<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] 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 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1800 Three Lincoln Centre
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
(972) 934-9227
(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 February 3, 1997.
Class Shares Outstanding
----- ------------------
No Par Value 16,135,496
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
------------ -------------
<S> <C> <C>
ASSETS
Property, plant and equipment $682,943 $666,438
Less accum. depreciation and amort. 260,752 252,871
-------- --------
Net property, plant and equipment 422,191 413,567
Current assets
Cash and cash equivalents 5,694 3,726
Accounts receivable, net 89,869 25,284
Inventories 7,296 7,174
Gas stored underground 13,085 14,652
Prepayments 2,150 1,489
-------- --------
Total current assets 118,094 52,325
Deferred charges and other assets 37,849 35,969
-------- --------
$578,134 $501,861
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock outstanding: 16,118,336
shares at 12/31/96 and 16,021,321
shares at 9/30/96 $ 80 $ 80
Additional paid-in capital 113,493 111,206
Retained earnings 65,892 61,012
-------- --------
Total shareholders' equity 179,465 172,298
Long-term debt 157,303 122,303
-------- --------
Total capitalization 336,768 294,601
Current liabilities
Current maturities of long-term debt 8,000 9,000
Notes payable to banks 52,300 62,800
Accounts payable 67,710 31,640
Taxes payable 7,729 3,584
Customers' deposits 10,257 9,858
Other current liabilities 14,229 10,674
-------- --------
Total current liabilities 160,225 127,556
Deferred income taxes 39,866 39,056
Deferred credits and other liabilities 41,275 40,648
-------- --------
$578,134 $501,861
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Twelve months ended
December 31, December 31,
------------------- --------------------
1996 1995 1996 1995
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Operating revenues $157,653 $130,468 $510,929 $448,440
Purchased gas cost 105,977 79,743 332,978 274,187
-------- -------- -------- --------
Gross profit 51,676 50,725 177,951 174,253
Operating expenses
Operation 21,417 21,721 82,503 85,344
Maintenance 908 1,075 4,045 4,347
Depreciation and
amortization 6,225 5,591 21,483 21,172
Taxes, other than
income 4,882 4,198 17,563 16,731
Income taxes 5,225 5,195 13,340 11,123
-------- -------- -------- --------
Total operating
expenses 38,657 37,780 138,934 138,717
-------- -------- -------- --------
Operating income 13,019 12,945 39,017 35,536
Other income (expense) 89 160 (367) 238
Interest charges, net 4,216 3,872 15,042 14,144
-------- -------- -------- --------
Net income $ 8,892 $ 9,233 $ 23,608 $ 21,630
======== ======== ======== ========
Net income per share $. 55 $ .59 $ 1.48 $ 1.40
======== ======== ======== ========
Cash dividends per
share $ .25 $ .24 $ .97 $ .93
======== ======== ======== ========
Average shares
outstanding 16,055 15,674 15,988 15,503
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three months ended
December 31,
1996 1995
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 8,892 $ 9,233
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 6,225 5,591
Charged to other accounts 966 120
Deferred income taxes (benefit) 810 793
Other 83 98
-------- --------
16,976 15,835
Net change in operating assets and
liabilities (20,968) (4,221)
-------- --------
Net cash provided (used) by
operating activities (3,992) 11,614
Cash Flows From Investing Activities
Retirements of property, plant and
equipment (90) 4,064
Capital expenditures (15,725) (19,161)
-------- --------
Net cash used in investing activities (15,815) (15,097)
Cash Flows From Financing Activities
Net increase (decrease) in notes
payable to banks (10,500) 7,200
Cash dividends paid (4,012) (3,739)
Issuance of long-term debt 40,000 -
Repayment of long-term debt (6,000) -
Issuance of common stock 2,287 2,352
-------- --------
Net cash provided by financing
activities 21,775 5,813
-------- --------
Net increase in cash and cash equivalents 1,968 2,330
Cash and cash equivalents at beginning
of period 3,726 2,294
-------- --------
Cash and cash equivalents at end
of period $ 5,694 $ 4,624
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1996
1. Unaudited interim financial information
In the opinion of management, all material adjustments necessary for a fair
presentation have been made to the unaudited interim period financial
statements. Such adjustments consisted only of normal recurring accruals.
Because of seasonal and other fac tors, the results of operations for the three
month period ended December 31, 1996 are not indicative of expected results of
operations for the year ending September 30, 1997. These interim financial
statements and notes are condensed as permitted by the instructions to Form 10-
Q, and should be read in conjunction with the audited consolidated financial
statements of Atmos Energy Corporation ("Atmos" or the "Company") in its 1996
annual report to shareholders. The condensed consolidated balance sheet of
Atmos, as of December 31, 1996, and the related condensed consolidated
statements of income for the three-month and twelve-month periods ended December
31, 1996 and 1995, and condensed consolidated statements of cash flows for the
three-month periods ended December 31, 1996 and 1995, included herein have been
subjected to a review by Ernst & Young LLP, the Company's independent
accountants, whose report is included herein.
Common stock - As of December 31, 1996, the Company had 75,000,000 shares of
common stock, no par value (stated at $.005 per share), authorized and
16,118,336 shares outstanding.
2. Business Combination
Agreement to Merge with United Cities Gas Company
In July 1996, the Company announced that it had reached a definitive agreement
with United Cities Gas Company ("United Cities") of Brentwood, Tennessee,
wherein United Cities will be merged with and into Atmos, by means of a tax-free
reorganization. The Company will exchange approximately 13.4 million shares of
its common stock for all of the issued and outstanding common stock of United
Cities. Atmos will be the surviving corporation. Atmos has agreed to increase
the indicated annual dividend to not less than $1.02 per share, for no less than
four quarters, at the first Board meeting following the closing of the
transaction. The transaction is expected to be accounted for by the pooling of
interests method. The merger was approved by both the United Cities and Atmos
shareholders in November 1996. As of February 5, 1997, the companies have
obtained the required regulatory approvals for the merger from all states except
Illinois, Missouri, Kansas, South Carolina and Virginia. Stipulations are being
prepared for presentation to the utility commissions in Missouri and Kansas
which could result in approvals in February 1997. The Company presented
testimony
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to the Illinois Commission on February 4, 1997. Some issues must be resolved
before the Illinois Commission will approve the merger. The South Carolina
Commission voted to approve the merger on January 15, 1997, and the Company is
awaiting the issuance of an order. A hearing is scheduled in Virginia on
February 11, 1997. The Company is not aware of any opposition to the merger in
Virginia.
United Cities is a natural gas utility company engaged in the distribution and
sale of natural gas to approximately 314,000 customers in Tennessee, Illinois,
Virginia, Kansas, Missouri, South Carolina, Georgia, and Iowa, and in the sale
of propane to approximately 27,000 customers in Tennessee, Virginia and North
Carolina. United Cities' assets primarily consist of the property, plant and
equipment used in its natural gas and propane sales and distribution businesses.
Following consummation of the merger, Atmos intends to continue to operate the
United Cities business as a division of Atmos, along with Atmos' Energas, Trans
La, Western Kentucky, and Greeley divisions. The accompanying consolidated
financial statements of the Company do not include the assets, liabilities, or
operating results of United Cities.
3. Contingencies
On March 15, 1991, suit was filed in the 15th Judicial District Court of
Lafayette Parish, Louisiana, by the "Lafayette Daily Advertiser" and others
against the Trans La Division of the Company, Trans Louisiana Industrial Gas
Company, Inc. ("TLIG"), a wholly owned subsidiary of the Company, and Louisiana
Intrastate Gas Corporation and certain of its affiliates ("LIG"). LIG is the
Company's primary supplier of natural gas in Louisiana and is not otherwise
affiliated with the Company.
The plaintiffs purported to represent a class consisting of all residential and
commercial gas customers in the Trans La Division's service area. Among other
allegations, the plaintiffs alleged that the defendants violated the antitrust
laws of the state of Louisiana by manipulating the cost-of-gas component of the
Trans La Division's gas rate to the purported customer class, thereby causing
such purported class members to pay a higher rate. The plaintiffs made no
specific allegation of an amount of damages.
The defendants brought an appeal to the Louisiana Supreme Court of rulings made
by the trial court and the Third Circuit Court of Appeals which denied
defendants' exceptions to the jurisdiction of the trial court. It was the
position of the defendants that the plaintiffs' claims amount to complaints
relating to the level of gas rates and should be within the exclusive
jurisdiction of the Louisiana Commission.
On January 19, 1993, the Louisiana Supreme Court issued a decision reversing in
part the lower courts' rulings, dismissing all of plaintiffs' claims against the
defendants which sought
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<PAGE>
damages due to alleged overcharges and further ruling that all such claims are
within the exclusive jurisdiction of the Louisiana Commission. Any claims which
seek damages other than overcharges were remanded to the trial court but were
stayed pending the completion of the Louisiana Commission proceeding referred to
below.
The Company has reached a settlement with the plaintiffs in the context of the
Louisiana Commission proceeding referred to below, which settlement resolves all
outstanding issues relating to the Company, subject to certain procedural
conditions.
On July 14, 1995, the Louisiana Commission entered an order approving a
settlement with the Company and TLIG in connection with its investigation of the
costs included in the Trans La Division's purchased gas adjustment component in
its rates. The order exonerated the Company of any wrongdoing with respect to
the manipulation of the cost of gas component of its gas rate to residential and
commercial customers. In the settlement, the Company agreed to refund
approximately $541,000 plus interest to the Trans La Division's customers over a
two-year period due to certain issues related to the calculation of the weighted
average cost of gas. The refund totaling approximately $1,016,000, which
includes interest calculated through October 1, 1995, began in September 1995
and will be credited to customer bills along with interest that accrues after
October 1, 1995. The Company refunded approximately $533,000 under the
settlement in fiscal 1996 and an additional $151,000 to date in fiscal 1997.
Most of the issues that generated the refunds arose before Trans Louisiana Gas
Company was acquired by the Company in 1986.
The Greeley Gas Company Division of the Company is a defendant in several
lawsuits filed as a result of a fire in a building in Steamboat Springs,
Colorado on February 3, 1994. The plaintiffs claim that the fire resulted from
a leak in a severed gas service line owned by the Greeley Division. On January
12, 1996, the jury awarded the plaintiffs approximately $2.5 million in
compensatory damages and approximately $2.5 million in punitive damages. The
jury assessed the Company with liability for all of the damages awarded. The
Company has filed a Notice of Appeal with the Colorado Court of Appeals with
respect to this case. The Company has adequate insurance to cover the
compensatory damages awarded. However, the Company's insurance carrier informed
the Company that, based upon a recent Colorado Court ruling, the punitive
damages awarded against the Company cannot be covered by the Company's insurance
policy. The Company is continuing to review the position of the insurance
carrier with respect to coverage of punitive damages. The Company believes it
has meritorious issues for an appeal but cannot assess, at this time, the
likelihood of success in the appeal.
From time to time, claims are made and lawsuits are filed against the Company
arising out of the ordinary business of the Company. In the opinion of the
Company's management, liabilities, if any, arising from these actions are either
covered by insurance,
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<PAGE>
adequately reserved for by the Company or would not have a material adverse
effect on the financial condition of the Company.
4. Long-term and short-term debt
In November 1996 the Company issued $40,000,000 of 6.09% term notes, payable in
November 1998. The proceeds from the term notes were used primarily to
refinance a portion of notes payable to banks and for working capital, capital
expenditures and general corporate purposes.
At December 31, 1996, the Company had committed, short-term, unsecured bank
credit facilities totaling $90,000,000, of which $80,000,000 was unused. The
Company also had aggregate uncommitted lines of credit totaling $165,000,000, of
which $122,700,000 was unused at December 31, 1996.
5. Statements of cash flows
Supplemental disclosures of cash flow information for the three month periods
ended December 31, 1996 and 1995 are presented below.
<TABLE>
<CAPTION>
Three months ended
December 31,
1996 1995
------ ------
(In thousands)
<S> <C> <C>
Cash paid for
Interest $5,876 $3,987
Income taxes 5 98
</TABLE>
- 8 -
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Atmos Energy Corporation
We have reviewed the accompanying condensed consolidated balance sheet of Atmos
Energy Corporation as of December 31, 1996, and the related condensed
consolidated statements of income for the three-month and twelve-month periods
ended December 31, 1996 and 1995 and the condensed consolidated statements of
cash flows for the three-month periods ended December 31, 1996 and 1995. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial state ments taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements at
December 31, 1996, and for the three-month and twelve-month periods ended
December 31, 1996 and 1995 for them to be in conformity with generally accepted
ac counting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Atmos Energy Corporation as of
September 30, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein) and in our report dated November 4, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of September 30, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
February 5, 1997
- 9 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company distributes and sells natural gas to residential, commercial,
industrial and agricultural customers in six states. Such business is subject to
regulation by state and/or local authorities in each of the states in which the
Company operates. In addition, the Company's business is affected by seasonal
weather patterns, competitive factors within the energy industry, and economic
conditions in the areas that the Company serves.
Revenues and sales volume statistics for the three-month and twelve-month
periods ended December 31, 1996 and 1995 appear on pages 15 and 16. Average
meters in service are as follows:
<TABLE>
<CAPTION>
Quarter ended
December 31,
1996 1995
------- -------
<S> <C> <C>
Average Meters in Service
Residential 593,273 582,705
Commercial 61,669 61,086
Industrial (including agricultural) 18,694 19,062
Public authority and other 4,761 5,026
------- -------
Total 678,397 667,879
</TABLE>
Agreement to Merge with United Cities Gas Company
In July 1996, the Company announced that it had reached a definitive agreement
with United Cities Gas Company ("United Cities") of Brentwood, Tennessee,
wherein United Cities will be merged with and into Atmos by means of a tax-free
reorganization. In November 1996 the shareholders of both companies approved the
merger. As of February 5, 1997, the companies were seeking the required
approvals of various regulators in order to complete the merger. For further
information, please see Note 2 of the notes to consolidated financial
statements.
Rate Activity
In May 1996, the Company filed to increase revenues by approximately $7.7
million for a portion of its Energas Company service area, which includes
approximately 200,000 customers inside the city limits of 67 cities in West
Texas. All cities either approved, or took no action to reject, a settlement
allowing a $5.3 million increase in annual revenues to be effective for bills
rendered on or after November 1, 1996. In October 1996, the Company filed a
rate request with the Railroad Commission of Texas to increase revenues by
approximately $.5 million for the remaining rural customers in West Texas.
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<PAGE>
In February 1995, the Company filed with the Kentucky Commission for a rate
increase for its Western Kentucky Division, which includes approximately 171,000
customers. In October 1995, the Kentucky Commission issued an order authorizing
the Company to increase its rates by $2.3 million annually effective November 1,
1995, and by an additional $1.0 million annually beginning in March 1996. The
settlement included a decrease in depreciation rates, recovery of expenses
related to adoption of Statement of Financial Accounting Standards No. 106 and
included a provision for the Company to begin a three-year demand-side
management pilot program for the 1996-97 heating season, which could cost up to
$450,000 annually, resulting in a total annual operating in come increase of
approximately $4.0 million.
FINANCIAL CONDITION
For the three months ended December 31, 1996 net cash used by operating
activities totaled $4.0 million compared with $11.6 million net cash provided by
operating activities for the three months ended December 31, 1995. Net
operating assets and liabilities increased $21.0 million for the three months
ended December 31, 1996 compared with an increase of $4.2 million for the three
months ended December 31, 1995. This increase in operating assets and
liabilities resulted primarily from large swings in accounts receivable,
accounts payable and inventories of gas in underground storage which occur when
entering and leaving the winter or heating season.
Major cash flows from investing activities for the three months ended December
31, 1996 included capital expenditures of $15.7 million compared with $19.2
million for the three months ended December 31, 1995. The capital expenditures
budget for fiscal 1997 is currently $92.1 million, as compared with actual
capital expenditures of $77.6 million in fiscal 1996. Budgeted capital projects
include major expenditures for mains, services, meters, vehicles and computer
software and equipment. In November 1996 the Board of Directors approved an
additional $24 million in the 1997 capital budget for a new Customer Information
System (CIS) and related business process and infrastructure changes in 1997.
These expenditures will be financed from internally generated funds and
financing activities.
For the three months ended December 31, 1996, cash flows provided by financing
activities amounted to $21.8 million as compared with $5.8 million for the three
months ended December 31, 1995. During the quarter, notes payable to banks
decreased $10.5 million, as compared with an increase of $7.2 million in the
quarter ended December 31, 1995, due to seasonal factors and the refinancing of
short-term debt with proceeds from the issuance of $40.0 million of long-term
debt in the quarter ended December 31, 1996. The debt issued consisted of $40.0
million of 6.09% term notes, payable in November 1998. Payments of long-term
debt totaled $6.0 million for the quarter ended December 31, 1996. Such payments
consisted of a $3.0 million installment on the Company's 9.76% Senior Notes, a
$2.0 million installment on the
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<PAGE>
Company's 11.2% Senior Notes and the final installment of $1.0 million on the
Company's 9.75% Senior Notes. The Company paid $4.0 million in cash dividends
during the three months ended December 31, 1996, compared with dividends of $3.7
million paid during the three months ended December 31, 1995. This reflects
increases in the quarterly dividend rate and in the number of shares
outstanding. In the quarter ended December 31, 1996, the Company issued 97,015
shares of common stock, including 96,161 shares issued in connection with the
Employee Stock Ownership Plan and 854 shares under the Outside Director's Stock-
for-Fee Plan. In the quarter ended December 31, 1995, 386,458 shares of common
stock were issued including 313,411 shares issued in connection with the
acquisition of Oceana Heights Gas Company.
The Company believes that internally generated funds, its short-term credit
facilities and access to the debt and equity capital markets will provide
necessary working capital and liquidity for capital expenditures and other cash
needs for the remainder of fiscal 1997. At December 31, 1996 the Company had
$90.0 million in committed short-term credit facilities, of which $80.0 million
was available for additional borrowing. The committed lines of credit are
renewed or renegotiated at least annually. At December 31, 1996, the Company
also had $165.0 million of uncommitted short-term lines of credit, of which
$122.7 million was unused.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THREE MONTHS ENDED DECEMBER
31, 1995
Operating revenues increased to $157.7 million for the three months ended
December 31, 1996 compared with $130.5 million for the three months ended
December 31, 1995. The increase in operating revenues was due to increased cost
of natural gas, which is reflected in revenues, and rate increases implemented
in Texas and Kentucky. The weather for the three months ended December 31, 1996
was 5% warmer than the 30-year normal and 3% warmer than the weather for the
corresponding quarter of the prior year. Volumes sold decreased to 32.0 billion
cubic feet ("Bcf") from 33.0 Bcf. Changes in cost of gas are reflected in
regulated sales prices through purchased gas adjustment mechanisms. The average
sales price per thousand cubic feet ("Mcf") sold increased $.96 to $4.82 while
the average cost of gas per Mcf sold increased $.89 to $3.31. The increase in
the average sales price reflects the increased cost of natural gas and rate
increases implemented during the past year. Recent rate increases include a
$2.3 million annual rate increase in Kentucky effective in November 1995, with
an additional $1.0 million annually in March 1996, and a $5.3 million annual
increase in West Texas effective in November 1996. Transportation revenues
increased slightly due to an increase from $.30 to $.31 in the average
transportation revenue per Mcf. Volumes transported were unchanged at
approximately 7.2 Bcf for the first quarter.
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<PAGE>
Gross profit increased by 1.9% to $51.7 million for the three months ended
December 31, 1996, from $50.7 million for the three months ended December 31,
1995. The primary factor contributing to the increased gross profit was the
rate increases discussed above. Operating expenses, excluding income taxes,
increased approximately 3% to $33.4 million for the three months ended December
31, 1996 from $32.6 million for the three months ended December 31, 1995.
Factors contributing to the increase were higher depreciation and amortization
and taxes other than income taxes. Income taxes increased slightly due to
higher pre-tax profits. Operating income increased for the three months ended
December 31, 1996 by .6% to $13.0 million from $12.9 million for the three
months ended December 31, 1995. The increase in operating income resulted from
increased gross profit.
Interest charges increased due to increased average short-term debt outstanding
in the three months ended December 31, 1996, which more than offset a decrease
in the Company's weighted average short-term interest rate, as compared with the
quarter ended December 31, 1995.
Net income decreased for the three months ended December 31, 1996 by
approximately 4% to $8.9 million from $9.2 million for the three months ended
December 31, 1995. This decrease primarily resulted from increases in operating
expenses and interest charges. Earnings per share decreased by 7% to $.55.
Average shares outstanding increased 2.4% as compared with the first quarter of
fiscal 1996. Dividends per share increased 4.2% to $.25 due to a $.01 per share
increase in the quarterly dividend rate beginning with the dividend paid in
December 1996.
TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH TWELVE MONTHS ENDED DECEMBER
31, 1995
Operating revenues increased to $510.9 million for the 12 months ended December
31, 1996 from $448.4 million for the 12 months ended December 31, 1995 due to
increased revenues from all classes of customers, increased cost of natural gas
which is reflected in revenues, increased sales volumes to weather sensitive
customers due to colder weather, and rate increases implemented in Texas and
Kentucky, as discussed above. Transpor tation volumes decreased to 26.5 Bcf
from 28.0 Bcf and average transportation revenue per Mcf decreased from $.38 to
$.32, resulting in a $2.2 million decrease in transportation revenues. Total
sales and transportation volumes increased 1% to 143.5 Bcf for the 12 months
ended December 31, 1996 from 142.2 Bcf for the 12 months ended December 31,
1995. The company-wide weather for calendar year 1996 was 4% colder than for
calendar year 1995 but 3% warmer than normal. The Company experienced increased
sales volumes with all weather-sensitive customer classes in the 12 months ended
December 31, 1996. The average sales price per Mcf sold increased $.46 to
$4.25. The average cost of gas per Mcf sold increased $.45 to $2.85. Changes
in cost of gas are reflected in regulated sales prices through purchased gas
adjustment mechanisms.
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<PAGE>
Gross profit increased by 2% to $178.0 million from $174.3 million for the 12
months ended December 31, 1995. The increase in gross profit for the 12 months
ended December 31, 1996 was due to colder weather, increased sales volumes, and
rate increases. Operating expenses exclusive of income taxes decreased to $125.6
million for the 12 months ended December 31, 1996 from $127.6 million for the 12
months ended December 31, 1995. Factors contributing to the decrease in
operating expenses were decreased employee welfare, outside services, injuries
and damages, and labor expenses. Income taxes increased $2.2 million for the 12
months ended December 31, 1996, compared with the 12 months ended December 31,
1995 due primarily to higher pre-tax income. Operating income increased from the
12 months ended December 31, 1995 by 10% to $39.0 million for the 12 months
ended December 31, 1996, due to increased gross profit.
Interest charges increased due to an increase in average short-term debt
outstanding in the 12 months ended December 31, 1996, which more than offset the
decrease in the Company's weighted average short-term interest rate for the 12
months ended December 31, 1996, as compared with the 12 months ended December
31, 1995.
Net income for the 12 months ended December 31, 1996 was $23.6 million compared
with $21.6 million for the 12 months ended December 31, 1995. The increase in
net income resulted primarily from the increase in operating income. Earnings
per share increased by 6% to $1.48. Average shares outstanding increased
approximately 3% as compared with the prior year. Dividends per share increased
4.3% to $.97.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
The matters discussed or incorporated by reference in this report contain both
historical and forward-looking statements. The forward-looking statements
involve risks and uncertainties that affect the Company's operations, markets,
services, rates, recovery of costs, availability of gas supply, and other
factors as discussed in the Company's filings with the Securities and Exchange
Commission. These risks and uncertainties include, but are not limited to,
economic, competitive, governmental, weather, and technological factors.
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<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
<TABLE>
<CAPTION>
Quarter ended 12 Months ended
December 31, December 31,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales Volumes -- MMcf (1)
Residential 16,871 16,856 51,558 49,416
Commercial 7,265 6,970 21,836 20,629
Industrial (including
agricultural) 6,026 7,272 38,410 39,044
Public authority and other 1,836 1,876 5,142 5,090
-------- -------- -------- --------
Total 31,998 32,974 116,946 114,179
Transportation Volumes --
MMcf (1) 7,205 7,210 26,529 28,033
-------- -------- -------- --------
Total Volumes Handled 39,203 40,184 143,475 142,212
======== ======== ======== ========
Operating Revenues (000's)
Gas Revenues
Residential $ 89,630 $ 71,553 $261,195 $218,834
Commercial 34,807 27,061 98,095 82,369
Industrial (including
agricultural) 20,652 21,448 114,096 112,323
Public authority and other 9,165 7,123 23,780 19,296
-------- -------- -------- --------
Total gas revenues 154,254 127,185 497,166 432,822
Transportation Revenues 2,240 2,165 8,382 10,544
Other Revenues 1,159 1,118 5,381 5,074
-------- -------- -------- --------
Total Operating Revenues $157,653 $130,468 $510,929 $448,440
======== ======== ======== ========
Average Gas Sales Revenues per Mcf $ 4.82 $ 3.86 $ 4.25 $ 3.79
Average Transportation Revenue per Mcf $ .31 $ .30 $ .32 $ .38
Cost of Gas per Mcf Sold $ 3.31 $ 2.42 $ 2.85 $ 2.40
</TABLE>
(1) Volumes are reported as metered in million cubic feet ("MMcf").
