By: /s/ H. KEITH KAELBER
H. Keith Kaelber, Senior Vice
President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Page 18 of 18
EXHIBIT 21.1
SUBSIDIARIES OF MIDSTREAM COMBINATION CORP.
STATE OR JURISDICTION
OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
None.
EXHIBIT 21.2
SUBSIDIARIES OF NGC CORPORATION
STATE OR JURISDICTION
OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
Accord Energy Limited ............................. England
Bradshaw Gathering System Joint Venture ........... Texas
Caney River Transmission Company .................. Delaware
ECI Capital Corporation ........................... Texas
Electric Clearinghouse, Inc. ...................... Texas
Ellisburg Leidy N.E. Hub (general partnership) .... Pennsylvania
Enerchange LLC (limited liability company) ........ Delaware
Gulf Coast Fractionators (general partnership) .... Texas
HUB Services, Inc. ................................ Delaware
Kansas Gas Supply Corporation ..................... Delaware
LPG Services Group, Inc. .......................... Missouri
Natural Gas Clearinghouse (general partnership) ... Colorado
Natural Gas Clearinghouse, Inc. ................... Delaware
Natural Gas Clearinghouse of Argentina, Inc. ...... Delaware
Natural Gas Clearinghouse of Mexico, Inc. ......... Delaware
NEI Arkansas Gathering, Inc. ...................... Arkansas
NGC Anadarko Gathering Systems, Inc. .............. Texas
NGC Avoca, Inc. ................................... Delaware
NGC Canada, Inc. .................................. Alberta, Canada
STATE OR JURISDICTION
OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
NGC Cayuta, Inc. .................................. Delaware
NGC Energy, Inc. .................................. Texas
NGC Energy Resources, Limited Partnership
(limited partnership) ........................... Delaware
NGC GP, Inc. ...................................... Delaware
NGC Futures, Inc. ................................. Texas
NGC Global Energy Services, Inc. .................. Delaware
NGC Holding Company, Inc. ......................... Delaware
NGC Liquids Marketing, Inc. ....................... Delaware
NGC Intrastate Pipeline Company ................... Texas
NGC Oil Trading and Transportation, Inc. .......... Texas
NGC Regulated Holdings, Inc. ...................... Delaware
NGC Storage, Inc. ................................. Delaware
NGC Transportation, Inc. .......................... Delaware
NGC UK Limited .................................... England
NOTTI Gathering Company, Inc. ..................... Delaware
Novagas Clearinghouse Limited Partnership
(limited partnership) ........................... Alberta, Canada
O'Keene Gas Gathering Company ..................... Oklahoma
Ozark Finance Corporation ......................... Delaware
Ozark Gas Pipeline Corporation .................... Delaware
Ozark Gas Transmission System (general partnership) Texas
Ozark Pipeline, Inc. .............................. Delaware
STATE OR JURISDICTION
OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
Phantex Pipeline Co. .............................. Delaware
QuickTrade LLC (limited liability company) ........ Delaware
Tennessee Ozark Gas Company ....................... Delaware
Trident Acquisition Corp. ......................... Delaware
Trident Gas Marketing, Inc. ....................... Delaware
Trident NGL, Inc. ................................. Delaware
Trident NGL Pipeline Company ...................... Delaware
Waskom Gas Processing Company (general partnership) Texas
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated March 15, 1996
included in NGC Corportation's Annual Report on Form 10-K/A for the year ended
December 31, 1995, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
July 31, 1996
Exhibit 23.4
CONSENT OF LEHMAN BROTHERS
We hereby consent to the inclusion of our opinion letter to the Board
of Directors of NGC Corporation ("NGC") dated May 20, 1996 as Appendix III to
the NGC Corporation Proxy Statement-Prospectus filed with the Securities and
Exchange Commission of Form S-4 and references made to our firm and such opinion
in the Proxy Statement-Prospectus under the captions "SUMMARY: The Combination:
OPINION OF INDEPENDENT FINANCIAL ADVISOR" and "THE COMBINATION": Opinion of
Independent Financial Advisor." In providing this consent we do not admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder and we do not thereby admit that we are experts with
respect to any part of the Proxy Statement-Prospectus within the meaning of the
term "expert" as used in the Securities Act.