- 15 -
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
(Continued)
HEATING DEGREE DAYS (2)
<TABLE>
<CAPTION>
Weather Quarter ended December 31, 12 Months ended December 31,
Service Sensitive -------------------------- ----------------------------
Area Customers % 1996 1995 Normal (3) 1996 1995 Normal (3)
- ------- ----------- ----- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Texas (Energas) 45 1,289 1,249 1,402 3,371 3,216 3,548
Kentucky (WKG) 26 1,613 1,769 1,613 4,454 4,210 4,413
Louisiana (Trans La) 13 540 735 661 1,785 1,683 1,745
Colorado, Kansas and
Missouri (GGC) 16 2,292 2,162 2,350 6,042 5,929 6,245
---
System Average 100% 1,436 1,473 1,512 3,888 3,737 3,988
</TABLE>
(2) A heating degree day is equivalent to each degree that the average of the
high and the low temperatures for a day is below 65 degrees. The greater
the number of heating degree days, the colder the climate. Heating degree
days are used in the natural gas industry to measure the coldness of
weather experienced and to compare relative temperatures between one
geographic area and another. Normal heating degree days are derived from a
30-year average of actual heating degree days compiled by the National
Weather Service.
(3) The calculations for normal degree days for each of Atmos' service areas
were updated effective October 1, 1996 to reflect more recent data. The
system average weighting for each service area was also updated to more
accurately reflect the current portion of total customers located in each
service area. The impact of the change was to increase the system average
normal heating degree days for the quarter from 1,507 to 1,512 and for the
year from 3,983 to 3,988.
- 16 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of notes to consolidated financial statements on pages 6 and 7 herein
for a description of legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Atmos Energy Corporation, a Texas corporation ("Atmos"), and United Cities
Gas Company, an Illinois and Virginia corporation ("United Cities"),
entered into an Agreement and Plan of Reorganization dated July 19, 1996,
as amended by Amendment No. 1 to Agreement and Plan of Reorganization dated
October 3, 1996 (the "Reorganization Agreement"). Pursuant to the
Reorganization United Cities will be merged with and into Atmos, with Atmos
as the surviving corporation (the "Merger"). A proposal to ratify and
approve the Reorganization Agreement and to approve the Plan of Merger and
Merger was approved by the holders of 84.9% of the outstanding shares of
Atmos common stock entitled to vote and 71.7% of the outstanding shares of
United Cities common stock entitled to vote at special meetings of the
respective shareholders held on November 12, 1996. The affirmative vote of
the holders of two-thirds of the outstanding shares of Atmos common stock
entitled to vote at the Atmos special meeting was required for approval of
the proposal. The affirmative vote of the holders of a majority of the
outstanding shares of United Cities common stock entitled to vote at the
United Cities special meeting was required for approval of the proposal.
The results of the respective shareholder groups' votes on November 12,
1996 for the proposal to ratify and approve the Reorganization Agreement
and approve the Plan of Merger and the merger were as follows:
<TABLE>
<CAPTION>
Shareholder VOTES VOTES BROKER
Group FOR AGAINST ABSTAINED NON-VOTE
- ----------- ---------- ------- --------- --------
<S> <C> <C> <C> <C>
Atmos 13,618,535 129,859 105,672 -
United Cities 9,445,280 64,096 76,290 -
</TABLE>
- 17 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required by Item 601 of Regulation S-K and filed as part
of this report is set forth in the Exhibits Index, which immediately
precedes such exhibits.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report, Item 5, Other Events, dated
November 2, 1996, disclosing that it had entered into an agreement with
Southern Union Company with respect to the resolution of a dispute with
Southern Union in connection with the United Cities/Atmos merger.
The Company also filed a Form 8-K Current Report dated November 12, 1996.
Under Item 5, Other Events, it disclosed the approvals of the merger by the
United Cities shareholders and Atmos shareholders at special meetings of
the respective shareholders held on November 12, 1996. The results of the
shareholder votes at the special meetings are disclosed under Item 4,
Submission of Matters to a Vote of Security Holders included herein.
- 18 -
<PAGE>
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, thereunto duly authorized.
ATMOS ENERGY CORPORATION
(Registrant)
Date: February 12, 1997 By: /s/ James F. Purser
---------------------------------------------
James F. Purser
Executive Vice President
and Chief Financial Officer
Date: February 12, 1997 By: /s/ David L. Bickerstaff
---------------------------------------------
David L. Bickerstaff
Vice President and Controller
(Principal Accounting Officer)
- 19 -
<PAGE>
EXHIBITS INDEX
Item 6(a)
Exhibit Page
Number Description Number
- ------- ----------- ------
10.1 Loan Agreement by and between the
Company and NationsBank of Texas,
N.A. dated as of November 26, 1996
10.2 Amendment No. 1 to the Atmos Energy
Corporation Retirement Plan for
Outside Directors
10.3 Atmos Energy Corporation Supplemental
Executive Benefits Plan (Amended and
Restated in its Entirety: November
13, 1996)
10.4 Atmos Energy Corporation Executive
Annual Performance Bonus Plan
(Amended and Restated as of November
13, 1996)
10.5 Gas Service Agreement (Service for
Firm Transportation) between the
Company and Westar Transmission
Company dated January 1, 1996
10.6 Gas Service Agreement (Service for
Firm Transportation) between KN
Westex Gas Services Company ("KN Westex")
and EnerMart Trust dated
January 1, 1996 (Irrigation)
10.7 Gas Service Agreement (Service for
Firm Transportation) between Westar
Transmission Company and EnerMart
Trust dated January 1, 1996
(Irrigation)
10.8 Gas Service Agreement (Service for
Firm Transportation) between KN
Westex and EnerMart Trust dated
January 1, 1996 (Large Volume
Industrials)
10.9 Amendment dated January 1, 1996 to
Gas Sales Agreement dated January 1,
1992 between KN Marketing, L.P. (Formerly
Anthem Energy Company, L.P.) and
EnerMart Trust relating to industrial
customers.
- 20 -
<PAGE>
Exhibit Page
Number Description Number
- ------- ----------- ------
10.10 Gas Sales Agreement (Baseload)
between the Company and KN Marketing,
L.P. ("KN Marketing") dated
January 1, 1996.
10.11 Gas Sales Agreement (Irrigation)
between KN Marketing and EnerMart
Trust dated March 1, 1996.
10.12 Gas Sales Agreement between the
Company and Westar Transmission
Company dated January 1, 1986, as
amended by Letter Agreement dated
November 21, 1986, the Agreement
dated December 9, 1988, revising the
pricing formula for city gate sales
and the Amendment dated January 1,
1996 addressing a backup gas supply
and operational matters.
10.13 Gas Sales Agreement (Swing) between
the Company and KN Marketing
dated January 1, 1996
10.14 Gas Service Agreement (Service for
Firm Transportation) between the
Company and KN Westex dated January 1, 1996
10.15 Gas Service Agreement (Service for
Firm Transportation) between EnerMart
Trust and Westar Transmission Company
dated January 1, 1996 (Large Volume
Industrials)
10.16 Operating Agreement between the
Company and Westar Transmission
Company, effective December 1, 1996
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos for
the quarter ended December 31, 1996
- 21 -
<PAGE>
EXHIBIT 10.1
LOAN AGREEMENT
BY AND BETWEEN
ATMOS ENERGY CORPORATION
AND
NATIONSBANK OF TEXAS, N.A.
DATED AS OF NOVEMBER 26, 1996
<PAGE>
INDEX
Page
Section 1. Definitions 1
(a) Breakage Amount 1
(b) Business Day 1
(c) Change of Control 1
(d) Consolidated Capitalization 2
(e) Consolidated Funded Indebtedness 2
(f) Consolidated Indebtedness 2
(g) Consolidated Net Property 2
(h) Debt 2
(i) Environmental Laws 3
(j) Environmental Liability 3
(k) Environmental Lien 3
(l) ERISA 3
(m) Event of Default 3
(n) Financial Statements 3
(o) Fixed Assets 3
(p) GAAP 4
(q) Guaranty or Guaranties 4
(r) Lien 4
(s) Loan 4
(t) Maturity Date 4
(u) Maximum Rate 4
(v) Minority Interests in Subsidiaries 4
(w) 1959 Indenture 4
(x) 1986 Note Purchase Agreements 5
(y) 1987 Note Purchase Agreements 5
(z) 1989 Note Purchase Agreement 5
(aa) 1991 Note Purchase Agreement 5
(ab) 1992 Note Purchase Agreement 5
(ac) 1993 Indenture 5
(ad) 1994 Note Purchase Agreement 5
(ae) Person 6
(af) Plan 6
(ag) Shareholders' Equity 6
(ah) Subsidiary 6
(ai) Wholly-Owned Subsidiary 6
Section 2. Amount and Terms of Credit 6
(a) The Loan 6
(b) Promissory Note 6
(c) Computations, Etc 6
Section 3. Use of Proceeds 7
Section 4. Prepayment Prior to the Maturity Date 7
Section 5. Capital Adequacy and Increased Costs 7
(a) Reserve Requirements 7
(b) Taxes 8
(i)
<PAGE>
(c) Change in Laws 8
(d) Breakage Amount 9
Section 6. Closing 9
Section 7. Representations and Warranties 9
(a) Corporate Existence 9
(b) Corporate Power and Authorization 9
(c) Binding Obligations 9
(d) No Legal Bar or Resultant Lien 10
(e) No Consent 10
(f) Financial Condition 10
(g) Litigation 10
(h) Liabilities 10
(i) Taxes; Governmental Charges 11
(j) Titles, Etc 11
(k) Defaults 11
(l) Casualties; Taking of Properties 11
(m) Margin Stock 12
(n) Location of Business and Offices 12
(o) Compliance with the Law 12
(p) No Material Misstatements 12
(q) ERISA 12
(r) Subsidiaries 13
(s) Environmental Matters 13
(t) Investment Company Act 13
Section 8. Conditions of Lending 13
(a) Conditions 14
(i) Execution and Delivery 14
(ii) Legal Opinion 14
(iii) Corporate Resolutions 14
(iv) Incumbency 14
(v) Articles of Incorporation and Bylaws 14
(vi) Other Documents 14
(vii) Legal Matters Satisfactory 14
(viii) Representations and Warranties 14
(ix) No Event of Default 15
(b) Failure to Satisfy 15
Section 9. Covenants 15
(a) Financial Statements and Reports 15
(i) Annual Audited Financial Statements 15
(ii) Quarterly Financial Statements 15
(iii) Securities and Exchange Commission
Filings 15
(b) Certificates of Compliance 16
(c) Accountants' Certificate 16
(d) Taxes and Other Liens 16
(e) Compliance with Laws 16
(f) Further Assurances 17
(g) Performance of Obligations 17
(h) Insurance 17
(i) Accounts and Records 17
(ii)
<PAGE>
(j) Right of Inspection 17
(k) Notice of Certain Events 17
(l) ERISA Information and Compliance 18
(m) Environmental Reports and Notices 18
(n) Liens 19
(o) Consolidations, Mergers, and Sales of Assets 20
(p) Change of Control 21
(q) Dividends 21
(r) Leverage 21
(s) Consolidated Net Property 21
(t) Operating Cash Flow 21
(u) Investments 22
(v) Corporate Existence and Due Qualification 24
(w) Maintenance of Properties 24
(x) Transactions with Affiliates 25
(y) Downstream Transfers 25
Section 10. Events of Default 25
(a) Events 25
(b) Remedies 27
(c) Right of Set-Off 27
Section 11. Exercise of Rights; Waivers 27
Section 12. Notices 28
Section 13. Expenses; Indemnification 28
(a) Expenses 28
(b) Indemnification 28
Section 14. Governing Law 29
Section 15. Invalid Provisions 29
Section 16. Maximum Interest Rate 29
Section 17. Multiple Counterparts 30
Section 18. Survival 30
Section 19. Parties Bound 30
Section 20. Participations 30
Section 21. Option to Fund 31
Section 22. Accounting Terms 31
Section 23. No Control 31
Section 24. Other Agreements 31
(iii)
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of
the 26th day of November, 1996, by and between ATMOS ENERGY CORPORATION, a Texas
corporation ("Borrower"), and NATIONSBANK OF TEXAS, N.A., a national banking
association ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower has requested Bank to extend credit to it for the
purposes hereinafter described, and Bank is willing to do so on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. When used herein, the terms "Agreement,"
--------- -----------
"Borrower" and "Bank" shall have the meanings indicated above, and the
following terms shall have the following meanings:
(a) Breakage Amount - "Breakage Amount" is the amount of any cost or
---------------
expense incurred by Lender (as determined in a commercially reasonable manner)
as a result of its termination of any interest rate swap or other hedging
arrangement entered into by Lender in connection with the Loan. If the Breakage
Amount calculated by Lender is a negative number, then such amount shall be
subtracted from the Prepayment Amount. If the Breakage Amount calculated by
Lender is a positive number, then such amount shall be added to the Prepayment
Amount. In the event that (i) the Loan is accelerated as a result of any
default by Borrower, or (ii) Borrower fails to borrow the full amount of the
Loan, then Borrower shall pay to Lender on demand the Breakage Amount as
calculated by Lender except that in no event shall Lender pay any Breakage
Amount to Borrower.
(b) Business Day - The normal banking hours during any day (other than
------------
Saturdays or Sundays) that banks are legally open for business in Dallas, Texas.
(c) Change of Control - A "Change of Control" shall occur if any
-----------------
Person or group of Persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under such Act) of (i) 40% or more of the outstanding voting
stock of Borrower or (ii) 10% or more of the outstanding voting stock of
Borrower if at any time following such acquisition of 10% or more of the
outstanding voting stock a majority of the Persons serving on the Board of
Directors of Borrower are Persons
-1-
<PAGE>
proposed directly or indirectly by the Person or group of Persons who acquired
such 10% or more of outstanding voting stock.
(d) Consolidated Capitalization - At any date, the sum (without
---------------------------
duplication) of Consolidated Funded Indebtedness plus Shareholders' Equity plus
---- ----
Minority Interests in Subsidiaries, all determined as of such date.
(e) Consolidated Funded Indebtedness - For any period:
--------------------------------
(i) all Consolidated Indebtedness in respect of borrowed money,
whether secured or unsecured, which by its terms matures more than one
(1) year after the date as of which the calculation of Consolidated
Funded Indebtedness is made (other than sinking fund, serial maturity,
periodic installment, and amortization payments on account of such
Consolidated Indebtedness that are required to be made within such
year), and
(ii) Consolidated Indebtedness in respect of borrowed money
maturing within one (1) year from such date that is renewable or
extendable at the option of the obligor to a date beyond one (1) year
from such date, including any such Consolidated Indebtedness renewable
or extendable (regardless of whether theretofore renewed or extended)
under, or payable from the proceeds of other Consolidated Indebtedness
that may be incurred pursuant to the provisions of, any revolving
credit agreement or other similar agreement (provided that there shall
be excluded from Consolidated Funded Indebtedness described in this
clause (ii) Consolidated Indebtedness that has been outstanding for
one year or less and that has been incurred under a revolving credit
agreement or other similar agreement entered into to support
commercial paper or similar short term working capital credit
facilities).
(f) Consolidated Indebtedness - At any date, all Debt of Borrower and
-------------------------
its Subsidiaries, determined on a consolidated basis.
(g) Consolidated Net Property - The aggregate amount of assets of
-------------------------
Borrower and its Subsidiaries properly includable under GAAP under the
categories "property, plant and equipment" on the consolidated balance sheet of
Borrower and its Subsidiaries, less the amount of accumulated depreciation and
amortization attributable thereto.
(h) Debt - At any date, without duplication and determined in
----
accordance with GAAP, (i) all obligations of a Person, contingent or otherwise,
that should be reflected as liabilities on such Person's balance sheet
(including, without limitation, obligations of such Person as lessee under
capital leases, but excluding common stock, preferred stock, surplus, retained
-2-
<PAGE>
earnings, reserves for taxes in respect of income deferred to the future, and
other deferred credits and reserves), (ii) all obligations that are secured by
any Lien existing on property owned by such Person regardless of whether the
obligations secured thereby shall have been assumed by such Person, and (iii)
all Guaranties by such Person.
(i) Environmental Laws - The Comprehensive Environmental Response,
------------------
Compensation and Liability Act of 1980, as amended by the Super Fund Amendments
and Reauthorization Act of 1986, 42 U.S.C.A. (S)9601, et seq.; the Resource
-- ----
Conservation and Recovery Act, as amended by the Hazardous Solid Waste Amendment
of 1984, 42 U.S.C.A. (S)6901, et seq.; the Clean Air Act, 42 U.S.C.A. (S)7401,
-- ----
et seq.; the Clean Water Act of 1977, 33 U.S.C.A. (S)1251 et seq.; the Toxic
- -- ---- -- ----
Substances Control Act, 15 U.S.C.A. (S)2601, et seq.; and all other laws
-- ----
relating to or imposing liability or standards of conduct concerning
environmental protection matters, including without limitation, air pollution,
water pollution, noise control, or the handling, discharge, disposal, or
recovery of on-site or off-site hazardous substances or materials, as each of
the foregoing may be amended from time to time.
(j) Environmental Liability - Any claim, demand, obligation, cause of
-----------------------
action, accusation, allegation, order, violation, damage, injury, judgment,
penalty or fine, cost of enforcement, cost of remedial action, or any other
costs or expense whatsoever, including reasonable attorneys' fees and
disbursements, resulting from the violation or alleged violation of any
Environmental Law or the imposition of any Environmental Lien.
(k) Environmental Lien - A Lien in favor of any court, governmental
------------------
agency or instrumentality, or any other Person (i) for any liability under any
Environmental Law or (ii) for damages arising from or cost incurred by such
court, governmental agency or instrumentality, or other Person in response to a
release or threatened release of a hazardous or toxic waste, substance, or
constituent into the environment.
(l) ERISA - The Employee Retirement Income Security Act of 1974, as
-----
amended, and the regulations promulgated thereunder, as in effect as of the date
hereof and any subsequent provisions that are amendatory thereof, supplemental
thereto, or substituted therefor. In addition, the terms "Commonly Controlled
Entity," "Multiemployer Plan," "PBGC," "Plan," "Prohibited Transaction," and
"Reportable Event" have the same meanings as provided therefor in ERISA.
(m) Event of Default - The events described in Section 10 of this
----------------
Agreement.
(n) Financial Statements - Consolidated and consolidating balance
--------------------
sheets and income statements and consolidated statements
-3-
<PAGE>
of cash flows, together with appropriate footnotes and schedules, prepared in
accordance with GAAP.
(o) Fixed Assets - The assets of Borrower and its Subsidiaries
------------
constituting "net property, plant and equipment" as defined by GAAP on the
consolidated balance sheet of Borrower and its Subsidiaries.
(p) GAAP - Generally accepted accounting principles, consistently
----
applied throughout the period involved. In the event of a change in GAAP after
the date of this Agreement, this Agreement and the Note, to the extent GAAP
applies, shall continue to be construed in accordance with GAAP as in existence
on the date hereof.
(q) Guaranty or Guaranties - Guaranty or Guaranties by any Person
-------- ----------
shall mean (a) all guaranties, sales with recourse, endorsements (other than for
collection or deposit in the ordinary course of business), and other obligations
(contingent or otherwise) to pay, purchase, repurchase, or otherwise acquire or
become liable upon or in respect of any Debt of others and (b) without limiting
the generality of the foregoing, all obligations (contingent or otherwise) to
purchase products, supplies, or other property or services from others under
agreements requiring payment therefor regardless of the non-delivery or non-
furnishing thereof, or to make investments in others, or to maintain the
capital, working capital, solvency, or the general financial conditions of
others, or to indemnify others against and hold them harmless from damages,
losses and liabilities, all under circumstances intended by such Person to
enable others to incur or discharge any of their Debt or to comply with
agreements relating to their Debt or otherwise to assure or protect their
creditors against loss in respect of such Debt.
(r) Lien - Any mortgage, deed of trust, pledge, security interest,
----
assignment, encumbrance, or lien (statutory or otherwise) of every kind and
character.
(s) Loan - The $40,000,000 which Bank has loaned to Borrower on a term
----
basis pursuant to the terms and provisions of this Agreement.
(t) Maturity Date - November 25, 1998, the day which is one (1) day
-------------
less than two (2) years from the Closing Date.
(u) Maximum Rate - The highest rate of nonusurious interest permitted
------------
from day to day by applicable law, including Tex. Rev. Civ. Stat. Ann. art.
5069-1.04 (and as the same may be incorporated by reference in other Texas
statutes), but, otherwise, without limitation, the rate based upon the
"indicated rate ceiling."
-4-
<PAGE>
(v) Minority Interests in Subsidiaries - Interests held by others in
----------------------------------
any subsidiary of Borrower in which less than 100% of the voting securities are
owned directly or indirectly by Borrower.
(w) 1959 Indenture - That certain Indenture of Mortgage and Deed of
--------------
Trust dated as of July 15, 1959, between United Cities Gas Company and City
National Bank and Trust Company of Chicago and R. Emmett Hanley, Trustees,
together with those First through Twentieth Supplemental Indentures dated from
November 1, 1960, through December 1, 1992, respectively, amending such
Indenture.
(x) 1986 Note Purchase Agreements - Those certain Note Purchase
-----------------------------
Agreements, dated as of December 30, 1986, by and between (i) Borrower and John
Hancock Mutual Life Insurance Company and (ii) Borrower and Mellon Bank, N.A.,
together with those certain letter agreements dated November 13, 1987 and
Amendments to Note Purchase Agreements, dated as of October 11, 1989 and
November 12, 1991, respectively, amending each of the foregoing Note Purchase
Agreements.
(y) 1987 Note Purchase Agreements - Those certain Note Purchase
-----------------------------
Agreements, dated as of December 21, 1987, by and between (i) Borrower and John
Hancock Mutual Life Insurance Company, (ii) Borrower and John Hancock Charitable
Trust I (which was subsequently assigned to John Hancock Mutual Life Insurance
Company), and (iii) Borrower and Mellon Bank, N.A., together with those certain
Amendments to Note Purchase Agreements, dated as of October 11, 1989 and
November 12, 1991, respectively, amending each of the foregoing Note Purchase
Agreements.
(z) 1989 Note Purchase Agreement - That certain Note Purchase
----------------------------
Agreement, dated as of October 11, 1989, by and between Borrower and John
Hancock Mutual Life Insurance Company, together with that certain Amendment to
Note Purchase Agreement, dated as of November 12, 1991, amending such Note
Purchase Agreement.
(aa) 1991 Note Purchase Agreement - That certain Note Purchase
----------------------------
Agreement, dated as of August 29, 1991, by and between Borrower and The Variable
Annuity Life Insurance Company, together with that certain Amendment to Note
Purchase Agreement, dated as of November 26, 1991, amending such Note Purchase
Agreement.
(bb) 1992 Note Purchase Agreement - That certain Note Purchase
----------------------------
Agreement dated as of August 31, 1992, between Borrower and The Variable Annuity
Life Insurance Company, together with that certain Amendment to Note Purchase
Agreement, dated as of December 22, 1993, amending such Note Purchase Agreement.
(cc) 1993 Indenture - That certain Tenth Supplemental Indenture, dated
--------------
as of December 1, 1993, to Indenture of Mortgage and Deed of Trust dated as of
March 1, 1957, between Borrower and
-5-
<PAGE>
Colorado National Bank (Formerly Central Bank Denver, N.A.), as Trustee, and
First Amendment, dated as of December 1, 1993, between Borrower and First Colony
Life Insurance Company, to Bond Purchase Agreement dated as of April 1, 1991,
between First Colony Life Insurance Company and Greeley Gas Company
(dd) 1994 Note Purchase Agreement - That certain Note Purchase
----------------------------
Agreement dated November 14, 1994, among Borrower and New York Life Insurance
Company, New York Life Insurance and Annuity Corporation, The Variable Annuity
Life Insurance Company, American General Life Insurance Company, and Merit Life
Insurance Company.
(ee) Person - An individual, corporation, partnership, association,
------
trust, or any other entity or organization, including a government or political
subdivision, agency, or instrumentality thereof.
(ff) Plan - Any plan subject to Title IV of ERISA and maintained by
----
Borrower or any such plan to which Borrower is required to contribute on behalf
of its employees.
(gg) Shareholders' Equity - The sum (determined in accordance with
--------------------
GAAP) of Borrower's (i) common stock, (ii) retained earnings, (iii) capital
surplus, and (iv) paid in capital.
(hh) Subsidiary - Any corporation or other entity of which securities
----------
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by Borrower or another Subsidiary.
(ii) Wholly-Owned Subsidiary - Any Subsidiary in which Borrower owns,
-----------------------
either directly or indirectly, 100% of the voting securities.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
--------- --------------------------
(a) The Loan. Subject to and upon the terms and conditions herein set
--------
forth, Bank agrees to lend to Borrower the sum of $40,000,000 on a term basis.
Bank will credit the proceeds of the Loan to Borrower's deposit account with
Bank.
(b) Promissory Note. The Loan shall be evidenced by a promissory note
---------------
(the "Note") of Borrower, which Note shall (i) be dated November 26, 1996; (ii)
bear interest at the rate of 6.09% per annum; (iii) be payable as to interest in
consecutive quarterly installments as it accrues on the last day of each
calendar quarter commencing December 31, 1996, and continuing through and
including September 30, 1998, and on the Maturity Date; (iv) be payable as to
principal in one installment on the Maturity Date; (v) be entitled to the
benefits of this Agreement;
-6-
<PAGE>
and (vi) be in the form of EXHIBIT A annexed hereto, with blanks completed in
---------
conformity herewith. A Breakage Amount determined as per Section 5(d) hereof
may be payable in the event Borrower fails to borrow the full amount of the
Loan.
(c) Computations, Etc. All payments made to Bank or the holder of the
-----------------
Note under this Agreement shall be made without setoff or counterclaim and free
and clear of, and exempt from, and without deduction for or account of, any
taxes not later than 2 p.m. (Dallas time) on the date when due and shall be in
lawful money of the United States of America in immediately available funds at
the payment office of Bank. Borrower hereby authorizes Bank, if and to the
extent payment is not made when due under the Note, to charge from time to time
against any account of Borrower with Bank any amount so due. Interest shall be
computed on Bank basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable, unless such calculation would result in a
usurious rate, in which case interest shall be calculated on a per annum basis
of a year of 365 or 366 days, as the case may be. If the Note, or any payment
required to be made thereon, becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding full
Business Day and interest shall be payable at the then applicable rate per annum
during such extension.
SECTION 3. USE OF PROCEEDS. Borrower agrees that the proceeds of the
--------- ---------------
Loan hereunder will be used solely for working capital, capital expenditures and
other lawful corporate purposes.
SECTION 4. PREPAYMENT PRIOR TO THE MATURITY DATE. Borrower may prepay
--------- -------------------------------------
the Loan in full, but not in part, on any Business Day selected by Borrower (the
"Prepayment Date") following at least ten (10) Business Days' prior written
notice thereof to Bank. As of the close of business on the second Business Day
prior to the Prepayment Date, Bank shall determine the aggregate amount which
Borrower shall pay to Bank in satisfaction of Borrower's obligations under the
Loan (the "Prepayment Amount"). The Prepayment Amount shall be equal to (i) the
sum of (a) the total principal amount of the Loan outstanding on the Prepayment
Date (the "Principal"), plus (b) the total amount of interest accruing up to but
not including the Prepayment Date, plus or minus (ii) the Breakage Amount. If
the Breakage Amount calculated by Bank is a negative number, then such amount
shall be subtracted from the Prepayment Amount; if the Breakage Amount
calculated by Bank is a positive number, then such amount shall be added to the
Prepayment Amount.
SECTION 5. CAPITAL ADEQUACY AND INCREASED COSTS.
--------- ------------------------------------
-7-
<PAGE>
(a) Reserve Requirements. In the event of any change in any applicable
--------------------
law, treaty, or regulation or in the interpretation or administration thereof or
in the event any central bank or other fiscal monetary or other authority having
jurisdiction over Bank or the Loan imposes, modifies, or deems applicable to the
Loan any reserve requirement of the Board of Governors of the Federal Reserve
System or any other reserve, special deposit, compulsory loan, assessment,
increased cost, or similar requirements against assets of, deposits with or for
the account of, or credit extended by, Bank, or imposes on Bank any other
condition affecting this Agreement or the Loan and the result of any of the
foregoing is to increase the cost to Bank in maintaining the Loan or to reduce
any amount (or the effective return on any amount) received by Bank hereunder,
then Borrower shall pay to Bank upon demand of Bank as additional interest on
the Note such additional amount or amounts as will reimburse Bank for such
additional cost or such reduction. Upon becoming aware of any such change or
imposition that may result in any such increase or reduction, Bank shall give
written notice to Borrower thereof together with a certificate of Bank setting
forth the amount necessary to compensate Bank as aforesaid and the basis for the
determination of such amount. Determinations made by Bank for purposes of this
Section 5(a) of the effect of any such change in its costs of maintaining the
Loan or on amounts receivable by it in respect of the Loan and of the additional
amounts required to compensate Bank in respect thereof shall be conclusive,
provided that such determinations are made on a reasonable basis and are absent
manifest error.
(b) Taxes. Both principal and interest on the Note are payable without
-----
withholding or deduction for or on account of any taxes. If any taxes are levied
or imposed on or with respect to the Note or on any payment on the Note, then,
and in any such event, Borrower shall pay to Bank upon demand of Bank such
additional amounts as may be necessary so that every net payment of principal
and interest on the Note, after withholding or deduction for or on account of
any such taxes, will not be less than any amount provided for herein. In
addition, if at any time when the Loan is outstanding any laws are enacted or
promulgated, or any court of law or governmental agency interprets or
administers any law, which, in any such case, materially changes the basis of
taxation of payments to Bank of principal of or interest on the Note by
subjecting such payment to double taxation or otherwise (except through an
increase in the rate of tax on the overall net income of Bank) then Borrower
will pay the amount of loss to the extent that such loss is caused by such a
change. Bank shall give notice to Borrower upon becoming aware of the amount of
any loss incurred by it through enactment or promulgation of any such law that
materially changes the basis of taxation of payments to Bank or of any such
enactment or promulgation that may result in such payments becoming subject to
double taxation or otherwise. Bank shall also deliver to Borrower a certificate
of Bank setting forth the basis for the determination of such loss and the
computation of such amounts.
-8-
<PAGE>
Determinations made by Bank for purposes of this Section 5(b) of the effect of
such taxes on its costs of maintaining the Loan or on amounts receivable by it
and of the additional amounts required to compensate Bank in respect thereof
shall be conclusive, provided that such determinations are made on a reasonable
basis and are absent manifest error.
(c) Change in Laws. If at any time the adoption of any new law or
--------------
regulation, change in existing laws or regulations, or interpretation of any new
or existing laws or regulations shall make it unlawful or impossible for Bank to
maintain or fund the Loan hereunder or any interest rate swap or other hedging
arrangement entered into by Bank in connection with the funding of the Loan,
then Bank shall promptly notify Borrower in writing and Borrower shall do one of
the following at its option: (i) repay the outstanding Loan owed to Bank on the
next interest payment date, without penalty and without paying a Breakage Amount
(or immediately if Bank may not lawfully continue to maintain and fund such
Loan); or (ii) if such change in laws relates to the interest rate swap or other
hedging arrangement entered into by Bank in connection with the funding of the
Loan, become a direct party to the interest rate swap or hedging arrangement; or
(iii) convert such Loan to bear interest at the Bank's current prime rate.
(d) Breakage Amount. A Breakage Amount may be payable should the Loan
---------------
be prepaid or should Borrower fail to borrow the full amount of the Loan. When
Bank determines a Breakage Amount is payable, it shall deliver to Borrower a
certificate as to the computation of the Breakage Amount and the basis for
determining such amount, which shall be determined in a commercially reasonable
manner. Determinations by Bank of the Breakage Amount shall be conclusive,
provided such determinations are made on a reasonable basis and are absent
manifest error.
SECTION 6. CLOSING. The closing of the transactions contemplated by
--------- -------
this Agreement shall take place at the office of Bank (or other mutually
agreeable location) on or before December 31, 1996, as the parties shall agree
(the "Closing Date"). The obligations of Bank set forth herein are subject to
the satisfaction (in the opinion of Bank) on or before the Closing Date, unless
waived in writing by Bank, of the conditions specified in Section 8 hereof.
SECTION 7. REPRESENTATIONS AND WARRANTIES. In order to induce Bank to
--------- ------------------------------
enter into this Agreement, Borrower hereby represents and warrants to Bank
(which representations and warranties shall survive the delivery of the Note) as
follows:
(a) Corporate Existence. Borrower and each Subsidiary (other than
-------------------
Enermart Trust, a Pennsylvania business trust) is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction in
which it was incorporated, has the corporate power and authority to own its
-9-
<PAGE>
assets and to transact the business in which it is now engaged or proposes to be
engaged in, and is duly qualified as a foreign corporation in all jurisdictions
wherein the failure to qualify would have a material adverse effect on the
business, assets, or financial condition of Borrower and its Subsidiaries taken
as a whole. Enermart Trust is a Pennsylvania business trust, has the power and
authority to own its assets and to transact the business in which it is now
engaged or proposes to be engaged in, and is duly qualified in all jurisdictions
where the failure to so qualify would have a material adverse affect on the
business, assets or financial condition of Borrower and its Subsidiaries taken
as a whole.
(b) Corporate Power and Authorization. Borrower is duly authorized and
---------------------------------
empowered to create and issue the Note, to execute, deliver, and perform this
Agreement, and to incur the obligations provided for herein and therein; and all
corporate and other action on Borrower's part requisite for the due creation and
issuance of the Note and for the due execution, delivery, and performance of
this Agreement and to make the borrowings hereunder has been duly and
effectively taken.
(c) Binding Obligations. This Agreement and the Note constitute valid
-------------------
and binding obligations of Borrower, enforceable in accordance with their
respective terms (except that enforcement may be subject to any applicable
bankruptcy, insolvency, or similar laws generally affecting the enforcement of
creditors rights and to the availability of equitable remedies).
(d) No Legal Bar or Resultant Lien. The Note and this Agreement do not
------------------------------
and will not violate, contravene, or conflict with any provisions of any
contract, agreement, law, regulation, order, injunction, judgment, decree, or
writ to which Borrower is subject or result in the creation or imposition of any
lien or other encumbrance of any nature upon any assets or properties of
Borrower now owned or hereafter acquired other than those contemplated by this
Agreement.
(e) No Consent. Except for regulatory approvals from the states of
----------
Colorado and Missouri which have been obtained, the execution, delivery, and
performance by Borrower of the Note and this Agreement do not require the
consent or approval of any other person or entity, including without limitation
any consent of shareholders required by law or by its articles of incorporation
or bylaws or any regulatory authority or governmental body of the United States
or any state thereof or any political subdivision of the United States or any
state thereof.
(f) Financial Condition. All Financial Statements of Borrower and the
-------------------
Subsidiaries (or of any Subsidiary) that have been delivered to Bank as of the
date hereof are complete and
-10-
<PAGE>
correct in all material respects (subject, in the case of any Financial
Statements that are unaudited, to year-end audit adjustments) and have been
prepared in accordance with GAAP. Such financial statements (together with the
pertinent notes thereto) fairly present the financial condition of Borrower and
the Subsidiaries at the respective dates indicated, all in accordance with GAAP.
No change has occurred in the condition (financial or otherwise), business, or
operations of Borrower or any Subsidiary since the date of the last Financial
Statement delivered to Bank prior to the date hereof that has a material adverse
effect on the business, assets, or financial condition of Borrower and its
Subsidiaries taken as a whole, except as disclosed in EXHIBIT B attached hereto.
---------
(g) Litigation. Except as described in the Financial Statements or as
----------
otherwise disclosed in EXHIBIT B attached hereto, there is no litigation, legal
---------
or administrative proceeding, investigation, or other action of any nature
pending or, to the knowledge of the officers of Borrower, threatened against or
affecting Borrower or any Subsidiary which, if adversely determined, would have
a material adverse effect on the business, assets, or financial condition of
Borrower and its Subsidiaries taken as a whole or the ability of Borrower to
perform its obligations under this Agreement or the Note.
(h) Liabilities. Neither Borrower nor any Subsidiary has any material
-----------
(as determined in the aggregate) liability, fixed or contingent, except as
disclosed to Bank in the Financial Statements or in EXHIBIT C attached hereto.
---------
No unusual or unduly burdensome restrictions, restraint, or hazard exists by
contract, law, or governmental regulation or otherwise relative to the business,
assets, or properties of Borrower or any Subsidiary that would have a material
adverse effect on the business, assets, or financial condition of Borrower and
its Subsidiaries taken as a whole.
(i) Taxes; Governmental Charges. Each of Borrower and the Subsidiaries
---------------------------
has filed all tax returns and reports required to be filed and has paid all
taxes, assessments, fees, and other governmental charges levied upon its assets,
properties, or income that are due and payable, including interest and
penalties, or has provided adequate reserves, if required, in accordance with
GAAP for the payment thereof, except such as are being contested in good faith
by appropriate proceedings and for which adequate reserves for the payment
thereof as required by GAAP have been provided and except for certain county,
city, school district, or similar ad valorem taxes for which the failure to pay
would not have a material adverse effect on the business, assets, or financial
condition of Borrower and its Subsidiaries taken as a whole.
(j) Titles, Etc. Each of Borrower and the Subsidiaries has good and
-----------
marketable title to, or a valid leasehold interest in,
-11-
<PAGE>
all of its assets and properties, real or personal, including the properties and
assets and leasehold interests reflected in the Financial Statements referred to
in Section 7(f) hereof (other than any properties or assets disposed of in the
ordinary course of business), necessary or appropriate for the operation of its
respective businesses, free and clear of all liens, mortgages, pledges, security
interests, or other encumbrances, except the liens described in Section 9(n)
hereof and except for such other liens or encumbrances that, if present, would
not have a material adverse effect on the business, assets, or financial
condition of Borrower and its Subsidiaries taken as a whole.
(k) Defaults. Borrower is not a party to any indenture, loan, or
--------
credit agreement, or to any lease or other agreement or instrument, which could
have a material adverse effect on the ability of Borrower to carry out its
obligations under this Agreement or the Note. Neither Borrower nor any
Subsidiary is in default and no event or circumstance has occurred which, but
for the passage of time or the giving of notice or both, would constitute a
default under any loan or credit agreement, indenture, mortgage, deed of trust,
security agreement, or other agreement or instrument to which Borrower or any
Subsidiary is a party in any respect that would have a material adverse effect
on the business, assets, or financial condition of Borrower and its Subsidiaries
taken as a whole. No Event of Default hereunder has occurred and is continuing
nor has any event occurred or failed to occur which, with the passage of time or
service of notice or both, would constitute an Event of Default.
(l) Casualties; Taking of Properties. Neither the business nor the
--------------------------------
assets or properties of Borrower and its Subsidiaries taken as a whole has been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits or concessions by any domestic or foreign government or any
agency thereof, riot, activities of armed forces, or acts of God or of any
public enemy.
(m) Margin Stock. Borrower is not engaged in the business of extending
------------
credit for the purpose of purchasing or carrying any "margin stock" as defined
in Regulation U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221) or for the purpose of reducing or retiring any indebtedness
that was originally incurred to purchase or carry a margin stock or for any
other purpose that might cause this transaction to be considered a "purpose
credit" within the meaning of Regulation U. Borrower is not engaged principally
or as one of its important activities in the business of extending credit for
the purpose of purchasing or carrying margin stock. Neither Borrower nor any
person or entity acting on behalf of Borrower has taken or will take any action
that might cause the loans hereunder or this Agreement to violate Regulation U
or any other regulation of the
-12-
<PAGE>
Board of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934 or any rule or regulation thereunder, in each case as now
in effect or as the same may hereafter be in effect.
(n) Location of Business and Offices. The principal place of business
--------------------------------
and chief executive offices of Borrower is located at the address stated on the
signature page hereof.
(o) Compliance with the Law. Neither Borrower nor any Subsidiary (i)
-----------------------
is in violation of any law, judgment, decree, order, ordinance, or governmental
rule or regulation to which Borrower or any of its assets or properties are
subject, or (ii) has failed to obtain any license, permit, franchise, or other
governmental authorization necessary to the ownership of any of its assets or
properties or the conduct or proposed conduct of its business; which violation
or failure would have a material adverse effect on the business, assets, or
financial condition of Borrower and its Subsidiaries taken as a whole.
(p) No Material Misstatements. No information, exhibit, or report
-------------------------
furnished by Borrower or any Subsidiary to Bank in connection with the
negotiation of this Agreement contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statement
contained therein not misleading.
(q) ERISA. Each of Borrower and the Subsidiaries is in compliance in
-----
all material respects with the applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction that would have a material adverse
effect on the financial condition of Borrower has occurred and is continuing
with respect to any Plan; no notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated; no circumstances exist which constitute
grounds entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted such proceedings; no
Plan currently maintained by Borrower or any of the Subsidiaries is a
Multiemployer Plan; neither Borrower nor any Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; Borrower and each
Commonly Controlled Entity have met their minimum funding requirements under
ERISA with respect to all of their Plans and the present value of all vested
benefits under each Plan exceeds the fair market value of all Plan assets
allocable to such benefits, as determined on the most recent valuation date of
such Plan in accordance with the provisions of ERISA; and neither Borrower nor
any Commonly Controlled Entity has incurred any liability to the PBGC under
ERISA.
(r) Subsidiaries. All of Borrower's subsidiaries are listed in EXHIBIT
------------ -------
D attached hereto. All of the outstanding capital stock of each Subsidiary has
- -
been validly issued, is
-13-
<PAGE>
fully paid and nonassessable, and is owned by Borrower free and clear of all
mortgages, deeds of trust, pledges, liens, security interests, and other charges
or encumbrances.
(s) Environmental Matters. Except as disclosed on EXHIBIT E attached
--------------------- ---------
hereto, neither Borrower nor any Subsidiary (i) has received notice or otherwise
learned of any Environmental Liability that could reasonably be expected to have
a material adverse effect on the business, assets, or financial condition of
Borrower and its Subsidiaries taken as a whole or the ability of Borrower to pay
and perform its obligations under this Agreement and the Note arising in
connection with (A) any noncompliance with or violation of the requirements of
any Environmental Law or (B) the release or threatened release of any toxic or
hazardous waste, substance, constituent, or other substance into the
environment, (ii) has threatened or actual liability in connection with the
release or threatened release of any toxic or hazardous waste, substance,
constituent, or other substance into the environment that could reasonably be
expected to have a material adverse effect on the business, assets, or financial
condition of Borrower and its Subsidiaries taken as a whole or the ability of
Borrower to pay and perform its obligations under this Agreement and the Note,
or (iii) has received notice or otherwise learned of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release or threatened release of any toxic or hazardous waste, substance, or
constituent into the environment for which Borrower or any Subsidiary is or may
be liable and which could reasonably be expected to have a material adverse
effect on the business, assets, or financial condition of Borrower and its
Subsidiaries taken as a whole. Except as disclosed in EXHIBIT E, the operations
---------
of Borrower and the Subsidiaries comply in all material respects with all
applicable laws relating to hazardous materials.
(t) Investment Company Act. Neither Borrower nor any Subsidiary is an
----------------------
"investment company" or a company directly or indirectly "controlled" by or
"acting on behalf of" an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
SECTION 8. CONDITIONS OF LENDING.
--------- ----------------------
(a) Conditions. The obligation of Bank to make the Loan shall be
----------
subject to the following conditions precedent:
(i) Execution and Delivery. Borrower shall have executed and
----------------------
delivered to Bank the Note and other required documents, all in form
and substance satisfactory to Bank.
(ii) Legal Opinion. Bank shall have received from Borrower's
-------------
general counsel a favorable legal opinion in form and substance
satisfactory to Bank (i) as to the matters (as
-14-
<PAGE>
of the date of such opinion) set forth in Subsections 7(a), (b), (c),
(d), (e) and (g) hereof, and (ii) as to such other matters as Bank or
its counsel may reasonably request.
(iii) Corporate Resolutions. Bank shall have received appropriate
---------------------
certified corporate resolutions and evidence of existence and good
standing for Borrower.
(iv) Incumbency. Bank shall have received a signed certificate
----------
of the Secretary of Borrower, certifying the names of each of the
officers of Borrower authorized to sign loan documents on behalf of
Borrower, together with the true signatures of each such officer. Bank
may conclusively rely on such certificate until Bank receives a
further certificate of the Secretary of Borrower canceling or amending
the prior certificate and submitting signatures of the officers named
in such further certificate.
(v) Articles of Incorporation and Bylaws. Bank shall have
------------------------------------
received copies of the Articles of Incorporation of Borrower and all
amendments thereto, certified by the Secretary of State of the State
of Texas, and a copy of the bylaws of Borrower and all amendments
thereto, certified by the Secretary of Borrower as being true,
correct, and complete.
(vi) Other Documents. Bank shall have received such other
---------------
instruments and documents incidental and appropriate to the
transaction provided for herein as Bank or its counsel may reasonably
request, and all such documents shall be in form and substance
satisfactory to Bank.
(vii) Legal Matters Satisfactory. All legal matters incident to
--------------------------
the consummation of the transactions contemplated hereby shall be
satisfactory to special counsel for Bank retained at the expense of
Borrower.
(viii) Representations and Warranties. The representations and
------------------------------
warranties of Borrower under this Agreement (excluding, however, the
representations and warranties set forth in Sections 7(g), (h), and
(s) and the last sentence of Section 7(f) as to any matter referred to
in such provisions to the extent that it has theretofore been
disclosed in writing by Borrower to Bank) are true and correct in all
material respects.
(ix) No Event of Default. No Event of Default shall have
-------------------
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice or both,
would constitute an Event of Default.
-15-
<PAGE>
(b) Failure to Satisfy. If, notwithstanding Borrower's failure to
------------------
satisfy all conditions precedent to the obtaining of the Loan, Bank nevertheless
makes the Loan, the making of the Loan shall not constitute a waiver of the
unfulfilled condition or conditions nor any Event of Default caused by such
failure.
SECTION 9. COVENANTS. A deviation from the provisions of this
--------- ---------
Section 9 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by Bank. Without the prior written consent
of Bank, Borrower will at all times comply with the covenants contained in this
Section 9 from the date hereof and for so long as any part of the Note is
outstanding.
(a) Financial Statements and Reports. Borrower shall promptly furnish
--------------------------------
to Bank from time to time upon request such information regarding the business,
affairs, and financial condition of Borrower, as Bank may reasonably request,
and will furnish to Bank the following Financial Statements and other documents
and information:
(i) Annual Audited Financial Statements. Within one hundred
-----------------------------------
(100) days after the close of each fiscal year of Borrower, Borrower
shall deliver to Bank the annual audited Financial Statements of
Borrower and its Subsidiaries as of the end of such fiscal year.
(ii) Quarterly Financial Statements. Within sixty-five (65) days
------------------------------
after the end of each of the first three fiscal quarters of Borrower,
Borrower shall deliver to Bank the quarterly Financial Statements of
Borrower and its Subsidiaries as of the end of such quarter.
(iii) Securities and Exchange Commission Filings. Promptly after
------------------------------------------
the filing thereof, Borrower shall deliver to Bank a copy of any
report, proxy statement, financial statement, or other filing made by
Borrower or any Subsidiary with the Securities and Exchange
Commission, any state securities agency, or any national stock
exchange or quotation service; and promptly upon receipt thereof,
copies of any notices received from the Securities and Exchange
Commission or any state securities agency relating to any order, rule,
statute, or other laws or information that would have a material
adverse effect on the financial condition, properties, or operations
of Borrower and its Subsidiaries taken as a whole.
(b) Certificates of Compliance. Concurrently with the furnishing of
--------------------------
the annual audited Financial Statements pursuant to Subsection 9(a)(i) above and
each of the quarterly unaudited Financial Statements pursuant to Subsection
9(a)(ii) above, Borrower will furnish or cause to be furnished to Bank a
certificate signed by the chief financial officer of Borrower (i)
-16-
<PAGE>
stating that Borrower has fulfilled in all material respects its obligations
under the Note and this Agreement and that all representations and warranties
made herein and therein continue to be true and correct in all material respects
(or specifying the nature of any change) or, if an Event of Default has
occurred, specifying the Event of Default and the nature and status thereof and
the action that is proposed to be taken with respect thereto; (ii) setting forth
the computation, in reasonable detail as of the end of each period covered by
such certificate, of compliance with Sections 9(q), (r), (s) and (t) of this
Agreement; and (iii) containing or accompanied by such financial or other
details, information, and material as Bank may reasonably request to evidence
such compliance.
(c) Accountants' Certificate. Concurrently with the furnishing of the
------------------------
annual audited Financial Statements pursuant to Subsection 9(a)(i) above,
Borrower will furnish a statement from the firm of independent public
accountants who audited such statements (i) to the effect that nothing has come
to their attention to cause them to believe that there existed on the date of
such statements any Event of Default or any condition or event which with notice
or lapse of time or both would become an Event of Default, or if such
accountants shall have obtained knowledge of any such condition or event,
specifying in such certificate each such condition or event of which they have
knowledge and the nature and status thereof.
(d) Taxes and Other Liens. Borrower and each Subsidiary will pay and
---------------------
discharge promptly all taxes, assessments, and governmental charges or levies
imposed upon Borrower or any Subsidiary or upon the income or any assets or
property of Borrower or any Subsidiary as well as all claims of any kind
(including claims for labor, materials, supplies, and rent) that, if unpaid,
might become a lien or other encumbrance upon any or all of the assets or
property of Borrower or any Subsidiary; provided, however, that Borrower and the
Subsidiaries shall not be required to pay any such tax, assessment, charge,
levy, or claim if the amount, applicability, or validity thereof is contested in
good faith by appropriate proceedings diligently conducted and if Borrower and
such Subsidiaries shall have set up adequate reserves therefor, if required,
under GAAP.