LEHMAN BROTHERS
By:/S/ JOHN R. RUTHERFORD
Name: John R. Rutherford
Title: Sr. Vice President
Houston, Texas
July 31, 1996
EXHIBIT 23.5
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ C. L. WATSON
C. L. Watson, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ STEPHEN W. BERGSTROM
Stephen W. Bergstrom, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ STEPHEN J. BRANDON
Stephen J. Brandon, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ ROY ALAN GARDNER
Roy Alan Gardner, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ DAVID R. VARNEY
David R. Varney, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ C. KENT JESPERSEN
C. Kent Jespersen, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ JEFFREY M. LIPTON
Jeffrey M. Lipton, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ ALBERT TERENCE POOLE
Albert Terence Poole, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ DANIEL L. DIENSTBIER
Daniel L. Dienstbier, Director
July 31, 1996
I hereby consent to being named in this Form S-4 Registration
Statement, as it may be amended from time to time (as so amended, the
"Registration Statement"), of Midstream Combination Corp., as a person
designated to serve on the Board of Directors of NGC Corporation,
successor-in-interest to Midstream Combination Corp. pursuant to the Combination
(as defined in the Registration Statement), upon consummation of the
Combination.
/s/ J. OTIS WINTERS
J. Otis Winters, Director
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 (No. 33 - ) of
NGC Corporation of our report on Accord Energy Limited dated March 14, 1996,
which appears on pages 1 - 18 of Item 8 of NGC Corporation's 1995 Annual Report
on Form 10-K/A.
PRICE WATERHOUSE
Chartered Accountants and Registered Auditors
London, England
July 31, 1996
REVOCABLE PROXY
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF NGC CORPORATION
The undersigned stockholder of NGC Corporation, a Delaware corporation
(the "Company"), hereby appoint(s) ______________________________ and
________________________________, and each of them, each with full power of
substitution and resubstitution, proxies and attorneys-in-fact of the
undersigned, with all of the powers that the undersigned would possess if
personally present, to attend and act for the undersigned at the Special Meeting
of Stockholders (the "Special Meeting") of the Company to be held
___________________________, 1996 at 13430 Northwest Freeway, Suite 1200,
Houston, Texas 77040 commencing at 9:00 a.m., Central time, and any and all
adjournments and postponements thereof, and (without limiting the generality of
the foregoing) in connection therewith to vote and represent all of the shares
of common stock of the Company that the undersigned would be entitled to vote.
Said Proxies and attorneys, and each of them, shall have all of the
powers that the undersigned would have if voting in person. The undersigned
hereby revokes any other proxies to vote at such meeting and hereby ratifies and
confirms all that said proxies and attorneys, and each of them, may lawfully do
by virtue hereof. Said proxies, without hereby limiting their several authority,
are specifically authorized to vote in accordance with their best judgment with
respect to all matters incident to the conduct of the Special Meeting and all
matters presented at the meeting but which are not known to the Board of
Directors of the Company at the time of the solicitation of this proxy.
The Board of Directors of the Company recommends a vote FOR the
following proposal:
1. Proposal to approve and adopt the Combination Agreement and
Plan of Merger, dated as of May 22, 1996, among the Company,
Chevron U.S.A. Inc and its wholly-owned subsidiary, Midstream
Combination Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Each of the above named proxies present at the Special Meeting, either in person
or by substitute, shall have and exercise all of the powers of said proxies
hereunder.
(Continued and to be signed on reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AT THE SPECIAL MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF IN ACCORDANCE WITH THE INSTRUCTIONS SET
FORTH ABOVE OR, IN THE EVENT NO INSTRUCTIONS ARE SET FORTH, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
The undersigned acknowledges receipt of a copy of the Notice of Special
Meeting and Prospectus/Proxy Statement (with all Appendices and annexes) dated
_____________________, 1996 relating to the Special Meeting.
Date _________________ ________________________________
Signature
Date _________________ ________________________________
Signature
IMPORTANT: Please date this Proxy and sign
exactly as your name appears above. If shares are
held by joint tenants, both should sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give title as such.
If a corporation, please sign in full corporate
name by the president or other authorized
officer. If a partnership, please sign in
partnership name by an authorized person.