(e) Compliance with Laws. Borrower will observe and comply, and cause
--------------------
each Subsidiary to comply, in all material respects, with all applicable laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, orders, and restrictions relating to environmental standards
or controls or to energy regulations of all federal, state, county, municipal,
and other governments, departments, commissions, boards, agencies, courts,
authorities, officials, and officers, whether domestic or foreign.
-17-
<PAGE>
(f) Further Assurances. Borrower will cure promptly any defects in the
------------------
creation and issuance of the Note and the execution and delivery of the Note and
this Agreement. Borrower at its sole expense will promptly execute and deliver
to Bank upon request all such other and further documents, agreements, and
instruments in compliance with or accomplishment of the covenants and agreements
in this Agreement or to correct any omissions in the Note or more fully to state
the obligations set out herein.
(g) Performance of Obligations. Borrower will pay the Note and other
--------------------------
obligations incurred by it hereunder according to the reading, tenor, and effect
thereof and hereof, and Borrower will do and perform every act and discharge all
of the obligations provided to be performed and discharged by Borrower under
this Agreement at the time or times and in the manner specified.
(h) Insurance. Borrower now maintains and will continue to maintain,
---------
and each Subsidiary now maintains and Borrower will cause each Subsidiary to
continue to maintain, insurance with respect to its assets against such
liabilities, casualties, risks, and contingencies and in such types and amounts
as are usually carried by companies engaged in the same or similar businesses
and similarly situated. Upon request of Bank, Borrower and the Subsidiaries will
furnish or cause to be furnished to Bank from time to time a summary of the
respective insurance coverage of Borrower and the Subsidiaries in form and
substance satisfactory to Bank and if requested will furnish Bank copies of the
applicable policies.
(i) Accounts and Records. Borrower will keep, and will cause each
--------------------
Subsidiary to keep, adequate books, records, and accounts in which full, true,
and correct entries will be made of all dealings or transactions in relation to
their business and activities, prepared in a manner consistent with prior years.
(j) Right of Inspection. Borrower will permit, and will cause each
-------------------
Subsidiary to permit, upon reasonable notice, any officer, employee, or agent of
Bank to examine Borrower's and the Subsidiaries' books, records, and accounts,
and take copies and extracts therefrom, all at such reasonable times as Bank may
request.
(k) Notice of Certain Events. Borrower shall promptly notify, and
------------------------
Borrower shall promptly cause each Subsidiary to notify, Bank if Borrower or the
Subsidiaries learn of the occurrence of any of the following:
(i) any Event of Default, or any fact, condition, or event that,
with the giving of notice or passage of time or both, would become an
Event of Default, or the failure of Borrower to observe any of its
undertakings hereunder, together with a detailed statement by Borrower
or the
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<PAGE>
appropriate Subsidiary of the steps being taken to cure such default;
(ii) any legal, judicial, or regulatory proceedings affecting
Borrower or any Subsidiary or any of the assets or properties of
Borrower or any Subsidiary that, if adversely determined, could
reasonably be expected to have a material adverse effect on the
business, assets, or financial condition of Borrower and its
Subsidiaries taken as a whole;
(iii) any dispute between Borrower or any Subsidiary and any
governmental or regulatory body or any other person or entity that, if
adversely determined, might reasonably be expected to have a material
adverse effect on the business, assets, or financial condition of
Borrower and its Subsidiaries taken as a whole;
(iv) any other matter that in Borrower's reasonable opinion could
have a material adverse effect on the business, assets, or financial
condition of Borrower and its Subsidiaries taken as a whole; or
(v) the occurrence of an "Event of Default" under the 1986,
1987, 1989, 1991, 1992 or 1994 Note Purchase Agreements or the 1993
Indenture or any event that, with notice or the lapse of time or both,
would become an "Event of Default" thereunder.
(l) ERISA Information and Compliance. Borrower will promptly furnish
--------------------------------
to Bank, and Borrower will cause each Subsidiary to promptly furnish to Bank,
upon becoming aware of or having reason to know of the occurrence of a
Reportable Event or a Prohibited Transaction under ERISA that would have a
material adverse effect on the financial condition of Borrower or of any
circumstances existing that constitute grounds entitling the PBGC to institute
proceedings to terminate a Plan subject to ERISA with respect to Borrower or any
Commonly Controlled Entity, and promptly but in any event within two Business
Days of receipt of notice by Borrower or any Commonly Controlled Entity of
notice that PBGC intends to terminate a Plan or appoint a trustee to administer
same, a written notice signed by the President or the chief financial officer of
Borrower or the appropriate Subsidiary specifying the nature thereof, what
action Borrower or the appropriate Subsidiary is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto. Borrower will not create a Multiemployer Plan.
(m) Environmental Reports and Notices. Borrower will deliver, and
---------------------------------
cause each Subsidiary to deliver, to Bank written notice promptly upon
Borrower's or any Subsidiary's learning that it has received notice or otherwise
learned of any claim, demand, action, event, condition, report, or investigation
indicating any
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<PAGE>
potential or actual liability arising in connection with (A) the non-compliance
with or violation of the requirements of any Environmental Law that reasonably
could be expected to have a material adverse effect on the business, assets, or
financial condition of Borrower and its Subsidiaries taken as a whole; (B) the
release or threatened release of any toxic or hazardous waste, substance, or
constituent into the environment that reasonably could be expected to have a
material adverse effect on the business, assets, or financial condition of
Borrower and its Subsidiaries taken as a whole or which release Borrower or the
appropriate Subsidiary would have a duty to report to any court or government
agency or instrumentality; or (C) the existence of any Environmental Lien on any
properties or assets of Borrower or any Subsidiary.
(n) Liens. Without the prior written consent of Bank, Borrower will
-----
not create, incur, assume, or suffer to exist, or permit any Subsidiary to
create, incur, assume, or suffer to exist, any mortgage, deed of trust, pledge,
lien, security interest, hypothecation, assignment, deposit agreement, or other
preferential arrangement, charge, or encumbrance (including without limitation
any conditional sale or other title retention agreement or finance lease) of any
nature, upon or with respect to any of its properties, now owned or hereafter
acquired, or sign or file, or permit any Subsidiary to sign or file, under the
Uniform Commercial Code of any jurisdiction a financing statement that names
Borrower or any Subsidiary as debtor, or sign or permit any Subsidiary to sign,
any security agreement authorizing any secured party thereunder to file such
financing statement; provided, however, that Borrower may grant any of the
following described Liens without Bank's consent:
(i) any Lien existing on any asset of Borrower or of a
Subsidiary that, if material, is identified on EXHIBIT F;
---------
(ii) any Lien on any assets securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring such
assets, provided that such Lien attaches to such asset concurrently
with or within 90 days after the acquisition thereof;
(iii) any Lien on any asset of any corporation existing at the
time such corporation is merged or consolidated with or into Borrower
or a consolidated Subsidiary and not created in contemplation of such
event;
(iv) any Lien existing on any asset prior to the acquisition
thereof by Borrower or a Subsidiary and not created in contemplation
of such acquisition;
(v) any Lien on any Fixed Assets of Borrower created pursuant to
or under Section 4.08 of each of the 1986 Note Purchase Agreements,
the 1987 Note Purchase Agreements, and
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<PAGE>
the 1989 Note Purchase Agreement, or under Section 4.8 of the 1991
Note Purchase Agreement, or under Section 4.8 of the 1992 Note
Purchase Agreement, or under Section 4.10 of the 1994 Note Purchase
Agreement, or under Section 6.06 of the 1993 Indenture, or pursuant to
or under a similar provision, utilizing the same or a similar cash
flow-to-debt test, contained in any other loan agreement that Borrower
may enter into after the date hereof, which agreement grants a loan or
extends credit to Borrower with a maturity date in excess of one year,
and Liens securing obligations arising out of the extension or
refinancing of the obligations referred to above, provided that such
obligations are not increased and are not secured by any additional
property;
(vi) Liens arising against after-acquired property located in
the states of Colorado, Kansas and Missouri pursuant to and under the
1993 Indenture, and all supplements and amendments thereto; and liens
arising against after-acquired property pursuant to and under the 1959
Indenture of United Cities Gas Company, and all supplements and
amendments thereto; and Liens securing obligations arising out of the
extension or refinancing of the obligations referred to above,
provided that such obligations are not increased and are not secured
by any additional property;
(vii) Liens for taxes or assessments or other governmental
charges or levies if not yet due and payable;
(viii) Liens imposed by law, such as operators', mechanics',
materialmen's, landlords', warehousemen's and carriers' Liens, and
other similar Liens, securing obligations incurred in the ordinary
course of business which are not past due;
(ix) Liens, pledges, or deposits under workers' compensation,
unemployment insurance, Social Security, or similar legislation;
(x) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
money), leases permitted by the terms of this Agreement, public or
statutory obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in the
ordinary course of business and in each case payment with respect to
which is not yet past due; and
(xi) Liens on Fixed Assets not otherwise permitted by this
Agreement securing Debt in the aggregate (at the time such Liens are
created) not in excess of two percent (2%) of Consolidated Net
Property.
-21-
<PAGE>
(o) Consolidations, Mergers, and Sales of Assets.
--------------------------------------------
(i) Borrower will not (A) consolidate or merge with or into any
other Person or (B) sell, lease, or otherwise transfer, directly or
indirectly, all or substantially all of its assets; provided, however,
that Borrower may merge with another Person if Borrower is the
corporation surviving such merger and if, after giving effect thereto,
no event shall occur and be continuing which constitutes an Event of
Default or a condition, event, or act that, with the giving of notice
or lapse of time or both, would constitute an Event of Default.
(ii) Borrower will not permit any Subsidiary (A) to consolidate or
merge with or into, (B) transfer all or any substantial part of its
assets to, or (C) issue any shares of capital stock to, any person
other than Borrower or a wholly-owned Subsidiary.
(p) Change of Control. If a Change of Control shall occur, Borrower
-----------------
shall, within ten (10) days after the occurrence thereof, give Bank notice
thereof and shall describe in reasonable detail the facts and circumstances
giving rise thereto. Bank may, upon three (3) Business Days' notice to Borrower
given not later than sixty (60) days after such Change of Control, declare the
Note (together with accrued interest thereon) and any other amounts payable
hereunder (including without limitation the Breakage Amount if applicable)
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration, or other notice of any kind, all
of which are hereby waived by Borrower.
(q) Dividends. The aggregate cash dividends paid on the stock of
---------
Borrower and the Subsidiaries (other than, in the case of any Subsidiary,
dividends paid to Borrower or a Subsidiary that is wholly owned, directly or
indirectly, by Borrower) after the date hereof shall not exceed the sum of (i)
75% of the aggregate consolidated net income of Borrower and the Subsidiaries
for periods after September 30, 1990, plus (ii) $20,000,000, plus (iii) 100% of
---- ----
the net cash proceeds to Borrower from any issuance of its capital stock
subsequent to September 30, 1990, minus (iv) dividends paid since September 30,
-----
1991; provided that immediately before and after giving effect thereto no event
shall occur and be continuing which constitutes an Event of Default or a
condition, event or act that, with the giving of notice or lapse of time or
both, would constitute an Event of Default.
(r) Leverage.
--------
(i) Consolidated Funded Indebtedness shall not exceed 65% of
Consolidated Capitalization.
-22-
<PAGE>
(ii) Consolidated Indebtedness (excluding trade accounts payable
and other current and accrued liabilities other than liabilities for
borrowed money) shall not exceed 70% of the sum of (A) Consolidated
Indebtedness (excluding trade accounts payable and other current and
accrued liabilities other than liabilities for borrowed money), plus
(B) Shareholder's Equity, plus (C) Minority Interests in Subsidiaries.
(s) Consolidated Net Property. At no time shall Borrower's
-------------------------
Consolidated Net Property be less than 150% of Borrower's Consolidated Funded
Indebtedness.
(t) Operating Cash Flow. Borrower shall use its best efforts to cause,
-------------------
for each consecutive four fiscal quarter period, the sum of Borrower and the
Subsidiaries consolidated net incomes plus the aggregate amount of depreciation
----
deducted in calculating such net incomes plus the aggregate amount of deferred
----
taxes deducted in calculating such net incomes plus the aggregate amount of all
other noncash charges deducted in calculating such net incomes, to be equal to
or greater than 12.5% of Consolidated Indebtedness (excluding trade accounts
payable and other current and accrued liabilities other than liabilities for
borrowed money) as of the end of the last fiscal quarter. In the event that, at
the end of any fiscal quarter, the standards set forth in the immediately
preceding sentence shall not be met with respect to the latest four consecutive
fiscal quarters (including such fiscal quarter), Borrower shall cause valid and
perfected first-priority Liens to be created and maintained at all times
thereafter pursuant to documentation satisfactory to Bank, securing the
repayment of the Note, against properties of Borrower (and/or Subsidiaries, if
necessary) reasonably acceptable to Bank and having a book value as of the end
of such fiscal quarter equal to at least one and one-half times the aggregate
principal balance outstanding under the Note as of the end of such fiscal
quarter.
(u) Investments. Neither Borrower nor any Subsidiary, directly or
-----------
indirectly, shall (a) purchase or otherwise acquire or own any stock or other
securities of any other Person; (b) make or permit to be outstanding any loan,
advance or capital contribution to, or any Guaranties of the obligations of, any
other Person (other than receivables in the ordinary course of business); (c)
enter into any agreements for the purchase or other acquisition of any product,
materials, or supplies, or for transportation or for the payment for services,
if in any such case payment therefor is to be made regardless of the nondelivery
of the product, materials, or supplies or the nonfurnishing of the
transportation or services for reasons other than the failure or refusal of the
purchaser to accept the same; provided, however, that the following (herein
called "Permitted Investments") shall be permitted:
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<PAGE>
(i) marketable direct obligations of the United States of
America and obligations guaranteed by the United States of America,
which have the full faith and credit of the United States of America,
including repurchase agreements involving United States government
securities if such repurchase agreements are with a bank or trust
company that is organized under the laws of the United States or any
State thereof;
(ii) commercial paper issued by any corporation organized under
the laws of the United States or any state thereof maturing within one
year or less from the date of investment and rated at least A-2, P-2
or Duff 2 by Standard & Poor's Corporation, Moody's Investors Service,
or Duff & Phelps, Inc., respectively;
(iii) tax exempt securities maturing within one year or less rated
at least AA- by Standard & Poor's Corporation, Aa3 by Moody's
Investors Service, or AA-by Duff & Phelps, Inc.;
(iv) cash surrender value of life insurance policies carried by
and for the benefit of Borrower on the lives of key employees, in
amounts that the Board of Directors of Borrower determines in good
faith are customary in Borrower's industry and are necessary and
appropriate for the protection of the business, operations and
financial condition of Borrower;
(v) investments by Borrower or a Subsidiary in the capital stock
or other equity securities of any other Subsidiary or any corporation
which concurrently with such investment becomes a Subsidiary, and
loans and advances by Borrower or a Subsidiary to any such other
Subsidiary (but excluding Guaranties of the obligations of any such
other Subsidiary except for Guaranties of the obligations of any
Wholly-Owned Subsidiary, which may be included if the Guaranty
reasonably may be expected to benefit, directly or indirectly, the
guarantor corporation); provided, however, that the Subsidiary in
which the investment is made or to which the loan or advance is made
pursuant to this clause (v) is engaged in the business of gas,
electric, water or other utilities (including, where relevant to the
particular utility involved, the generation, transportation,
transmission, or distribution thereof) or a related business;
(vi) investments, loans, or advances which would be permitted
under the immediately preceding clause (v) except that the entity in
which such investment is made or to which such loan or advance is made
is not (and does not as a
-24-
<PAGE>
result of such investment become) a Subsidiary, provided that at no
time shall the aggregate of all investments, loans, or advances
outstanding pursuant to this clause (vi) exceed 50% of Borrower's
Shareholders' Equity;
(vii) investments, loans or advances which would be permitted
under the preceding clause (v) except that the entity in which such
investment is made or to which such loan or advance is made is not a
utility and is not (and does not as a result of such investment
become) a Subsidiary, provided that at no time shall the aggregate of
all investments, loans or advances outstanding pursuant to this clause
(vii) exceed 25% of Borrower's Shareholders' Equity;
(viii) other investments, loans or advances by Borrower which
would not be permitted under the preceding clauses (v), (vi) or (vii),
provided that immediately after the making of such investment, and if
the amount of such investment and all other outstanding investments
pursuant to this clause (viii) were treated as cash dividends paid on
the stock of Borrower and the Subsidiaries for purposes of Section
9(q), Borrower would be permitted to pay at least one additional
dollar in cash dividends under Section 9(q) (investments made pursuant
to this clause (viii) are herein called "Limited Investments");
(ix) loans or advances to officers, directors and employees of
Borrower or any Subsidiary for home ownership or consumer or similar
purposes, but not for commercial or investment purposes, provided that
such loans reasonably may be expected to benefit, directly or
indirectly, Borrower, and provided further that the aggregate amount
of all such loans or advances at any time outstanding shall not exceed
2-1/2% of Borrower's Shareholders' Equity;
(x) time and demand deposits of any bank or trust company
organized under the laws of the United States of America or any State
thereof that are fully insured as to payment by the Federal Deposit
Insurance Corporation, provided however, that such deposits need not
be so insured if the deposits are made in the ordinary course of the
collection process for Borrower or any Subsidiary;
(xi) security deposits and notes receivable from customers
arising in the ordinary course of Borrower's business;
(xii) certificates of deposit or similar instruments evidencing
Eurodollar deposits maturing within one year or less issued by a bank
or trust company with
-25-
<PAGE>
combined capital and surplus not less than $100,000,000 and whose
unsecured certificates of deposit are rated at least AA by Standard &
Poor's Corporation or Duff & Phelps, Inc., or at least Aa2 by Moody's
Investors Service; and
(xiii) the guaranty by Borrower of indebtedness of and tha making
of loans to Woodward Marketing, L.L.C., to the extent the aggregate
amount of such indebtedness and loans are less than $5,625,000 at any
time outstanding.
The preceding notwithstanding, in no event shall Borrower or any
Subsidiary make or incur any Permitted Investment listed in clauses (v), (vi),
(vii), (viii) and (ix) of this Section 9(u) at any time following the occurrence
of an Event of Default or an event or condition which, upon the passing of time
or the giving of notice or both, would constitute an Event of Default or if the
incurrence of such Investment would result in the violation of any other
provision of this Agreement.
(v) Corporate Existence and Due Qualification. Borrower shall preserve
-----------------------------------------
and maintain, and cause each Subsidiary to preserve and maintain, its corporate
existence and good standing in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required; provided, however, that nothing herein
shall prevent any merger or consolidation otherwise permitted under Section 9(o)
of this Agreement.
(w) Maintenance of Properties. Borrower shall maintain, keep, and
-------------------------
preserve, and cause each Subsidiary to maintain, keep and preserve, all of its
properties (tangible and intangible) necessary or usable in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
(x) Transactions with Affiliates. Neither Borrower nor any Subsidiary
----------------------------
shall enter into any transaction with an Affiliate of Borrower or of such
Subsidiary except in the ordinary course of, and pursuant to the reasonable
requirements of, Borrower's or such Subsidiary's operations and business and
upon terms found in good faith by the Board of Directors of Borrower or such
Subsidiary to be fair and reasonable and no less favorable than those Borrower
or such Subsidiary could obtain in a comparable arm's-length transaction with a
Person other than an Affiliate. For purposes hereof, an "Affiliate" of any
Person shall mean any other Person that directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, such Person (the term "control" meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise).
-26-
<PAGE>
(y) Downstream Transfers. Notwithstanding any other provision hereof
--------------------
to the contrary, Borrower shall not at any time transfer, sell assign or
contribute any substantial portion of its assets that would properly be included
in the determination of Consolidated Net Property to any Subsidiary regardless
of the consideration received in exchange therefor.
SECTION 10. EVENTS OF DEFAULT.
---------- -----------------
(a) Events. Any one or more of the following events shall be
------
considered an Event of Default as that term is used herein:
(i) Borrower shall fail to pay when due or declared due the
principal of or interest on the Note or any fee or any other
indebtedness of Borrower incurred pursuant to this Agreement and such
failure shall continue for a period of one (1) Business Day after the
same shall become due;
(ii) Any representation or warranty made by Borrower under this
Agreement or in any certificate or statement furnished at any time or
made to Bank pursuant hereto, or in connection herewith, or in
connection with any document furnished hereunder, shall prove to be
incomplete, incorrect, misleading, or untrue in any material respect
as of the date on which such representation or warranty is made or
deemed made;
(iii) Default shall be made in the due observance or performance
of any of the covenants or agreements of Borrower contained in
Sections 9(g), (k), (n), (o), (p), or (q) of this Agreement, or
default shall be made in the due observance or performance of any of
the covenants or agreements contained in any other section of this
Agreement and such default shall continue for more than thirty (30)
days after notice thereof has been given to Borrower by Bank or Bank
is notified of such default, or should have been so notified, pursuant
to the provisions of Section 9(k) hereof, whichever is earlier;
(iv) Borrower or any Subsidiary shall fail to make any payment of
principal, premium, if any, or interest with respect to any Debt
(other than Debt owing Bank) in an aggregate principal amount in
excess of $5,000,000 when due or within any applicable grace period;
(v) Any event or condition shall occur which results in the
acceleration of the maturity of any Debt of Borrower or any Subsidiary
(other than Debt owing Bank) in an aggregate principal amount in
excess of $5,000,000 or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or any
Person
-27-
<PAGE>
acting on such holder's behalf to accelerate the maturity thereof;
(vi) Borrower or any Subsidiary shall (A) commence a voluntary
case or other proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
an appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or any substantial part of its property, (B)
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, (C) make a general assignment for the
benefit of creditors, (D) fail generally to pay its debts as they
become due, or (E) take any corporate action authorizing any of the
foregoing;
(vii) An involuntary case or other proceeding shall be commenced
against Borrower or any Subsidiary seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of thirty (30) days; or
an order for relief shall be entered against Borrower or any
Subsidiary under the federal bankruptcy laws as now or hereinafter in
effect; or
(viii) A judgment or order for the payment of money in excess of
$5,000,000 (or judgments or orders aggregating in excess of
$5,000,000) shall be rendered against Borrower or any Subsidiary and
such judgments or orders shall continue unsatisfied and unstayed for a
period of thirty (30) days.
(b) Remedies. Upon the occurrence of any Event of Default specified in
--------
Subsections 10(a)(vi) and (vii) above, the entire principal amount due under the
Note and all interest then accrued thereon and any other liabilities of Borrower
hereunder (including, without limitation, the Breakage Amount if applicable)
shall become immediately due and payable all without notice and without
presentment, demand, protest, notice of protest or dishonor, notice of intent to
accelerate, notice of acceleration, or any other notice of default of any kind,
all of which are hereby expressly waived by Borrower. In the case of any other
Event of Default, Bank may, by notice to Borrower, declare the principal of, and
all interest then accrued on, the Note and any other liabilities hereunder
(including, without limitation, the Breakage Amount if applicable) to be
forthwith
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<PAGE>
due and payable, whereupon the same shall forthwith become due and payable
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration, or other notice of any kind, all of which Borrower hereby
expressly waives, anything contained herein or in the Note to the contrary
notwithstanding. Nothing contained in this Section 10 shall be construed to
limit or amend in any way the Events of Default enumerated in the Note or any
other document executed in connection with the transaction contemplated herein.
If the Note is accelerated, then Bank shall determine the Breakage Amount, and
Borrower shall pay to Bank upon its demand the Breakage Amount, provided that in
no event shall Bank pay Borrower or shall Borrower otherwise be entitled to a
credit for any Breakage Amount.
(c) Right of Set-Off. Upon the occurrence and during the continuance
----------------
of any Event of Default, Bank is hereby authorized at any time and from time to
time, without notice to Borrower (any such notice being expressly waived by
Borrower), to set-off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at any
time owing by Bank to or for the credit or the account of Borrower against any
and all of the indebtedness of Borrower now or hereafter existing under the Note
and this Agreement, irrespective of whether Bank shall have made any demand
under this Agreement or the Note and although such indebtedness may be
unmatured. Bank agrees promptly (and in any event within five (5) Business Days)
to notify Borrower after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of Bank under this Section 10 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that Bank may have. None of the rights granted to Bank in this Section 10 shall
apply to any deposits held by it constituting trust funds and so identified to
it at the time the applicable deposit account is created.
SECTION 11. EXERCISE OF RIGHTS; WAIVERS. No failure to exercise, and
---------- ---------------------------
no delay in exercising, on the part of Bank, any right 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
hereunder. The rights of Bank hereunder are cumulative and are not exclusive of
any other rights, powers, privileges, or remedies now or hereafter existing, at
law or in equity or otherwise. No modification or waiver of any provision of
this Agreement or the Note nor consent to departure therefrom shall be effective
unless in writing, and no such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other
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<PAGE>
action in the same, similar, or other circumstances without such notice or
demand.
SECTION 12. NOTICES. Any notices or other communications required or
---------- -------
permitted to be given by this Agreement or any other documents and instruments
referred to herein must be given in writing (including telegraphic, telex and
facsimile transmission) and must be personally delivered or mailed first class
postage paid addressed to the party to be notified at its address on the
signature page hereof. Any such notice or other communication shall be deemed
to have been given (whether actually received or not) on the day it is
personally delivered as aforesaid or, if mailed, on the third Business Day after
it is mailed as aforesaid. Either party may change its address for purposes of
this Agreement by giving notice of such change to the other party pursuant to
this Section 12.
SECTION 13. EXPENSES; INDEMNIFICATION.
---------- -------------------------
(a) Expenses. Borrower shall pay (i) all reasonable and necessary out-
--------
of-pocket expenses of Bank (including the reasonable fees and disbursements of
special counsel for Bank) in connection with the preparation of this Agreement
and the documents described or referred to herein, any waiver or consent
hereunder or any amendment hereof, or any default or Event of Default or alleged
default or Event of Default hereunder, and (ii) all reasonable and necessary
out-of-pocket expenses incurred by Bank (including the reasonable fees and
disbursements of counsel for Bank) in connection with any Event of Default or
any condition, event, or act that, with the giving of notice or lapse of time or
both, would constitute an Event of Default, and collection and other enforcement
proceedings resulting therefrom. Borrower shall indemnify Bank against any
transfer taxes, document taxes, assessments, or charges made by any governmental
authority by reason of the execution and delivery of this Agreement or the Note.
The provisions of this Section 13(a) shall survive the termination of this
Agreement.
(b) Indemnification. Borrower agrees to indemnify and hold harmless
---------------
Bank from and against any loss, cost, liability, damage, or expense (including
the reasonable fees and out-of-pocket expenses of counsel to Bank, including all
necessary local counsel hired by such counsel) incurred by Bank in investigating
or preparing for, defending against, or providing evidence, producing documents,
or taking any other action with respect to any commenced or threatened
litigation, administrative proceeding, or investigation under any federal
securities law or any other statute of any jurisdiction, or any regulation, or
at common law or otherwise that arises out of or is based upon any acts,
practices, or omissions or alleged acts, practices, or
-30-
<PAGE>
omissions of Borrower or its agents relating to (i) the use of the proceeds of
the Loan or (ii) the acquisition by Borrower of all or any part of the stock or
property of any Person, regardless of whether Borrower shall have borrowed
hereunder to finance all or any part of such acquisition. The indemnity set
forth herein shall be in addition to any other obligations or liabilities of
Borrower to Bank hereunder or at common law or otherwise and shall survive any
termination of this Agreement and the payment of all indebtedness of Borrower to
Bank hereunder and under the Note, provided that Borrower shall have no
obligation under this Section 13 to Bank with respect to any of the foregoing
arising out of the negligence or willful misconduct of Bank.
SECTION 14. GOVERNING LAW. This Agreement is being executed and
---------- -------------
delivered, and is intended to be performed, in Dallas, Texas, and the
substantive laws of Texas shall govern the validity, construction, enforcement,
and interpretation of this Agreement and all other documents and instruments
referred to herein, unless otherwise specified therein or unless the laws of
another state require the application of the laws of such state.
SECTION 15. INVALID PROVISIONS. If any provision of this Agreement
---------- ------------------
is held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provisions shall be fully
severable and this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of the Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
SECTION 16. MAXIMUM INTEREST RATE. Regardless of any provisions
---------- ---------------------
contained in this Agreement or in any other documents and instruments referred
to herein, Bank shall never be deemed to have contracted for or be entitled to
receive, collect, charge, or apply as interest on the Note any amount in excess
of the maximum rate of interest permitted to be charged by applicable law. In
the event Bank ever receives, collects, charges, or applies as interest any such
excess or if an acceleration of the maturities of the Note or any prepayment by
Borrower results in Borrower having paid any interest in excess of the maximum
rate, such amount that would constitute excessive interest shall be applied to
the reduction of the unpaid principal balance of the Note for which such excess
was received, collected, or applied. If the principal balance of such Note is
paid in full, any such remaining excess shall forthwith be paid to Borrower.
All sums paid or agreed to be paid to Bank for the use, forbearance, or
detention of the indebtedness evidenced by the Note or this
-31-
<PAGE>
Agreement shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term of such indebtedness
until paid in full so that the rate or amount of interest on account of such
indebtedness does not exceed the maximum lawful rate permitted under applicable
law. In determining whether the interest paid or payable under any specific
contingency exceeds the maximum rate of interest permitted by law, Borrower and
Bank shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee, or premium, rather
than as interest, (ii) exclude voluntary prepayments and the effect thereof, and
(iii) compare the total amount of interest contracted for, charged, or received
with the total amount of interest that could be contracted for, charged, or
received throughout the entire contemplated term of the Note at issue at the
maximum lawful rate under applicable law.
SECTION 17. MULTIPLE COUNTERPARTS. This Agreement may be executed in
---------- ---------------------
identical separate counterparts, each of which for all purposes is to be deemed
an original, but all of which shall constitute, collectively, one agreement. No
party to this Agreement shall be bound hereby until a counterpart of this
Agreement has been executed by all parties hereto.
SECTION 18. SURVIVAL. All covenants, agreements, undertakings,
---------- --------
representations, and warranties made in this Agreement, the Note, or other
documents and instruments referred to herein shall survive all closings
hereunder and shall not be affected by any investigation made by any party.
SECTION 19. PARTIES BOUND. This Agreement shall be binding upon and
---------- -------------
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, legal representatives, and estates, provided, however, that
Borrower may not, without the prior written consent of Bank, assign any rights,
powers, duties, or obligations hereunder.
SECTION 20. PARTICIPATIONS.
---------- --------------
(a) Bank shall have the right at any time and from time to time to
sell one or more participations in the Note. Bank's obligations hereunder shall
remain unchanged, and no participant shall have the right to consent to or
restrict Bank's ability to agree to the modification, waiver or amendment of any
of the terms of this Agreement or the Note or to consent to any action or
failure to act of any party to this Agreement or the Note or to excuse or
refrain from exercising any power or rights which Bank may have under this
Agreement and the Note. To the extent of any such participation, the provisions
of this Agreement shall inure to the benefit of, and be binding on, each
participant,
-32-
<PAGE>
including, but not limited to, any indemnity from Borrower to Bank. Borrower
shall have no obligation or liability to and no obligation to negotiate or
confer with, any participant, and Borrower shall be entitled to treat Bank as
the sole owner of the Note without regard to notice or actual knowledge of any
such participation. Upon the occurrence of an Event of Default, each
participant will have and is hereby granted the right to setoff against and to
appropriate and apply from time to time, without prior notice to Borrower or any
other party, any such notice being hereby expressly waived, any and all deposits
(general or special) or other indebtedness or claims, direct or indirect,
contingent or otherwise, at any time held or owing by the participant to or for
the credit or account of Borrower against the payment of the Note and any other
obligations of Borrower hereunder, provided, however, none of the rights granted
in this Section 20 shall apply to any deposits held by any participant
constituting trust funds and so identified to such participant at the time the
applicable deposit account is created. Within five (5) Business Days after such
setoff or appropriation by a participant, that participant shall give Borrower
and Bank written notice thereof; provided, however, a failure to give such
notice shall not affect the validity of the setoff or appropriation.
(b) Bank may furnish any information concerning Borrower in the
possession of Bank from time to time to participants (including prospective
participants), provided that the Person to whom such information shall be
disclosed shall have agreed in writing, subject to normal exceptions and to the
extent that the same is not in the public domain, to keep such information
confidential.
SECTION 21. OPTION TO FUND. Bank shall be entitled to fund and
---------- --------------
maintain its funding of all or any part of the principal balance of its Note in
any manner it sees fit.
SECTION 22. ACCOUNTING TERMS. Unless specified elsewhere herein or
---------- ----------------
otherwise required or permitted by any federal or state regulatory authority or
agency to which Borrower is subject, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements to be delivered hereunder shall be prepared in accordance
with, GAAP.
SECTION 23. NO CONTROL. None of the terms of this Agreement or of
---------- ----------
any other document executed in conjunction herewith or related hereto shall be
deemed to give Bank the rights and powers to exercise control over the business
or affairs of Borrower. The relationship between Borrower and Bank created by
this Agreement is only that of a debtor/creditor, and
-33-
<PAGE>
the powers of Bank hereunder are limited to the right to receive payment on the
Note and to exercise the remedies provided herein and in any other document
executed in conjunction herewith or related hereto.
SECTION 24. OTHER AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS
---------- ----------------
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed as of the day and year first above written.
ATMOS ENERGY CORPORATION ATMOS ENERGY CORPORATION,
5430 LBJ Freeway a Texas corporation
Three Lincoln Centre, Suite
160
Dallas, Texas 75240 By:
Attention: Carl Weller ---------------------------------
Treasurer James F. Purser
Telephone: (214) 450-9755 Executive Vice President and
Fax: (214) 455-3085 Chief Financial Officer
NATIONSBANK OF TEXAS, N.A. NATIONSBANK OF TEXAS, N.A.,
901 Main Street, 64th Floor a national banking association
Dallas, Texas 75202
Attention: Curtis L. Anderson
Senior Vice President By:
Utility Finance Division ---------------------------------
Telephone: (214) 508-1290 Curtis L. Anderson
Fax: (214) 508-3943 Senior Vice President
LIST OF EXHIBITS
A Form of Promissory Note (S) 2(b)
B Change in Condition (S) 7(f)
C Material Liabilities (S) 7(h)
D List of Subsidiaries (S) 7(r)
-34-
<PAGE>
E Environmental Matters (S) 7(s)
F Existing Liens (S) 9(n)
-35-
<PAGE>
EXHIBIT A
TERM NOTE
$40,000,000 Dallas, Texas November 26, 1996
FOR VALUE RECEIVED, ATMOS ENERGY CORPORATION, a Texas corporation having
its principal place of business at Three Lincoln Centre, Suite 160, 5430 LBJ
Freeway, Dallas, Texas 75240, referred to herein as "Borrower," promises to pay
to the order of NATIONSBANK OF TEXAS, N.A., a national banking association
referred to herein as the "Lender," the principal sum of Forty Million Dollars
($40,000,000), or, if less, such amount as may have been advanced and be
outstanding hereunder, together with interest on the unpaid principal balance as
set forth below. All sums hereunder are payable to the Lender at its principal
office at 901 Main Street, Dallas, Texas 75202.
1. DEFINITIONS. Unless the context hereof otherwise requires or
-----------
provides, the terms used herein have the same meanings as defined in that
certain Loan Agreement between the Borrower and the Lender of even date
herewith, as the same has been or may be amended or supplemented from time to
time (the "Agreement"). The definitions of "Maturity Date" and "Maximum Rate"
are reproduced below for purposes of clarity:
Maturity Date - November 25, 1998, the day which is one (1) day less
-------------
than two (2) years from the Closing Date.
Maximum Rate - The highest rate of nonusurious interest permitted from
------------
day to day by applicable law, including Tex. Rev. Civ. Stat. Ann. art.
5069-1.04 (and as the same may be incorporated by reference in other Texas
statutes), but, otherwise, without limitation, the rate based upon the
"indicated rate ceiling."
2. INTEREST RATE. The unpaid principal balance from the date hereof
-------------
until maturity (whether by acceleration or otherwise) shall bear interest at
6.09% per annum. All past-due payments of principal and interest under this
Note shall bear interest at the Maximum Rate from maturity until paid.
3. PAYMENT OF PRINCIPAL AND INTEREST. Interest only on the unpaid
---------------------------------
principal balance hereof shall be due and payable in seven (7) consecutive
quarterly installments commencing December 31, 1996, and continuing through and
including September 30, 1998. Then, the unpaid principal balance of this Note
together with accrued interest thereon, shall be due and
EXHIBIT A - Page 1
- ---------
<PAGE>
payable on the Maturity Date. The principal and interest due hereunder shall be
evidenced by the Lender's records which, absent manifest error, shall be
conclusive evidence of the computation of principal and interest balances owed
by the Borrower to the Lender.
4. DEFAULT. Upon the occurrence of an Event of Default described in
-------
Section 10(a)(vi) or Section 10(a)(vii) of the Agreement, the entire principal
of and accrued interest on this Note shall forthwith be due and payable without
demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate, notice of acceleration and all other
notices and further actions of any kind, all of which are hereby expressly
waived by the Borrower. Should any other Event of Default occur and be
continuing, the holder of this Note may, without demand or notice of its
election declare the entire unpaid balance of this Note, or any part thereof,
immediately due and payable, whereupon the principal of and accrued interest on
such Note shall be forthwith due and payable without demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by the Borrower.
5. PREPAYMENT. The Borrower may at any time prepay in whole but not in
----------
part the unpaid principal of this Note in the manner and to the extent specified
in Section 4 of the Agreement.
6. WAIVER. Each surety, endorser, guarantor and any other party now or
------
hereafter liable for the payment of this Note in whole or in part ("Surety") and
the Borrower hereby severally (a) waive grace, demand, presentment for payment,
notice of nonpayment, protest, notice of protest, non-payment or dishonor,
notice of intent to accelerate, notice of acceleration and all other notices
(except as provided in the Agreement), filing of suit and diligence in
collecting this Note or enforcing any other security with respect to same, (b)
agree to any substitution, surrender, subordination, waiver, modification,
change, exchange or release of any security or the release of the liability of
any parties primarily or secondarily liable hereon, (c) agree that the Lender is
not required first to institute suit or exhaust its remedies hereon against the
Borrower, any Surety or others liable or to become liable hereon or to enforce
its rights against them or any security with respect to same or to join any of
them in any suit against any others of them, and (d) consent to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to any of them. No failure or delay on
the part of the Lender in
EXHIBIT A - Page 2
- ---------
<PAGE>
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
7. ATTORNEYS' FEES. If this Note is not paid at maturity, regardless of
---------------
how such maturity may be brought about, or is collected or attempted to be
collected through the initiation or prosecution of any suit or through any
probate, bankruptcy or any other judicial proceedings, or is placed in the hands
of an attorney for collection, the Borrower shall pay, in addition to all other
amounts owing hereunder, all actual expenses of collection, all court costs and
reasonable attorney's fees incurred by the holder hereof.
8. LIMITATION ON AGREEMENTS. Regardless of any provisions contained in
------------------------
the Agreement or in any other documents and instruments referred to herein, the
Lender shall never be deemed to have contracted for or be entitled to receive,
collect, charge, or apply as interest on this Note any amount in excess of the
Maximum Rate. In the event the Lender ever receives, collects, charges, or
applies as interest any such excess or if an acceleration of the maturities of
this Note or any prepayment by the Borrower results in the Borrower having paid
any interest in excess of the Maximum Rate, such amount that would constitute
excessive interest shall be applied to the reduction of the unpaid principal
balance of this Note for which such excess was received, collected, or applied.
If the principal balance of this Note is paid in full, any such remaining excess
shall forthwith be paid to the Borrower. All sums paid or agreed to be paid to
the Lender for the use, forbearance, or detention of the indebtedness evidenced
by this Note or the Agreement shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full term of such
indebtedness until paid in full so that the rate or amount of interest on
account of such indebtedness does not exceed the maximum lawful rate permitted
under applicable law. In determining whether the interest paid or payable under
any specific contingency exceeds the Maximum Rate, the Borrower and the Lender
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as an expense, fee, or premium, rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
compare the total amount of interest contracted for, charged, or received with
the total amount of interest that could be contracted for, charged, or received
throughout the entire contemplated term of this Note at the maximum lawful rate
under applicable law. The terms and provisions of this paragraph shall control
and supersede every other provision of all agreements between the Lender and the
Borrower in conflict herewith.
EXHIBIT A- Page 3
- ---------
<PAGE>
9. GOVERNING LAW AND VENUE. This Note and the rights and obligations of
-----------------------
the parties hereunder shall be governed by the laws of the United States of
America and by the laws of the State of Texas, and is performable in Dallas
County, Texas. Chapter 15 of the Texas Credit Code (Tex. Rev. Civ. Stat. Ann.
art 5069.15.01 et seq.) which regulates certain revolving credit loans and
-- ----
revolving tri-party accounts does not apply to this Note.
10. BUSINESS DAY. If any action is required or permitted to be taken
------------
hereunder on a Sunday, legal holiday or other day on which banking institutions
in the State of Texas are authorized or required to close, such action shall be
taken on the next succeeding day which is a Business Day, and, to the extent
applicable, interest on the unpaid principal balance shall continue to accrue at
the applicable rate.
11. AGREEMENT. This Note is the Note referred to in the Agreement, and is
---------
entitled to the benefits thereof and the security as provided for therein.
Reference is made to the Agreement and the Loan Documents for a statement of the
rights and obligations of the Borrower, a description of the nature and extent
of the security and the rights of the parties in respect to such security, and a
statement of the terms and conditions under which the due date of this Note may
be accelerated.
ATMOS ENERGY CORPORATION
By
-------------------------------
James F. Purser
Executive Vice President
and Chief Financial Officer
EXHIBIT A - Page 4
- ---------
<PAGE>
EXHIBIT B
CHANGE IN CONDITION
1. Material Adverse Changes: NONE
2. Litigation:
The Borrower has filed a Notice of Appeal with the Colorado Court of
Appeals with respect to the Steamboat Springs case described in the
Borrower's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996. The Borrower has adequate insurance to cover the compensatory damages
awarded. The Borrower's insurance carrier recently informed the Borrower
that, based upon a recent Colorado Court ruling, it no longer believes that
the punitive damages awarded against the Borrower can be covered by the
Borrower's insurance policy. The Borrower is currently reviewing the
position of the insurance carrier with respect to coverage of punitive
damages.
See also Financial Statements.
EXHIBIT B - Page Solo
- ---------
<PAGE>
EXHIBIT C
MATERIAL LIABILITIES
See Financial Statements
EXHIBIT C - Page Solo
- ---------
<PAGE>
EXHIBIT D
LIST OF SUBSIDIARIES
Jurisdiction Percentage
Name of Subsidiary of of Voting
Incorporation Stock Owned
- ---------------------------------------------------------------------
Atmos Energy Services, Inc. Delaware 100%
EGASCO, Inc. Texas 100%
EnerMart, Inc. Delaware 100%
EnerMart Trust Pennsylvania (1)
Trans Louisiana Industrial Gas Louisiana 100%
Company, Inc.
Western Kentucky Gas Resources Delaware 100%
Company
(1) Stock owned 100% by EnerMart, Inc.
EXHIBIT D - Page Solo
- ---------
<PAGE>
EXHIBIT E
ENVIRONMENTAL MATTERS
None
EXHIBIT E - Page Solo
- ---------
<PAGE>
EXHIBIT F
EXISTING LIENS
Certain assets of Greeley Gas Company, a division of Atmos Energy Corporation,
are pledged to secure certain indebtedness under the Tenth Supplemental
Indenture, dated as of December 1, 1993, between Atmos Energy Corporation and
Colorado National Bank, formerly Central Bank. The Tenth Supplemental Indenture
relates to certain First Mortgage Bonds with First Colony Life, Series J, issued
April 1, 1991. The Tenth Supplemental Indenture includes an "after-acquired
property" clause.
EXHIBIT F - Page Solo
- ---------
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 1 TO
THE ATMOS ENERGY CORPORATION
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
WHEREAS, effective November 8, 1989, ATMOS ENERGY CORPORATION (the
"Company") adopted THE ATMOS ENERGY CORPORATION RETIREMENT PLAN FOR OUTSIDE
DIRECTORS (the "Plan"); and
WHEREAS, pursuant to Article VII of the Plan, the Board of Directors of the
Company desires to amend the Plan as hereinafter set forth;
NOW, THEREFORE, the Plan shall be, and hereby is, amended in the following
respects:
Section 2.08 of the Plan shall be, and hereby is, amended and revised to
read in its entirey as follows:
" 'Years of Service' means 365-day periods of service as an Outside
Director or, for periods prior to January 1, 1994, as a director of Greeley
Gas Company, whether or not interrupted or consecutive."
IN WITNESS WHEREOF, the Company has executed this Amendment No. 1 to The
Atmos Energy Corporation Retirement Plan for Outside Directors this 13th day of
November, 1996 to be effective as of this date.
ATMOS ENERGY CORPORATION
By: /s/ Robert F. Stephens
--------------------------------
Robert F. Stephens
President and Chief
Operating Officer
<PAGE>
EXHIBIT 10.3
THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
Effective Date: October 1, 1987
Amended and Restated in its Entirety: November 13, 1996
<PAGE>
TABLE OF CONTENTS
Article Page
I
Purpose and Effective Date............................... 1
Section 1.1. Purpose.................................................. 1
Section 1.2. Effective Date........................................... 1
II
Definitions and Construction............................. 1
Section 2.1. Definitions.............................................. 1
Section 2.2. Construction............................................. 5
Section 2.3. Governing Law............................................ 5
III
Eligibility and Participation............................ 6
Section 3.1. Employees Eligible to Participate........................ 6
IV
Assets Used for Benefits................................. 6
Section 4.1. Amounts Provided by the Employer......................... 6
Section 4.2. Funding.................................................. 7
V
Supplemental Pension Benefits............................ 8
Section 5.1. Eligibility for Supplemental Pension..................... 8
Section 5.2. Amount of Supplemental Pension........................... 9
Section 5.3. Form of Payment of Supplemental Pension.................. 11
Section 5.4. Commencement of Supplemental Pension..................... 11
Section 5.5. Supplemental Pensions After a Change in Control.......... 11
VI
Disability Benefits...................................... 12
Section 6.1. Eligibility For Disability Benefits...................... 12
Section 6.2. Amount of Disability Benefits............................ 12
Section 6.3. Payment of Disability Benefits........................... 13
Section 6.4. Payment of Supplemental Pension to Disabled
Participants............................................. 13
VII
Death Benefits........................................... 14
Section 7.1. Eligibility For Death Benefits........................... 14
Section 7.2. Amount of Death Benefit.................................. 14
Section 7.3. Form of Payment of Death Benefit......................... 15
Section 7.4. Commencement of Death Benefits........................... 16
VIII
Administration........................................... 17
Section 8.1. Plan Administration...................................... 17
i
<PAGE>
Section 8.2. Powers of Plan Administrator............................. 17
Section 8.3. Calculation of Funding Obligations....................... 18
Section 8.4. Annual Statements........................................ 18
IX
Miscellaneous Provisions................................. 19
Section 9.1. Amendment or Termination of the Plan..................... 19
Section 9.2. Nonguarantee of Employment............................... 21
Section 9.3. Nonalienation of Benefits................................ 23
Section 9.4. Liability................................................ 23
Section 9.5. Noncompetition Agreement................................. 23
Section 9.6. Participation Agreement.................................. 24
Section 9.7. Successors to the Employer............................... 24
ii
<PAGE>
ARTICLE I
Purpose and Effective Date
Section 1.1. Purpose: The purpose of this Plan is to provide
supplemental retirement income, death and disability benefits to certain
executive employees of Atmos Energy Corporation.
Section 1.2. Effective Date: The Plan initially became effective on
October 1, 1987, was amended and restated as of November 11, 1992, was amended
as of November 8, 1995, was amended as of May 8, 1996, and has been amended and
restated as of November 13, 1996.
ARTICLE II
Definitions and Construction
Section 2.1. Definitions: The following words and phrases used in this
Plan shall have the respective meanings set forth below, unless the context in
which they are used clearly indicates a contrary meaning:
(a) Beneficiary: The individual or individuals described in Section
7.3 of this Plan who are receiving any benefit payments hereunder.
(b) Board of Directors: The Board of Directors of the Employer.
(c) Cause: The termination of employment by the Employer upon the
happening of either (i) or (ii) as follows:
(i) The willful and continued failure by the Participant to
substantially perform his duties with the Employer (other than any
such failure resulting from the Participant's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to the Participant by the Employer that
specifically identifies the manner in which the Employer believes
that the Participant has
<PAGE>
not substantially performed his duties.
(ii) The Participant's willful engagement in conduct that is
demonstrably and materially injurious to the Employer, monetarily or
otherwise.
For purposes of this paragraph, no act, or failure to act, on the
Participant's part shall be deemed "willful" if done, or omitted to be
done, by the Participant in good faith and with a reasonable belief that
the action or omission was in the best interests of the Employer.
(d) Change in Control:
(i) The occurrence of any of the following:
(A) Any "person" (as defined in subparagraph (ii) below),
other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Employer, is or becomes the
"beneficial owner" (as defined in subparagraph (ii) below),
directly or indirectly, of securities of the Employer
representing 33-1/3% or more of the combined voting power of the
Employer's then outstanding securities.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (ii) below) cease for any
reason to constitute a majority of the Board of Directors.
(C) The shareholders of the Employer approve a merger or
consolidation of the Employer with any other corporation, except
if:
(1) the merger or consolidation would result in the
voting securities of the Employer outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least 60% of the combined voting
power of the voting securities of the Employer or such
surviving entity outstanding immediately after such merger
or consolidation; or
(2) the merger or consolidation occurs
2
<PAGE>
in connection with the approval by the shareholders of the
Employer of a plan of complete liquidation of the Employer
or an agreement for the sale or disposition by the Employer
of all or substantially all the Employer's assets.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning provided in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(B) "Beneficial owner" shall have the meaning provided in
Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose election
by the Employer's Board of Directors or nomination for election
by the Employer's shareholders was approved by a vote of at
least 2/3's of the directors then still in office who either
were directors at the beginning of the Period or whose election
or nomination for election was previously so approved. However,
"new director" shall not include a director designated by a
person who has entered into an agreement with the Employer to
effect a transaction described in subparagraphs (i)(A) or (B)
above.
(e) Compensation: The sum of (i), (ii) and (iii) as follows:
(i) The greater of (A) the Participant's annual base salary at
the date of his termination of employment, or (B) the average of the
Participant's annual base salary for the highest three (3) calendar
years (whether or not consecutive) of the Participant's employment
with the Employer.
(ii) The greater of (A) the Participant's last Performance
Award, or (B) the average of the highest three (3) Performance Awards
(whether or not consecutive).
(iii) The Participant's annual car allowance amount at the date
of his termination of employment.
(f) Death Benefit: The total benefit provided under
3
<PAGE>
this Plan upon the death of a Participant, which benefit is calculated in
this Plan on a pre-tax basis.
(g) Disability: The termination of a Participant's employment with
the Employer on account of disability as determined under the Group Long-
Term Disability Plan.
(h) Disability Benefit: The monthly benefit provided under this Plan
to a Participant who suffers a Disability, which benefit is calculated in
this Plan on a pre-tax basis.
(i) Eligible Employee: An employee who is either a corporate officer
of the Employer elected by the Board of Directors (excluding any assistant
officers that may be elected from time to time) or the president of an
Operating Division.
(j) Employer: Atmos Energy Corporation.
(k) Group Long-Term Disability Plan: The Atmos Energy Corporation
Group Long-Term Disability Plan, as amended from time to time.
(l) Involuntary Termination: The termination of a Participant's
participation in the Plan due to either (i) or (ii) as follows:
(i) The Participant's employment with the Employer is terminated
involuntarily by the Employer for any reason other than Cause or
Disability.
(ii) Any reason prior to his termination of employment with the
Employer.
(m) Operating Division: Energas Company, Greeley Gas Company, Trans
Louisiana Gas Company, Western Kentucky Gas Company, and any other
division of the Employer that the Employer may hereafter establish.
(n) Participant: An Eligible Employee of the Employer who meets the
requirements to participate in the Plan in accordance with the provisions
of Article III hereof.
(o) Participation Agreement: The agreement between the Employer and a
Participant described in Section 9.6 of this Plan, executed in the form
attached hereto as Exhibit C or in such other form as the Board of
Directors, in its sole discretion, may establish from time to time.
(o) Plan: The Atmos Energy Corporation Supplemental Executive
Benefits Plan, as set forth herein and as amended
4
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from time to time.
(p) Pension Plan: The Employees' Retirement Plan of Atmos Energy
Corporation, the Western Kentucky Gas Retirement Plan, the Greeley Gas
Company Employees' Pension Plan, or any other defined benefit pension plan
subsequently adopted or established by the Employer, whichever is
applicable, as amended from time to time. Any amount payable to or with
respect to a Participant from any group annuity contract maintained in
connection with the Pension Plan shall be deemed part of the benefit
applicable to the Participant under the Pension Plan.
(q) Performance Awards: Any amount paid, or authorized to be paid, to
a Participant pursuant to any annual performance bonus plan adopted or
established by the Employer, or, upon and after a Change in Control, any
amount paid, or authorized to be paid, to a Participant as a performance
related cash bonus in addition to his base cash compensation.
(r) Plan Administrator: The Board of Directors.
(s) Plan Year: Each twelve (12) month period beginning on January 1
and ending on December 31.
(t) Retired Participant: A Retired employee of the Employer who
receives benefits under this Plan.
(u) Retirement or Retire: A Participant's voluntary resignation from
employment with the Employer after he is vested in his retirement benefits
under the Pension Plan and has reached the age when he is eligible for the
immediate commencement of those benefits from the Pension Plan.
(v) Supplemental Pension: A Participant's monthly pension benefit
provided under this Plan, which benefit is calculated in this Plan on a
pre-tax basis.
Section 2.2. Construction: The masculine gender, whenever appearing in
this Plan, shall be deemed to include the feminine gender; the singular may
include the plural; and vice versa, unless the context clearly indicates to the
contrary.
Section 2.3. Governing Law: This Plan shall be construed in accordance
with and governed by the laws of the State of
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Texas, except to the extent otherwise preempted by the Employee Retirement
Income Security Act of 1974, as amended, or any other Federal law.
ARTICLE III
Eligibility and Participation
Section 3.1. Employees Eligible to Participate: Each Eligible Employee
shall participate in this Plan, provided he complies with the provisions of
Sections 9.5 and 9.6 hereof. Any Participant who ceases being an Eligible
Employee during his employment with the Employer shall immediately cease
participation in this Plan, except as otherwise set forth herein.
ARTICLE IV
Assets Used for Benefits
Section 4.1. Amounts Provided by the Employer: Benefits payable under
this Plan shall constitute general obligations of the Employer in accordance
with the terms of this Plan. The Employer may, in its sole discretion,
establish a trust or other funding arrangement that is subject to the claims of
the Employer's general creditors for the purpose of funding a Participant's
accrued benefit payable under this Plan. Any such trust or other funding
arrangement may also provide for the distribution to the Participant of an
amount equal to any federal or state income taxes that are incurred by the
Participant in the event the establishment of such trust or other funding
arrangement constitutes the constructive receipt by the Participant of any
benefits payable hereunder prior to the actual
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<PAGE>
receipt of such benefits. The Employer shall make appropriate adjustments to
the amount of the Participant's Supplemental Pension payable each month in order
to reflect the effect upon such Supplemental Pension of the distribution
described in the foregoing sentence.
Section 4.2. Funding: Not later than the time each Participant Retires
or becomes eligible to receive an unreduced Supplemental Pension under this
Plan, whichever occurs first, the Employer shall contribute to a trust or other
funding arrangement an amount necessary to fund 100% of the then-present value
of such Participant's accrued Supplemental Pension. The amount required to be
funded by this Section 4.2 shall be calculated in accordance with Section 8.3
hereof. Notwithstanding the foregoing, immediately upon a Change in Control,
the Employer shall contribute to a trust or other funding arrangement an amount
necessary to fund 100% of the then-present value of all Supplemental Pension
benefits (vested and unvested) payable hereunder to each Participant and Retired
Participant, regardless of whether any such person is then eligible to Retire or
to receive an unreduced Supplemental Pension. The Employer shall review the
funding status of each such trust or other funding arrangement required to be
established under this Section 4.2 on an annual basis and shall make such
contributions thereto as may be required to maintain the value of the assets
thereof at no less than 100% of the then-present value of all such Supplemental
Pension benefits. For purposes of this Section 4.2 only,
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<PAGE>
notwithstanding the foregoing, no actions or events related to the merger of
United Cities Gas Company ("United Cities") with and into the Employer, as
contemplated by the Agreement and Plan of Reorganization, dated as of July 19,
1996, between the Employer and United Cities (the "Merger"), including
shareholder approval of the Merger or the consummation of the Merger, shall
constitute a Change in Control of the Employer that requires the Employer to
make any contributions pursuant to this Section 4.2.
ARTICLE V
Supplemental Pension Benefits
Section 5.1. Eligibility for Supplemental Pension:
(a) Upon Retirement. Except as otherwise provided elsewhere in this
Plan or in a Participant Agreement, a Participant who has been an Eligible
Employee for at least two years and Retires shall be entitled to receive a
Supplemental Pension.
(b) Upon Involuntary Termination Prior to a Change in Control. A
Participant who suffers an Involuntary Termination prior to a Change in
Control shall be entitled to receive a Supplemental Pension, subject to
the provisions of Section 5.1(c) of this Plan, so long as he is vested in
his retirement benefits under the Pension Plan at the time of his
Involuntary Termination and has been an Eligible Employee for at least two
years prior to the Involuntary Termination.
(c) Upon Voluntary Termination Prior to a Change in Control or
Termination For Cause. A Participant who voluntarily resigns
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<PAGE>
from employment with the Employer prior to being eligible for Retirement
and prior to a Change in Control or who is terminated from employment with
the Employer for Cause shall not be entitled to receive a Supplemental
Pension.
(d) Upon Disability. A Participant who suffers a Disability shall be
entitled to a Supplemental Pension as provided in Section 6.4.
Section 5.2. Amount of Supplemental Pension:
(a) Upon Retirement. The Supplemental Pension payable to a
Participant who Retires, and who has been an Eligible Employee for at
least two years shall, unless reduced as provided in paragraph (b) below,
equal (i) minus (ii) as follows:
(i) One-twelfth (1/12th) of seventy-five percent (75%) of the
Participant's Compensation, reduced if the Participant has fewer than
ten (10) years of vesting service under the Pension Plan by one-tenth
(1/10th) for each year of his vesting service less than ten (10);
(ii) The monthly amount of pension payable to the Participant
under the Pension Plan as of the date that his employment terminates
assuming payment in the normal form applicable to him under the
Pension Plan;
provided, however, in no event shall the combined annual payment from this
Plan and the Pension Plan to any Participant listed on the Minimum Benefit
Schedule attached to this Plan as Exhibit A be less than the minimum
Annual Amount for such Participant listed on the Minimum Benefit Schedule.
9
<PAGE>
(b) Reduction for Early Commencement of Supplemental Pensions. If a
Participant's Supplemental Pension commences before the Participant
attains age 62, his Supplemental Pension shall, unless otherwise provided
in Exhibit A or in a Participation Agreement, be reduced for each year (or
fraction thereof, based on full months) that the date of commencement
precedes age 62. The reduction shall be made in the same manner as
reductions are made for early commencement under the Pension Plan.
(c) Cost of Living and Other Adjustments. A Participant who has begun
to receive his Supplemental Pension shall be entitled to receive any cost
of living or other adjustments to which he is otherwise entitled pursuant
to the Pension Plan, and his Supplemental Pension shall not be reduced by
such adjustments. If a Participant would not be entitled to receive a cost
of living or other adjustment due to statutory or regulatory limitations
on Pension Plan benefits, the Supplemental Pension shall be increased by
the amount of such adjustment for the time the limitations are in effect.
(d) Upon Involuntary Termination Prior to a Change in Control. The
Supplemental Pension payable to a Participant who suffers an Involuntary
Termination prior to a Change in Control shall be determined in accordance
with paragraph (a) above, but for purposes of subparagraph (a)(i) shall be
based upon his Compensation and years of vesting service under the Pension
Plan as of the date of his Involuntary Termination.
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<PAGE>
Section 5.3. Form of Payment of Supplemental Pension:
(a) Married Participants. If a Participant is married when his
Supplemental Pension commences, it shall be paid in the form of a joint
and 50% survivor annuity, with the Participant's spouse on the date
payment commences as the joint annuitant.
(b) Unmarried Participants. If a Participant is not married when his
Supplemental Pension commences, it shall be paid in the form of a ten year
certain and life annuity payable to the Participant or the Participant's
named beneficiary.
Section 5.4. Commencement of Supplemental Pension:
(a) Upon Retirement. The Supplemental Pension of a Participant who
Retires shall commence at the time he begins receiving retirement benefits
from the Pension Plan.
(b) Upon Involuntary Termination Prior to a Change in Control. The
Supplemental Pension of a Participant who suffers an Involuntary
Termination prior to a Change in Control shall commence at the time he
begins receiving retirement benefits from the Pension Plan.
Section 5.5. Supplemental Pensions After a Change in Control:
(a) Eligibility For Supplemental Pension. Notwithstanding anything to
the contrary in this Plan, a Participant shall be entitled to a
Supplemental Pension, regardless of whether he has been an Eligible
Employee for at least two years or is vested in his retirement benefits
under the Pension Plan, if following a Change in Control of the Employer
either (i) or (ii) occurs:
11
<PAGE>
(i) A Participant's employment is terminated on account of
Disability or by the Employer for any reason other than for Cause.
(ii) The Participant's participation in the Plan is terminated by
the Employer prior to his termination of employment with the Employer
for any reason other than for Cause.
(b) Amount of Supplemental Pension. The Supplemental Pension payable
to a Participant described in paragraph (a) above shall be calculated in
the same manner as set forth in Section 9.1(c) for benefits payable in the
event of a termination of the Plan, but based on his Compensation as of
the date his participation in the Plan is terminated.
(c) Commencement of Supplemental Pension. The Supplemental Pension
payable to a Participant described in paragraph (a) above shall commence
at the time the Participant begins receiving retirement benefits from the
Pension Plan, or if he is not entitled to benefits from the Pension Plan
when his employment is terminated, at the time he would otherwise be
entitled to begin receiving retirement benefits under the Pension Plan if
he were so entitled.
ARTICLE VI
Disability Benefits
Section 6.1. Eligibility For Disability Benefits: A Participant shall be
entitled to a Disability Benefit if he suffers a Disability prior to his
Retirement.
Section 6.2. Amount of Disability Benefits: The Disability Benefit
payable to an eligible Participant shall equal (a) minus
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<PAGE>
(b) as follows:
(a) One-twelfth (1/12th) of sixty percent (60%) of the Participant's
Compensation calculated as of the date of his Disability.
(b) The monthly amount of disability benefit payable to the
Participant under the Group Long-Term Disability Plan as of the date that
his employment terminates due to Disability.
Section 6.3. Payment of Disability Benefits: A Participant's Disability
Benefits shall commence at the same time such Participant begins receiving
benefits from the Group Long-Term Disability Plan and shall continue for so long
as benefits are paid under the Group Long-Term Disability Plan.
Section 6.4. Payment of Supplemental Pension to Disabled Participants:
(a) Upon Reaching Normal Retirement Age. If a Participant who has
suffered a Disability reaches his normal retirement age under the Pension
Plan while still receiving Disability Benefits, such Participant shall be
entitled to a Supplemental Pension commencing at the time Participant
begins receiving retirement benefits from the Pension Plan regardless of
whether the Participant has been an Eligible Employee for at least two
years. The Supplemental Pension payable to such Participant shall be in
the form provided in Section 5.3 and determined in accordance with
Subsection 5.2(a). Upon commencement of a Participant's Supplemental
Pension under this Section 6.4(a), such Participant's Disability Benefit
under Section 6.3 hereof shall cease.
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<PAGE>
(b) Prior to Reaching Normal Retirement Age. Notwithstanding the
provisions of paragraph (a) above, a Participant receiving a Disability
Benefit may elect to receive a Supplemental Pension at any time after
becoming eligible to Retire and prior to his normal retirement age under
the Pension Plan. If such an election is made, the Participant's
Disability Benefits shall cease and the Participant shall commence
receiving a Supplemental Pension in the form provided in Section 5.3 at
the same time he begins receiving retirement benefits from the Pension
Plan. The Supplemental Pension payable to such Participant shall be
determined in accordance with Subsections 5.2(a) and (b), and shall be
determined based on the Participant's Compensation as of the date that
such individual terminated employment on account of disability.
ARTICLE VII
Death Benefits
Section 7.1. Eligibility For Death Benefits: A Participant shall be
entitled to a Death Benefit if he meets the requirements of either (a) or (b) as
follows:
(a) He dies before his employment with the Employer terminates or
while receiving a Disability Benefit under this Plan.
(b) He Retires, but dies before the commencement of his Supplemental
Pension.
Section 7.2. Amount of Death Benefit:
(a) In-Service Death: In the case of a Participant who dies as
provided in Subsection 7.1(a), the Death Benefit will be
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<PAGE>
the total of the following (i), (ii), and (iii):
(i) A lump sum payment equal to two times the Participant's
Compensation minus any amount payable under the Employer's Group
Basic Life Insurance Plan (the "Lump Sum Death Benefit").
(ii) A monthly benefit equal to one-twelfth of an amount equal
to fifty percent of the Participant's Compensation at the time of his
death (the "Monthly Death Benefit").
(iii) If the Participant leaves a child or children to whom
payments are to be made under Section 7.3 hereof, a monthly benefit
equal to one-twelfth of an amount equal to twenty-five percent of the
Participant's Compensation at the time of his death (the "Dependent
Death Benefit").
(b) Post Retirement Death: In the case of a Participant who dies as
provided in Subsection 7.1(b), a Death Benefit will be paid in the amount
and to the beneficiary that would have been applicable had the
Participant's Supplemental Pension commenced in the month of his death.
Section 7.3. Form of Payment of Death Benefit:
(a) Lump Sum and Monthly Death Benefits: The Lump Sum and Monthly
Death Benefits are payable to the Participant's surviving spouse. If the
Participant does not have a surviving spouse, the Lump Sum and Monthly
Death Benefits are payable to the Participant's surviving children in
equal shares (regardless of dependent status) or, if there are no
surviving children, to the Participant's surviving parents or siblings as
designated by the Participant for this purpose and in the manner specified
by the Participant on a form supplied by the Employer. Payment of the
Monthly Death Benefit shall be as a single life annuity if
15
<PAGE>
payable to Participant's surviving spouse or a 120-month term certain
annuity if payable to a child, parent, or sibling.
(b) Dependent Death Benefit: The Dependent Death Benefit is payable
to the Participant's dependent children in equal shares until there cease
to be any dependent children remaining. As each child loses his or her
dependent status, the child's share of the Dependent Death Benefit shall
be paid to the remaining dependent child or children in equal shares. A
child of the Participant is deemed to be a dependent until the child
reaches age eighteen or, if a full-time student (i.e. enrolled in twelve
hours or more of courses of higher education), age 25, or until the
child's death if earlier. At the discretion of the Plan Administrator, any
dependent child's share of the Dependent Death Benefit may be paid to the
Participant's surviving spouse or other guardian of such child if
applicable and shall constitute full settlement of the Plan's obligation
to such child with respect to such payment. If the Participant's surviving
spouse dies while receiving the Monthly Death Benefit and while any
dependent child or children of the Participant remain, then the Monthly
Death Benefit shall be added to the Dependent Death Benefit and shall be
payable in equal shares to the dependent children in the same manner and
for the same time period as the Dependent Death Benefit.
Section 7.4. Commencement of Death Benefits: The Death Benefits shall be
paid, with respect to the Lump Sum Death Benefit, or shall commence, with
respect to the Monthly and
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<PAGE>
Dependent Death Benefits, as of the first day of the month next following the
Participant's death.
ARTICLE VIII
Administration
Section 8.1. Plan Administration: The Plan shall be administered by the
Board of Directors. The Board of Directors may, in its sole discretion,
establish a committee to carry out the day-to-day administration of the Plan and
may delegate any portion of its authority and responsibilities as Plan
Administrator to such committee.
Section 8.2. Powers of Plan Administrator: The Plan Administrator shall
have the discretionary power and authority to interpret and administer the Plan
according to its terms, including the power to construe and interpret the Plan,
to supply any omissions therein, to reconcile and correct any errors or
inconsistencies, to decide any questions in the administration and application
of the Plan, and to make equitable adjustments for any mistakes or errors in the
administration and application of the Plan. The Plan Administrator shall have
such additional powers as may be necessary to discharge its duties and
17
<PAGE>
responsibilities hereunder.
Section 8.3. Calculation of Funding Obligations: The Employer shall
calculate its funding obligations hereunder solely by using the actuarial
assumptions and methodology set forth in Exhibit D hereto. In its discretion,
at any time prior to a Change in Control of the Employer, the Employer may amend
Exhibit D to change such actuarial assumptions and methodology, provided that
such changes are communicated promptly in writing to all Participants, Retired
Participants, and Beneficiaries. Upon and after a Change in Control of the
Employer, the actuarial assumptions and methodology set forth in Exhibit D may
be changed with respect to any Participant, Retired Participant, or Beneficiary
only with the written consent of such affected Participant, Retired Participant,
or Beneficiary. For purposes of this Section 8.3 only, and notwithstanding the
foregoing, no actions or events related to the merger of United Cities Gas
Company ("United Cities") with and into the Employer, as contemplated by the
Agreement and Plan of Reorganization, dated as of July 19, 1996, between the
Employer and United Cities, including shareholder approval of the Merger or the
consummation of the Merger, shall constitute a Change in Control of the Employer
that requires any consent be obtained pursuant to this Section 8.3.
Section 8.4. Annual Statements: As soon as practicable after the end of
each Plan Year, the Employer shall deliver to each Participant, Retired
Participant, and Beneficiary
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<PAGE>
a statement containing (i) the present value of the Employer's future benefit
obligations to the Participant, Retired Participant, or Beneficiary; (ii) the
actuarial assumptions used to calculate the present value of the Employer's
future benefit obligations hereunder; and (iii) the current value of the assets,
if any, held in a trust or other funding arrangement for the benefit of the
Participant, Retired Participant, or Beneficiary.
ARTICLE IX
Miscellaneous Provisions
Section 9.1. Amendment or Termination of the Plan:
(a) In General. Subject to the remaining provisions of this Section
9.1, the Board of Directors may by resolution, in its absolute discretion,
from time to time, amend, suspend, or terminate any or all of the
provisions of the Plan; provided, however, that no amendment, suspension,
or termination may apply so as to decrease the payment to any Participant
or beneficiary of any benefit under the Plan that he accrued prior to the
effective date of such amendment, suspension, or termination unless the
Participant has engaged in dishonest or competitive activities as
described in Section 9.5 hereof.
(b) Amendment That Decreases Benefits. If the Board of Directors
amends the Plan and such amendment results in a decrease in the
Supplemental Pension, Death Benefit or Disability Benefit that otherwise
would be paid under this Plan but for the amendment, except as provided in
subparagraphs (iii) and (iv) below, the Participant's Supplemental
Pension, Death Benefit or
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Disability Benefit shall equal the sum of (i) and (ii) as follows:
(i) The amount derived by multiplying the Participant's benefit
calculated pursuant to the terms of the Plan in effect immediately
prior to the amendment and based upon the Participant's Compensation
used to calculate the appropriate benefit by the following fraction:
The numerator is the number of years of vesting service the
Participant has under the Pension Plan prior to the effective date of
the amendment, and the denominator is the total number of years of
vesting service the Participant has under the Pension Plan; however,
neither the numerator nor the denominator shall exceed 10.
(ii) The amount derived by multiplying the Participant's benefit
as calculated pursuant to the terms of the Plan as amended based upon
the Participant's Compensation used to calculate the appropriate
benefit by the following fraction: The numerator is the number of
years that the Participant participated in the Pension Plan after the
effective date of the amendment (but this number when added to the
numerator of the fraction in subparagraph (i) above, shall not exceed
10) and the denominator is the total number of years of vesting
service the Participant has under the Pension Plan (but this number
shall not exceed 10).
(iii) Notwithstanding the foregoing provisions of this paragraph
(b), if the Plan is so amended before a Participant has five years of
vesting service under the Pension Plan, the Participant's
Supplemental Pension, Death Benefit or Disability Benefit shall be
calculated solely in accordance with the terms of the Plan as
amended.
(iv) Notwithstanding the foregoing provisions of this paragraph
(b), if any such amendment occurs upon or after a Change in Control,
the Participant's Supplemental Pension shall at least equal the
benefits which would be paid under paragraph (c) below if there was a
termination of the Plan at the time of such amendment.
(c) Termination of the Plan.
(i) If the Board of Directors terminates all or any portion of
the Plan and such termination adversely affects a Participant's
Supplemental Pension, such Participant shall be entitled to receive a
Supplemental Pension whether or not such Participant has been an
Eligible Employee for at least two years or has five years of vesting
service under the
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Pension Plan at the time of such Plan termination.
(A) It shall be based upon the Participant's Compensation
as of the date of the termination of the Plan;
(B) If payment of the Supplemental Pension begins before
the Participant has ten years of vesting service in the Pension
Plan, the reduction referred to in Section 5.2(a)(i) shall not
apply;
(C) If payment of the Supplemental Pension begins before
the Participant attains age 62, the reductions referred to in
Section 5.2(b) shall not apply; and
(D) If the Participant is not otherwise vested under the
Pension Plan, the calculation made under Subsection 5.2(a)(ii)
above shall be made as if he were so vested.
The Supplemental Pension determined under this paragraph (c) shall
commence at the time the Participant begins receiving retirement
benefits from the Pension Plan, or if he is not entitled to benefits
from the Pension Plan when his employment is terminated, at the time
he would otherwise be entitled to begin receiving retirement benefits
under the Pension Plan if he were so entitled.
(ii) If the Board of Directors terminates all or any portion of
the Plan and such termination adversely affects the Disability
Benefits or Death Benefits described in the Plan, a Participant shall
continue to be entitled to the Disability Benefits or Death Benefits
described in the Plan if he thereafter dies or suffers a Disability.
Any such Death Benefit or Disability Benefit, however, shall be
calculated as of the date of termination of such benefit or the Plan
as if such date of termination was the date the Participant died or
suffered a Disability. Payment of any such Death Benefit or
Disability Benefit shall be made in accordance with the terms of the
Plan as in effect immediately prior to the date of termination of
such benefit or the Plan.
Section 9.2. Nonguarantee of Employment: Nothing contained in this Plan
shall be construed as a contract of employment between the Employer and any
employee, as a right of any employee to be continued in the employment of the
Employer, or as a
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limitation of the right of the Employer to discharge any of its employees, with
or without Cause. If a Participant's employment with the Employer is terminated
without Cause or if the Participant's participation in the Plan is terminated
for any reason other than resignation or termination of employment for Cause
(except as otherwise provided in a Participation Agreement) the Participant
shall be entitled to the benefits payable under this Plan that have accrued
prior to the termination of employment or Plan participation. If such
termination occurs upon or after a Change in Control, the Participant's right to
a Supplemental Pension shall immediately vest regardless of whether the
Participant has been an Eligible Employee for at least two years or has five
years of vesting service under the Pension Plan as of the date of such
termination. The amount of the benefits payable under this Plan to such a
Participant (except as otherwise provided in a Participation Agreement) shall,
if such termination occurs upon or after a Change of Control, be calculated in
the same manner as set forth in Section 9.1 above for benefits payable in the
event of a termination of the Plan. Notwithstanding any provision to the
contrary herein contained, if, prior to a Change of Control, a Participant's
employment with the Employer is terminated without Cause or if the Participant's
participation in the Plan is terminated for any reason other than resignation or
termination of employment for Cause, then, except as otherwise provided in a
Participation Agreement, the amount of the benefits payable under this Plan to
such Participant shall be
22
<PAGE>
calculated in the manner set forth in Section 5.2 above and the Participant's
right to a Supplemental Pension shall vest only if the Participant has been an
Eligible Employee for at least two years and has five years of vesting service
under the Pension Plan as of the date of such termination.
Section 9.3. Nonalienation of Benefits: To the extent permitted by law,
benefits payable under this Plan shall not, without the Plan Administrator's
consent, be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary. Any unauthorized attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose
of any right to benefits payable hereunder shall be void. No part of the assets
of the Employer shall be subject to seizure by legal process resulting from any
attempt by creditors of or claimants against any Participant or beneficiary or
any person claiming under or through the foregoing to attach his interest under
the Plan.
Section 9.4. Liability: No director, officer, or employee of the
Employer shall be liable for any act or action, whether of commission or
omission, taken by any other director, officer, employee, or agent of the
Employer under the terms of the Plan or, except in circumstances involving his
bad faith, for anything done or omitted to be done by him under the terms of the
Plan.
Section 9.5. Noncompetition Agreement: All Participants in the Plan
shall have entered into Noncompetition Agreements in the
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<PAGE>
form attached hereto as Exhibit B as a condition to their participation in the
Plan. Notwithstanding any other provisions of this Plan to the contrary, no
benefits shall be payable under the Plan, and payment of benefits will cease, if
a Participant is in breach of such agreement at any time during the term of such
agreement.
Section 9.6. Participation Agreement: Each Participant shall enter into
a Participation Agreement as a condition to his participation in the Plan. Such
Participation Agreement shall constitute a separate and enforceable agreement
between the Employer and the Participant regarding the Participant's rights in
the Plan.
Section 9.7. Successors to the Employer: Any successor to the Employer
hereunder, which successor continues or acquires any of the business of the
Employer, shall be bound by the terms of this Plan in the same manner and to the
same extent as the Employer.
IN WITNESS WHEREOF, and as conclusive evidence of its adoption of this
Amended and Restated Supplemental Executive Benefits Plan, the Employer has
caused this Plan to be duly executed on this 13th day of November, 1996, to be
effective as of the date set forth in Section 1.2 above.
ATMOS ENERGY CORPORATION
By: /s/ ROBERT F. STEPHENS
-----------------------------------
Robert F. Stephens
President and Chief Operating
Officer
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<PAGE>
EXHIBIT A
MINIMUM BENEFIT SCHEDULE
One twelfth (1/12th) of the Annual Amount set forth below for a Participant
is the minimum total monthly pension amount payable from this Plan and the
Pension Plan to the Participant so long as payment commences no earlier than the
specified Earliest Commencement Age. Earlier commencement will result in
reduction under Section 5.2 of this Plan, except in the case of Mr. Vaughan,
whose benefits under this Plan (including the minimum Annual Amount stated
below) are payable upon his retirement at any time after he has reached age
fifty-five (55).
Participant Name Annual Amount Earliest
Commencement
Age
E. G. Carter $ 84,503 62
J. A. Enloe 76,924 62
N. V. Fariss 84,060 62
D. E. James 104,668 62
W. P. McKee, Jr. 79,851 62
H. E. Neel 100,259 62
J. F. Purser 124,625 62
C. G. Shaffer 69,499 62
R. F. Stephens 143,028 62
C. K. Vaughan 277,103 55
<PAGE>
EXHIBIT A-1
CALCULATION OF SUPPLEMENTAL PENSION
The monthly Supplemental Pension paid under the Plan shall be equal to the
amount provided in paragraph (a) below minus the amount provided in paragraph
(b) below as follows:
a. One-twelfth (1/12th) of an amount equal to ninety percent (90%) of
Compensation with respect to C. K. Vaughan and seventy-five percent
(75%) of Compensation with respect to all other Participants;
provided, however, that if the Participant has fewer than ten (10)
years of vesting service under the Pension Plan, the above amount
shall be reduced by one-tenth (1/10th) for each year by which his
vesting service is fewer than ten (10).
b. The monthly amount of pension payable to the Participant under the
Pension Plan as of the date that his employment terminates assuming
payment in the normal form applicable to him under Section 7.1 or 7.2
of the Pension Plan.
<PAGE>
EXHIBIT B
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of the ____________ day of
_______________________, 199_, by and between ATMOS ENERGY CORPORATION, a Texas
corporation (the "Employer"), and ______________________ ("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation Supplemental
Executive Benefits Plan (the "Plan"), pursuant to which certain executive or
management employees of the Employer are eligible to receive supplemental
retirement, disability, and death benefits; and
WHEREAS, in accordance with the requirements of the Plan and as an
inducement to the Employer to allow Participant's participation in the Plan,
Participant has agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Participant agrees that, during the term of this Agreement,
Participant shall not (a) participate, directly or indirectly, as an employee,
agent, representative, officer, director, stockholder, partner, joint venturer,
or otherwise or (b) have any direct or indirect financial interest in any form
in any business that sells or offers for sale, directly or indirectly, any
products or services that are competitive with the products or services sold or
offered for sale by the Employer in any geographic location in which the
Employer shall be doing business during such period of time as Participant is a
participant in the Plan; provided, however, that the ownership by Participant of
any stock listed on a national securities exchange of any corporation conducting
a competing business shall not be deemed a violation of this Agreement if the
aggregate amount of such stock owned by Participant does not exceed one percent
(1%) of the total outstanding stock of such corporation.
2. In the event of a breach or threatened breach of the provisions of
this Agreement by Participant, the Employer shall be entitled (as an absolute
right and without the necessity of proving irreparable injury or damages and in
addition to any other remedies available under the Plan or otherwise) to an
injunction restraining Participant from such violation.
3. If any provision of this Agreement shall, for any
1
<PAGE>
reason, be adjudged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair, or invalidate the
remainder of this Agreement but shall be confined in its operation to the
provisions of this Agreement directly involved in the controversy in which such
judgment shall have been rendered. To the extent that the provisions of this
Agreement are adjudged to be invalid or unenforceable, this Agreement shall be
construed and (in the absence of such construction) reformed so as to allow the
maximum benefit of the provisions of this Agreement permitted by law. If,
however, this Agreement shall for any reason be held by a court of competent
jurisdiction to be excessively broad as to time, duration, geographical scope,
activity, or subject matter, it shall be construed by limiting and reducing it
so as to be enforceable to the extent compatible with the applicable laws as
they shall then appear.
4. This Agreement shall become effective as of the commencement of
Supplemental Pension or Disability Benefits from the Plan and shall terminate
upon the earliest to occur of (i) five (5) years from the date Participant
begins receiving Supplemental Pension or Disability Benefits from the Plan, (ii)
the attainment of age 67 by Participant, or (iii) Participant's death.
5. This Agreement shall be construed and enforced in accordance with the
laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Noncompetition
Agreement as of the date first written above.
PARTICIPANT ATMOS ENERGY CORPORATION
By:
- ------------------------------------ ----------------------------------
2
<PAGE>
EXHIBIT C
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is entered into as of the ___________ day of
___________________, 19__ by and between ATMOS ENERGY CORPORATION, a Texas
corporation (the "Employer"), and ___________________ ("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation Supplemental
Executive Benefits Plan (the "Plan"), pursuant to which certain executive or
management employees of the Employer may receive supplemental retirement,
disability, and death benefits; and
WHEREAS, in accordance with Section 9.6 of the Plan, the Employer and
Participant have agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement. The Employer hereby agrees to provide to Participant the
benefits described in the Plan pursuant to the terms and conditions set forth in
the Plan and in this Agreement.
2. Amendment or Termination of the Plan; Termination of Participant
Without Cause. The Employer hereby agrees that, if it
(i) amends or terminates the Plan in such a manner that results in a
decrease in the amount of the benefits to be paid under the Plan to
Participant, or
(ii) terminates Participant's employment without Cause, or
(iii) terminates Participant's participation in the Plan for any reason
other than Participant's resignation or termination of Participant's
employment for Cause,
Participant shall have the right to, and the Employer agrees to pay to
Participant, any benefits accrued prior to the effective date of such amendment
or termination of the Plan or of such termination of Participant's employment
with the Employer or participation in the Plan. The amount of benefits that
shall be paid under this Paragraph 2 shall be calculated as follows:
1
<PAGE>
(a) In the event the Employer amends the Plan and such amendment
results in a decrease in the amount of the Supplemental Pension, Disability
Pension, or Death Benefit that would be paid under the Plan but for the
amendment thereof, the amount of Participant's benefit shall be the sum of:
(i) Participant's benefit as calculated pursuant to the terms of
the Plan in effect immediately prior to the amendment thereof, based upon
Participant's Compensation as of the date of his retirement, disability, or
death, multiplied by a fraction, the numerator of which shall be the number
of years of vesting service by Participant in the Pension Plan prior to the
effective date of the amendment (which number shall not be less than 5 nor
greater than 10) and the denominator of which shall be the total number of
years of vesting service by Participant in the Pension Plan (which number,
for purposes of calculating Participant's Supplemental Pension, shall not
be greater than 10); plus
(ii) Participant's benefit as calculated pursuant to the terms of
the Plan as amended, based upon Participant's Compensation as of the date
of his retirement, disability, or death, multiplied by a fraction, the
numerator of which shall be the number of years that Participant
participated in the Pension Plan after the effective date of the amendment
(which number, for purposes of calculating Participant's Supplemental
Pension, when added to the numerator of the fraction in clause (i) above,
may not exceed 10) and the denominator of which shall be the total number
of years of vesting service by Participant in the Pension Plan (which
number for purposes of calculating Participant's Supplemental Pension,
shall not be greater than 10);
provided, however, that if the Plan is so amended prior to Participant's fifth
year of vesting service in the Pension Plan, Participant's Supplemental Pension
payable hereunder shall be calculated solely in accordance with the terms of the
Plan as amended; provided, further, that, if such amendment occurs upon or after
a "Change in Control" (as defined in Subparagraph 3(b) below), Participant's
Supplemental Pension must be at least equal to that calculated pursuant to the
provisions of Section 9.1 of the Plan for benefits payable in the event of a
termination of the Plan.
(b) In the event the Employer terminates the Plan or any portion thereof
and such termination affects the Disability Pension or Death Benefit described
in the Plan, Participant's Disability Pension and Death Benefit shall be
calculated as of the date of termination of such benefit as though the date of
such termination was the date that
2
<PAGE>
Participant became disabled or died. Such Disability Pension and Death Benefit
shall become payable, however, only upon Participant's disability or death
occurring in accordance with the terms of the Plan or any portion thereof in
effect immediately prior to the date of its termination.
(c) In the event the Employer terminates the Plan or any portion thereof
and such termination affects the Supplemental Pension described in the Plan,
Participant's right to a Supplemental Pension shall immediately vest regardless
of whether Participant has been a corporate officer of the Employer or the
president of an Operating Division (hereafter an "Eligible Employee") for at
least two years or has five years of vesting service under the Pension Plan. In
such event, Participant's Supplemental Pension shall be the amount determined in
accordance with Section 5.2 of the Plan except that
(i) it shall be based upon Participant's Compensation as of the date
of the termination of the Plan,
(ii) the Participant shall be treated as having the number of years of
benefits service under the Pension Plan as he would have if he remains in
the Pension Plan until he reaches his Earliest Commencement Age as set
forth in the Minimum Benefit Schedule attached to the Plan as Exhibit A or,
if Participant is not listed on the Minimum Benefit Schedule, age 62, and
(iii) if Participant is not fully vested under the Pension Plan, the
calculation made under paragraph (b) of Exhibit A-1 to the Plan shall be
made on the basis of the monthly amount of pension that would be payable to
Participant if he were so fully vested.
(d) If, at any time prior to a "Change in Control" (as defined in
Subparagraph 3(b) hereof), Participant's employment with the Employer is
terminated without Cause (as defined in Subparagraph 2(e) below) or if
Participant's participation in the Plan is terminated for any reason other than
resignation or termination of employment for Cause, Participant shall
nevertheless be entitled to the benefits payable under the Plan that have
accrued prior to the termination of Participant's employment or Plan
participation, the amount of such benefits to be calculated in the manner set
forth in Section 5.2 of the Plan; provided, however, that Participant's right to
a Supplemental Pension shall vest only if Participant has been an Eligible
Employee for at least two years and has at least five years of vesting service
under the Pension Plan as of the date of such termination. The amount of the
benefits payable under the Plan to Participant in such event shall be calculated
in the same manner as set forth in Subparagraph 2(c) above for benefits payable
in the event of a termination of the Plan.
3
<PAGE>
(e) As used in this Agreement, "Cause" for termination of employment
shall mean termination upon
(i) the willful and continued failure by Participant to
substantially perform his duties with the Employer (other than any
such failure resulting from Participant's incapacity due to physical
or mental illness) after a written demand for substantial performance
is delivered to Participant by the Employer that specifically
identifies the manner in which the Employer believes that Participant
has not substantially performed his duties, or
(ii) Participant's willful engagement in conduct that is
demonstrably and materially injurious to the Employer, monetarily or
otherwise.
For purposes of this Subparagraph, no act, or failure to act, on
Participant's part shall be deemed "willful" unless done, or omitted
to be done, by Participant not in good faith and without a reasonable
belief that the action or omission was in the best interests of the
Employer. Notwithstanding the foregoing, Participant shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to Participant a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4)
of the entire membership of the Board of Directors of the Employer at
a meeting of such Board of Directors called and held for such purpose
(after reasonable notice to Participant and an opportunity for
Participant, together with Participant's counsel, to be heard before
the Board of Directors), finding that in the good faith opinion of
the Board of Directors that Participant was guilty of conduct set
forth above in clauses (i) or (ii) of this Subparagraph 2(e) and
specifying the particulars thereof in detail.
3. Change in Control.
(a) Notwithstanding anything expressly or impliedly to the contrary
contained in this Agreement or the Plan, if, following a Change in Control
of the Employer, Participant's employment is terminated by the Employer, or
he is demoted or reassigned to a position that causes him to cease to be an
Eligible Employee, for any reason other than for Cause (as defined in
Subparagraph 2(e) above), Participant shall nevertheless be entitled to
receive a Supplemental Pension at such time as he becomes entitled to
receive a benefit under the Pension Plan regardless of whether Participant
has been an Eligible Employee for at least two years or has five years of
vesting service under the Pension Plan at the time of such termination,
demotion, or reassignment. Such Supplemental Pension shall be calculated in
the same manner as set forth in Subparagraph 2(c) above for benefits
payable in the event of a termination of the Plan.
4
<PAGE>
(b) As used in this Paragraph 3, a "Change in Control" of the Employer
shall be deemed to have occurred if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Employer, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Employer representing 33-1/3% or more
of the combined voting power of the Employer's then outstanding
securities; or
(ii) during any period of two consecutive years individuals who at the
beginning of such period constitute the Board of Directors and any new
director (other than a director designated by a person who has entered
into an agreement with the Employer to effect a transaction described
in clauses (i) or (ii) of this Paragraph) whose election by the Board
or nomination for election by the Employer's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the shareholders of the Employer approve a merger or
consolidation of the Employer with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Employer outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 60% of the
combined voting power of the voting securities of the Employer or such
surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the shareholders of the Employer approve a plan of complete
liquidation of the Employer or an agreement for the sale or
disposition by the Employer of all or substantially all the Employer's
assets.
4. Limitations. Except as otherwise provided in Paragraph 3 of this
Agreement, Participant agrees that nothing in this Agreement or the Plan shall
entitle him, or be deemed to entitle him, to receive a Supplemental Pension
under the Plan if
(i) he has not met the requirements for a Supplemental Pension as set
forth in the Plan,
(ii) his employment with the Employer is terminated prior to his
reaching the age of eligibility for the
5
<PAGE>
immediate commencement of his Pension Plan benefit due to resignation, or
(iii) his employment with the Employer is terminated for Cause (as
defined in Subparagraph 2(e) above).
5. Amendment. No amendment or termination of the Plan by the Employer
shall constitute an amendment or termination of this Agreement. This Agreement
may be amended or modified only by the written agreement of the parties hereto,
and will terminate only upon the occurrence of the earlier of the following
events: (i) the execution of a written agreement to terminate this Agreement
signed by all of the parties hereto, (ii) the satisfaction of all of the
Employer's obligations to Participant under the Plan and this Agreement, (iii)
the termination by Participant of Participant's employment with the Employer by
resignation effective prior to Participant reaching age 55, unless such
resignation occurs after a Change in Control, (iv) the termination for Cause of
Participant's employment with the Employer, or (v) the breach by Participant of
any of the terms or provisions of the Noncompetition Agreement executed by
Participant in accordance with the Plan.
6. Funding. Not later than the time the Participant Retires or becomes
eligible to receive an unreduced Supplemental Pension under the Plan, whichever
occurs first, the Employer shall contribute to a trust or other funding
arrangement an amount necessary to fund 100% of the then-present value of the
Participant's accrued Supplemental Pension. Notwithstanding the foregoing,
immediately upon a Change in Control, the Employer shall contribute to a trust
or other funding arrangement an amount necessary to fund 100% of the then-
present value of all Supplemental Pension benefits (vested and unvested) payable
under this Agreement and/or the Plan to the Participant, regardless of whether
the Participant is then eligible to Retire or to receive an unreduced
Supplemental Pension. The amount required to be funded by this Paragraph 6
shall be calculated in accordance with Paragraph 7 hereof. The Employer shall
review the funding status of the trust or other funding arrangement established
under this Paragraph 6 on an annual basis and shall make contributions thereto
as may be required to maintain the value of the assets thereof at no less than
100% of the then-present value of all such Supplemental Pension benefits. For
purposes of this Paragraph 6 only, notwithstanding the foregoing, no actions or
events related to the merger of United Cities Gas Company ("United Cities") with
and into the Employer, as contemplated by the Agreement and Plan of
Reorganization, dated as of July 19, 1996, between the Employer and United
Cities (the "Merger"), including shareholder approval of the Merger or the
consummation of the merger, shall constitute a Change in Control of the Employer
that requires the Employer to make any contributions pursuant to this Paragraph
6.
7. Calculation of Funding Obligations. The Employer shall calculate its
funding obligations under this Agreement and the Plan solely by using the
actuarial assumptions and methodology
6
<PAGE>
set forth in Exhibit D to the Plan. Upon and after a Change in Control of the
Employer, the actuarial assumptions and methodology set forth in Exhibit D may
be changed with respect to the Participant or, if applicable, his Beneficiary,
only with the Participant's, or, if applicable, his Beneficiary's, written
consent. For purposes of this Paragraph 7 only, and notwithstanding the
foregoing, no actions or events related to the merger of United Cities Gas
Company ("United Cities") with and into the Employer, as contemplated by the
Agreement and Plan of Reorganization, dated as of July 19, 1996, between the
Employer and United Cities, including shareholder approval of the Merger or the
consummation of the merger, shall constitute a Change in Control of the Employer
that requires any consent be obtained pursuant to this Paragraph 7.
8. Annual Statements: As soon as practicable after the end of each Plan
Year, the Employer shall deliver to the Participant or, if applicable, his
Beneficiary, a statement containing (i) the present value of the Employer's
future benefit obligations to the Participant, or, if applicable, his
Beneficiary; (ii) the actuarial assumptions used to calculate the present value
of the Employer's future benefit obligations under the Plan; and (iii) the
current value of the assets, if any, held in any trust or other funding
arrangement for the benefit of the Participant, or, if applicable, his
Beneficiary.
9. No Guarantee of Employment. Nothing contained in this Agreement shall
be construed as a contract of employment between the Employer and Participant,
or as a right of Participant to be continued in the employment of the Employer,
or as a limitation of the right of the Employer to discharge Participant with or
without cause.
10. Legal Fees and Expenses. The Employer agrees to pay any and all legal
fees and expenses incurred by Participant in seeking to obtain or enforce any
right or benefit provided by this Agreement.
11. Capitalized Terms. Each capitalized term used in this Agreement that
is not otherwise defined herein shall have the same meaning attributed to it in
the Plan.
12. Agreement Binding on Successors to the Employer. Any successor to the
Employer hereunder, which successor continues or acquires any of the business of
the Employer, shall be bound by the terms of this Agreement in the same manner
and to the same extent as the Employer.
13. Prior Agreements Superseded. The terms of this Agreement supersede
the terms of all prior Participation Agreements between Participant and the
Employer.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Participation
Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:
By:
- ------------------------------------ ---------------------------------
8
<PAGE>
EXHIBIT D
ATMOS ENERGY CORPORATION
SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS
FOR
DETERMINING ANNUAL SEBP TRUST
FUNDING LIABILITIES
Actuarial Assumptions
Discount Rate 8%
Mortality
Prior to Age 62 None
After Age 62 IRS Applicable Table
(50/50 GAM83)
Salary Scale 0%
Method for Determining Liabilities
The liability determined is the present value as of the valuation date of the
projected age 62 SEBP benefit. The projected age 62 benefit is based on SEBP
compensation determined as the sum of (1), (2) and (3) as follows:
1. The greater of (A) the Participant's annual base salary at the date of his
termination of employment, or (B) the average of the Participant's annual
base salary for the highest three (3) calendar years (whether or not
consecutive) of the Participant's employment with the Employer.
2. The greater of (A) the Participant's last Performance Award or (B) the
average of the highest three (3) Performance Awards (whether or not
consecutive).
3. The Participant's annual car allowance amount at the date of his
termination of employment.
The qualified plan offset is the projected age 62 qualified plan benefit
with no salary scale or wage base projections.
This summary is hereby approved effective November 13, 1996 by:
------------------------
Robert F. Stephens
President and Chief
Operating Officer
Atmos Energy Corporation
Date: November 13, 1996
<PAGE>
EXHIBIT 10.4
ATMOS ENERGY CORPORATION
EXECUTIVE ANNUAL PERFORMANCE BONUS PLAN
(Amended and Restated as of November 13, 1996
I. PURPOSE OF THE PLAN
The purpose of this Plan is to aid Atmos Energy Corporation in
attracting and retaining high quality executive employees and to
encourage significant contributions to the success of the Company by
providing additional compensation to those executive employees who
contribute conspicuously to the successful and profitable operation of
the affairs of the Company.
II. DEFINITIONS
Unless the meaning is clearly different when used in context, these
terms shall have the following meanings:
A. "Bonus" or "Award" shall mean an award of cash which is made
pursuant to this Plan;
B. "Board of Directors" or "Board" shall mean the duly elected and
serving Board of Directors of the Company;
C. "Company" shall mean Atmos Energy Corporation;
D. "Participant" shall mean an eligible employee of the Company who
meets the participation requirements set forth in Section IV of this
Plan;
E. "Plan Year" shall be any consecutive twelve month period designated
by the Board of Directors. Unless otherwise so specified, such
period shall commence October 1 of each year and expire on the
following September 30;
F. "Plan" shall mean this Executive Annual Performance Bonus Plan.
III. ADMINISTRATION AND INTERPRETATION
This Plan shall be administered by the Board of Directors. The Board
shall have full power and authority to interpret and administer this
Plan and, to prescribe, amend, and rescind rules and regulations and
make all other determinations necessary or desirable for this Plan's
administration.
The decision of the Board relating to any question concerning or
involving the interpretation or administration of this Plan shall be
final and conclusive, and nothing in
1
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this Plan shall be deemed to give any employee, his legal representatives
or assigns, any right to participate in this Plan except to such extent,
if any, as the Board may have determined or approved pursuant to the
provisions of this Plan.
IV. PARTICIPATION
All duly elected officers of the Company and all operating company
presidents of the Company shall be Participants in this Plan.
V. DETERMINATION OF PLAN STANDARDS
As soon as practicable after the end of a Plan Year, the Board of
Directors will establish the corporate and individual performance
standards by which this Plan will be administered for the ensuing Plan
Year.
VI. PAYMENT OF BONUSES
As soon as practicable after the end of a Plan Year, the Board of
Directors will assess the performance of the Company for such Plan Year
and will determine if and to what extent the performance standards
applicable to such Plan Year have been attained, the amount of Bonus
payments, if any, to be made to Plan Participants, and the date of
payment of such Awards.
VII. DISCRETIONARY NATURE OF AWARDS
Notwithstanding anything contained herein to the contrary, the payment of
any Bonuses contemplated by this Plan as well as, the amounts and time of
payment thereof, are and shall remain totally and completely within the
discretion of the Board of Directors. Included within the discretionary
power of the Board is the right to award bonuses if Plan standards are
not met and to refuse to award bonuses if Plan standards are met.
VIII. LIMITATIONS
No Participant or any other person shall have any right to or interest in
any fund or specific asset or assets of the Company by virtue of this
Plan or by reason of a Bonus that has been awarded to him, but has not
yet been paid.
IX. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board of Directors may at any time amend, suspend or terminate this
Plan, in whole or in part, except that no such amendment, suspension or
termination shall alter or reduce any Participant's award which has been
approved by the Board prior to such amendment, suspension or termination,
but not yet paid to the Participant.
2
<PAGE>
X. NO EMPLOYMENT RIGHTS
Neither the adoption or existence of this Plan nor the award of any Bonus
hereunder confers or will confer to any employee of the Company any right
to continued employment with the Company, nor does it interfere in any
way with the right of the Company to terminate the employment of any of
its employees at any time.
XI. REPLACEMENT OF PRIOR PLAN
This Plan is intended to and does replace and supersede, in all respects,
the Annual Performance Bonus Plan for Corporate Officers, as adopted and
restated by the Board of Directors of the Company as of November 8, 1989.
ATMOS ENERGY CORPORATION
By:
-----------------------------
Date:
---------------------------
3
<PAGE>
Exhibit 10.5
GAS SERVICE AGREEMENT
(Service for Firm Transportation)
between
WESTAR TRANSMISSION COMPANY
"COMPANY"
and
ENERGAS COMPANY,
a division of Atmos Energy Corporation
"CUSTOMER"
Dated: January 1, 1996
<PAGE>
INDEX
SECTION TITLE PAGE
I Definitions.................................................. 1
II Customer Order............................................... 4
III Representation, Warranties Title
and Indemnities................. ............................ 5
IV Force Majeure................................................ 6
V Nominations and Scheduling................................... 7
VI Quality of Gas............................................... 12
VII Term......................................................... 12
VIII Remedies Upon Material Default............................... 13
IX Measurement and Pressure..................................... 13
X Billings, Payments and Audit................................. 14
XI Communications............................................... 15
XII Miscellaneous................................................ 17
Signatures................................................... 19
Customer Order
2
<PAGE>
GAS SERVICE AGREEMENT
(ENERGAS)
THIS AGREEMENT, effective on January 1, 1996, between WESTAR TRANSMISSION
COMPANY, (Company), and ENERGAS COMPANY, a division of Atmos Energy Corporation
(Customer), and for the consideration stated, the parties agree as follows:
RECITALS
1. Customer and Company from time to time will enter into certain
arrangements whereby Company will provide Customer firm transportation service
as set forth in a "Customer Order".
2. Company has entered into contracts with various transporters,
marketing companies, and other companies (Entity(ies)) in order to effectuate
the services which will be performed under any Customer Order.
3. Customer understands and agrees that any services provided under this
Agreement are subject to the various governmental filings by each Entity,
including, without limitation, compliance statements filed in accordance with
Part 284 of the Federal Energy Regulatory Commission's (FERC) regulations under
the Natural Gas Policy Act of 1978, as amended from time-to-time.
SECTION I
DEFINITIONS
1. "Firm Transportation" means, subject to force majeure, transportation
service on a non-interruptible basis.
2. "Day" means the period of twenty-four (24) consecutive hours,
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the next day. The reference date for any day is the calendar date
when the twenty-four (24)
1
<PAGE>
hour period began. "Business day" means a day consisting of Monday through
Friday, excluding federal holidays.
3. "Delivery Point(s)" means the outlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee described in a Customer Order.
4. "Gas" means natural gas with or without the removal of any hydrocarbon
or inert constituents after it is produced from a well, and includes gas
produced from a well producing gas only, from a well producing gas with
condensate, or from a well producing gas in association with oil.
5. "Customer Order" means a form described in general which is attached
as Exhibit A, and which evidences the agreement as to the terms of a particular
transaction for the service(s) provided under this Agreement.
6. "MCQ" or "Maximum Contract Quantity" means the maximum total contract
quantity of gas that may be received and delivered by Company during the term in
a Customer Order.
7. "MDQ" or "Maximum Daily Quantity" means during the term of a Customer
Order, the maximum daily quantity of gas that may be received and delivered by
Company during any day.
8. "Measuring Party" means a mutually agreeable party who will measure
the gas under an executed Customer Order. If no Measuring Party is designated,
then the Transporter immediately downstream of the Receipt Point(s) or upstream
of the Delivery Point(s) will be the Measuring Party.
9. "Month" means a period beginning at 7:00 a.m. CT on the first day of a
calendar month and ending at 7:00 a.m. CT on the first day of the next month.
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10. "Overrun" means any quantity of gas that exceeds the MDQ, and/or MCQ,
as agreed to between Company and Customer, and described in a Customer Order.
11. "Underdelivered" means a quantity of gas delivered by the Company to
the Delivery Point(s) for the Customer's account that is in excess of the amount
of gas received by the Company from the Customer at the Receipt Point(s).
12. "Overdelivered" means a quantity of gas delivered by the Customer at
the Receipt Point(s) for the Customer's account that is in excess of the amount
of gas delivered by the Company for the Customer's account at the Delivery
Point(s).
13. "Receipt Point(s)" means the inlet flange of Company's or
Transporter's facilities at the interconnection point with the facilities of
Customer or Customer's designee, described in a Customer Order.
14. "Transporter(s)" means any pipeline on which any gas under this
Agreement is transported.
15. For payment purposes, the quantity and measurement of gas delivered
and received hereunder will be stated in Mcf. For balancing purposes the
quantity of gas will be stated in MMBtu. For measurement purposes, the quantity
of gas delivered and received hereunder will be stated in Mcf and in MMBtu. The
MMBtu quantity will be derived by taking the measured volumes of gas in cubic
feet multiplied by their Gross Heating Value divided by one million (1,000,000).
The pertinent terms are as follows:
(a) "Cubic foot of gas" means the volume of gas which occupies one
(1) cubic foot of space at a temperature of sixty degrees (60
degrees) Fahrenheit and the referenced pressure base as set
forth by the Measuring Party.
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(b) "Mcf" means one thousand (1,000) cubic feet of gas and "Bcf"
means one billion (1,000,000,000) cubic feet of gas.
(c) "Btu" means the amount of heat required to raise the temperature
of one avoirdupois pound of pure water from fifty-eight and five
tenths degrees (58.5 degrees) Fahrenheit to fifty-nine and five
tenths degrees (59.5 degrees) Fahrenheit at a constant pressure
of fourteen and sixty-five hundredths (14.65) pounds per square
inch absolute.
(d) "MMBtu" means one million (1,000,000) Btu.
(e) "Gross Heating Value" means the number of Btu liberated by the
complete combustion, at constant pressure, of one (1) cubic foot
of gas, at a base temperature of sixty degrees (60 degrees)
Fahrenheit and a referenced pressure base as set forth by the
Measuring Party, with air of the same temperature and pressure of
the gas, after the products of combustion are cooled to the
initial temperature of the gas, and after the water resulting
from combustion is condensed to the liquid state. The Gross
Heating Value of the gas is to be corrected for the water vapor
content of the gas being delivered; provided, that if the water
vapor content of the gas is seven (7) pounds or less per one
million (1,000,000) cubic feet, the gas will be assumed to be dry
and no correction will be made.
(f) "Referenced pressure base" for measurement and determination of
gas volume and Gross Heating Value will be established by the
Measuring Party; however, the referenced pressure base is always
to be the same for gas volume and Gross Heating Value.
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16. "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996, covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
17. "Imbalance" means the difference between the confirmed gas volumes
received at the Receipt Point(s) and the confirmed gas volumes delivered at the
Delivery Point(s).
SECTION II
CUSTOMER ORDER
1. Customer Order. The parties may enter into one or more agreements for
firm transportation service hereunder from time to time, and each such agreement
will be reflected in a Customer Order executed by both parties which will
constitute a supplement to and form a part of this Agreement, so that each
transaction involving this Agreement and a Customer Order constitutes a single,
entire agreement between Customer and Company. Each Customer Order will contain
provisions regarding Term, Type of Service, Rate, Receipt Point(s), Delivery
Point(s), Quantity and any other obligations of Customer and Company.
2. Conflict. If a conflict exists between a Customer Order and this
Agreement, the terms of the Customer Order will govern the applicable
transaction. If a conflict exists between two or more Customer Orders under
this Agreement, the Customer Order with the latest effective date will govern
the applicable transaction period.
SECTION III
REPRESENTATIONS, WARRANTIES, TITLE AND INDEMNITIES
1. Company. Company represents that it has, or will have, all contracts
in place necessary to provide the services
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described in each Customer Order, subject to Paragraph 3 of the RECITALS and
Paragraph 10. Operating Conditions and Agreements. of Section XI MISCELLANEOUS.
2. Customer. Customer warrants that it has good title to or good right
to the gas delivered to Company under each applicable Customer Order, and that
the gas is free and clear of all liens, encumbrances, or adverse claims of any
kind. Customer indemnifies, saves and holds harmless, Company from all claims,
losses, causes of action, damages and expenses (including, but not limited to
attorney's fees and court costs) due to any adverse claims against the Company
for the gas delivered to Company by Customer. Customer warrants that all gas
delivered to Company for transportation hereunder is eligible for transportation
under any governmental authority having jurisdiction.
3. Control and Possession. Customer is in control and possession of the
gas and is responsible for and indemnifies Company against any injury or any
damage caused thereby until the gas is delivered to Company or its designee at
the Receipt Point(s), except for any injury or damage caused by Company.
Responsibility for the gas passes to Company at the Receipt Point(s), and then
Company is in control and possession of the gas and is responsible for, and
indemnifies Customer against injury or damage caused thereby, except for injury
or damage caused by Customer. Likewise, responsibility for the gas passes to
Customer at the Delivery Point(s), and then Customer is in control and
possession of the gas.
4. Damages. Notwithstanding anything in this Agreement to the contrary,
neither party will be responsible to the other party for any incidental,
consequential, lost profit, punitive or exemplary damages for a breach of this
Agreement.
SECTION IV
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FORCE MAJEURE
1. Force Majeure. In the event that either Company or Customer is
rendered unable, wholly or in part, by reason of an event of force majeure, to
perform its obligations under this Agreement, other than to make payment due
hereunder, and such party has given notice and full particulars of such force
majeure in writing to the other party as soon as possible after the occurrence
of the cause relied on, then the obligations of the parties, insofar as they are
affected by such force majeure, shall be suspended during the continuance of
such inability, but for no longer period, and such cause shall, insofar as
possible, be remedied with all reasonable dispatch.
The term "force majeure" in this Agreement means, without limitation; 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, arrests and restraints of the
government, either federal or state, civil or military, civil disturbances,
explosions, breakage, breakdown or accident to machinery, equipment or lines of
pipe, the necessity of repairing, altering, maintaining, inspecting, replacing,
changing the size of, substituting or removing machinery, equipment, pipelines,
storage or plant facilities, and any other causes, whether of the kind herein
enumerated or otherwise, not reasonably within the control of the party claiming
suspension. Such term likewise includes (i) in those instances where Customer
or Transporter is required to obtain servitudes, right-of-way grants, permits,
exceptions or licenses to enable such party to fulfill its obligations, the
inability of such party to acquire, or the delays on the part of such party in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
such servitudes, rights-of-way grants, permits, exceptions or licenses, and (ii)
in those instances where Customer or Transporter is required to furnish
materials and supplies for the
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purpose of constructing or maintaining facilities or is required to secure
permits or permission from any governmental agency (federal, state or municipal,
civil or military) to enable such party to fulfill its obligations hereunder,
the inability of such party to acquire or the delays on the part of such party
in acquiring, at reasonable cost and after the exercise of reasonable diligence,
such material 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 or a Transporter 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 the opposing party when such course is inadvisable in the
discretion of the party having the difficulty.
SECTION V
NOMINATIONS AND SCHEDULING
1. Nomination. For all quantities of gas that are to be scheduled
beginning on the first day of any month, Customer will provide written notice,
in a form to be provided by Company, either via the Company's electronic
bulletin board or via facsimile, no later than eleven (11:00) am CT three (3)
business days prior to the month of delivery. For all quantities that are to be
scheduled or changed any day after the first day of any month, Customer will
provide either via the Company's electronic bulletin board or via facsimile,
notice by eleven (11:00) am CT on the day prior to the day of the proposed
change. Company may waive any part of the notice requirement upon request if,
in Company's sole judgment, operating conditions permit such waiver. In addition
to the information required on the nomination form, Customer will specify
whether the gas scheduled is current month deliveries or Imbalance Payback
Quantities (defined below). The volumes will be allocated through the meters in
the following order: (i) Imbalance Payback Quantity, (ii) Base Load
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Requirements- Energas transportation, (iii) Base Load Requirements - Energas/KN
Marketing, L.P. sales, (iv) Swing Load Requirements - Energas/KN Marketing, L.P.
sales.
2. Confirmation Notice. Company shall provide Customer notice, by
Company's electronic bulletin board or by telefacsimile, of all quantities of
gas requested by Customer that Company has confirmed for flow. Such notice
shall be provided not later than 4:00 p.m. CT on the day prior to the day of
flow. Company shall also provide Customer notice by Company's electronic
bulletin board or by telefacsimile, of all quantities of gas received by Company
for Customer's account. Such notices shall be provided not later than 4:00 p.m.
CT on the day after the day of flow for only gas received at those Receipt
Points that are electronically monitored by Company.
3. Rate of Flow. The gas to be received by Company's Transporter
hereunder shall be delivered by Customer at uniform hourly and daily rates of
flow as nearly as practicable, but it is recognized that due to operating
conditions the quantities of gas received and delivered may not be in balance on
any one particular day. However, the Company reserves the right to reduce the
confirmed nomination at the Delivery Point(s) in the event Customer's nominated
gas at the Receipt Point(s) is not concurrently made available to Company or its
Transporter. Furthermore, in addition to the notices required under Section V,
paragraph 2 above, Company and Customer shall immediately inform each other of
any changes to deliveries at the Delivery Point(s) and the Company reserves the
right to reduce the confirmed nomination at the Receipt Point(s) to a quantity
that is ratable to the then current volumes being delivered at the Delivery
Point(s), provided that the Customer can nominate volumes at the Receipt
Point(s) as Imbalance Payback Quantity.
4. Imbalances. In any given month, any quantities of gas received by
Company from Customer (or its designee) at the
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Receipt Point(s) or delivered to Customer by Company at the Delivery Point(s)
that is less than or equal to a ten percent (10%) variance with the confirmed
quantities at the Receipt Point(s) and/or Delivery Point(s) is an "Imbalance
Quantity". Company shall provide a monthly statement to Customer showing the
previous month's volume activity confirmed at the Receipt Point(s) and the
Delivery Point(s) and the resulting Imbalance Quantity. Customer will then have
until forty-five (45) days following the receipt of such notification (Payback
Period) to schedule with Company the volumes necessary to reduce the Imbalance
Quantity to zero (Imbalance Payback Quantity).
5. Imbalance Exchanges. In the event Company establishes an imbalance
exchange service program in conjunction with the transportation services
provided under this Agreement, Customer will be eligible to participate in the
program under the terms thereof.
6. Cash Out. In the event there remains an Imbalance Quantity after the
Payback Period has expired, Company will cash out the remaining imbalance from
that transaction month for Underdelivered imbalances as set forth in Section
6A), and for Overdelivered imbalances as set forth in Section 6B). If Customer's
confirmed quantities of gas at the Delivery Point(s) are in excess of ten
percent (10%) of the confirmed quantities of gas at the Receipt Point(s)
(Underdelivery Quantities), or Customer's confirmed quantities of gas at the
Delivery Point(s) are less than ninety percent (90%) of the confirmed quantities
of gas at the Receipt Point(s) (Overdelivery Quantities), Company will invoice
and Customer will pay a cash out invoice as follows:
A) for Underdelivered imbalances or Underdelivery Quantities the Cash
Out invoice shall be equal to the Underdelivered quantity times
the "Index Basket" plus:
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(a) for 1996- $0.6742 per MMBtu plus the Westar Transmission
Company (Westar) transportation rate of $0.2858 per Mcf.
(b) for 1997- $0.6342 per MMBtu plus the Westar transportation
rate of $0.2858 per Mcf.
(c) for 1998- $0.6042 per MMBtu plus the Westar transportation
rate of $0.2858 per Mcf.
(d) for 1999 through 2001- $0.3042 per MMBtu plus the Westar
transportation rate of $0.2858 per Mcf.
(e) In the event the approved rate for transportation on the
Westar system (as that system is described in the Operating
Agreement) changes, then the $0.2858 per Mcf rate for
transportation will be replaced with the new rate which has been
approved by The Railroad Commission of Texas, which
notwithstanding the structure of such approved rate shall be the
cost of service rate expressed on a per unit of actual
throughput basis for the capacity used to provide the firm
transportation service.
B) for Overdelivered imbalances or Overdelivery Quantities the cash
out invoice shall be equal to the Overdelivered quantity times ninety
percent (90%) of the "Index Basket".
The "Index Basket" referred to above shall be equal to the sum of the
"prices" stated in dollars per MMBtu of: (i) fifty percent (50%) of the
arithmetic average of the index prices listed in each edition of "Natural
Gas Week", published during the applicable calendar month by Oil Daily
Company in the table titled "Gas Price Report", under the column labeled
"Delivered to Pipeline", "This Week" for Texas West Spot, and (ii) twenty
five percent (25%) of the first publication in the applicable month of
"Inside
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F.E.R.C.'s Gas Market Report", published by McGraw-Hill, Inc. for
Panhandle Eastern Pipeline Co., Texas, Oklahoma (Mainline) under the
heading "Prices of Spot Gas Delivered to Pipeline" under the category
labeled "Index", and (iii) twenty five percent (25%) of the index price
published in the first edition of the month in "Natural Gas Intelligence
Gas Price Index" for the applicable calendar month, identified in the table
entitled "SPOT GAS PRICES" under the column entitled "Contract Index", the
"Intrastate Avg." for the "West Texas/Permian" gas.
C) Should any of the indices or publications above become
unavailable, Customer and Company will use their best efforts to locate
another source of this information, or in the event that the information
cannot be obtained through another source, Customer and Company shall agree
upon another index to replace the index which has become unavailable.
7. Upstream and Downstream Transporters. Customer shall make, or cause
to be made, all necessary arrangements with other pipelines or parties upstream
of the Receipt Point(s) or downstream of the Delivery Point(s) in order to
effectuate Company's receipt or delivery of Customer's gas. Company's
obligations are subject to Customer making such necessary arrangements set forth
in the immediately preceding sentence, and such arrangements must be coordinated
with Company.
8. Third Party Imbalance Penalties. If on any day Customer or Company's
Transporter receives or delivers, or causes to be received or delivered, a
quantity or Btu content of gas that is greater or less than that nominated and
scheduled for receipt or delivery at the Receipt or Delivery Point(s), and such
deliveries cause Customer or Company to incur a penalty(ies), cashout cost(s),
fee(s), forfeiture(s) or charge(s) as levied by any transporter or
Transporter(s), upstream or downstream of the
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respective Receipt and Delivery Point(s), the responsible party agrees to bear
and pay such penalty(ies), cashout cost(s), fee(s), forfeiture(s) or charge(s).
Customer and Company agree to provide one another all information necessary to
determine what event, or which party caused the imbalance resulting in the
imposition of penalty(ies), cashout cost(s), fee(s), forfeiture(s) or charge(s)
by a transporter or Transporter(s) at the Receipt or Delivery Point(s).
SECTION VI
QUALITY OF GAS
1. Specification. All natural gas delivered by Customer to Company at
the Receipt Point(s) shall conform to the quality specifications imposed from
time to time by the most restrictive of the Transporter(s). All natural gas
redelivered by Company to Customer at the Deliver Point(s) shall be governed by
the Operating Agreement.
2. Failure to Conform. If the gas tendered for receipt by Company from
Customer fails at any time to conform to the quality specifications set forth in
the Section titled "Specification", then Company may refuse to accept the
receipt of the gas and will notify Customer. Customer shall make a diligent
effort to correct such failure within twenty-four (24) hours following any such
notice, and if Customer is not successful then Company in its sole discretion
may (i) request its Transporter to accept delivery of any non-conforming gas, or
(ii) continue to refuse to accept the non-conforming gas and Company's
obligations regarding such gas will be suspended. Non-conforming gas tendered
by Company to Customer at the Delivery Point(s) shall be governed by the
Operating Agreement,
3. Odorization. Odorization shall be governed by the Operating
Agreement.
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SECTION VII
TERM
This Agreement is in effect on the Effective Date and will continue through
December 31, 2001 and provided, that this Agreement and any Customer Order will
continue in effect until the later of (i) the expiration of any outstanding
Customer Order, or (ii) for so long as it takes to change any nominations to any
transporter or Transporter(s) reflecting the cessation of the receipt and
delivery of gas under any Customer Order and iii) to resolve any outstanding
Imbalance Quantities.
SECTION VIII
REMEDIES UPON MATERIAL DEFAULT
1. If either party hereto shall fail to perform any material covenant or
obligation imposed upon it under this Agreement, than in such event the non-
defaulting party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The non-
defaulting party shall cause a written notice to be served on the defaulting
party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting party
to terminate this Agreement if the default is not cured. The defaulting party
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and if
within such ten-day period, the defaulting party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no
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further force or effect from and after the expiration of such ten-day period.
2. Any termination of this Agreement pursuant to the provisions of this
Article shall be (i) without prejudice to the rights of Company to collect any
amounts then due Company for gas delivered prior to the time of termination (ii)
without prejudice to the rights of Customer to receive any gas for which it has
paid but not received prior to the time of termination, and (iii) without waiver
of any other remedy to which the non-defaulting party may be entitled.
SECTION IX
MEASUREMENT AND PRESSURE
1. Measurement. Unless specified in a Customer Order to the contrary,
the measurement of gas and testing of measurement facilities will be governed by
the applicable measurement and testing provisions and procedures of the
Measuring Party. The parties agree to rely on correct information provided by
the Measuring Party as to the quantity of gas measured at the Receipt and
Delivery Point(s).
2. Pressure. The gas delivered by Customer at the Receipt Point(s) shall
be delivered at a pressure sufficient to overcome the operating pressure
existing in Company's or its Transporter's facility from time to time; however,
in no event shall such delivery pressure exceed the maximum operating pressure
of the system receiving the gas. The gas delivered at the Delivery Point(s)
shall be delivered by Company or its Transporter at the pressure existing from
time-to-time in Company's or Transporter's pipeline. Company or Transporter
shall not be obligated to install or operate compression facilities in order to
effect receipt or delivery of gas. Customer (or Customer's designee), any
transporter and Company and Transporter are completely and solely responsible
for the installation and maintenance of
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overpressure protection equipment on their own pipeline(s), valve(s) and any
other interconnection equipment.
SECTION X
BILLINGS, PAYMENTS AND AUDIT
1. On or before the fifteenth (15th) day of each Month, Company shall
render a statement to Customer giving the total quantity of gas, expressed in
Mcf and in MMBtu, received and delivered by Company's Transporter hereunder
during the preceding Month , any imbalances, and the monies due therefor. Such
statements are to be rendered in accordance with this Agreement, and shall
include any amounts due for tax reimbursement under the provisions of this
Agreement. In the event the total amount due Company cannot be determined on or
before the fifteenth (15th) day of the Month, Company shall nevertheless invoice
Customer for the amounts that are known and/or nominated by Customer, and when
the information is available Company shall invoice for actual amounts (or refund
any payment as necessary) as soon as practicable after such amount is
determined.
2. Ten (10) days after the statement is received by Customer, Customer
shall make payment to Company by wire transfer per the instructions set forth in
the Article titled "COMMUNICATIONS". If Customer disputes the amount of any
statement for any reason, Customer shall notify Company of such dispute and
shall be obligated to pay only the undisputed portion of such statement on the
due date. Customer shall pay the disputed portion of the statement which is
determined to be owing to Company within fifteen (15) days after the date the
dispute is resolved, together with interest on such amount at the rate set forth
in Paragraph 4 below, commencing on the original due date of the statement and
continuing until paid. If the statement shall have been paid in full and it
shall be determined that such disputed portion of the statement was paid in
error, Company shall refund such amount to Customer, together with interest at
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the rate hereinafter set forth below over the period that Company had possession
of the money, within fifteen (15) days after resolution of the dispute.
3. All statements, bills, computations and payments shall be subject to
correction of any errors contained therein until two (2) years after date of
payment, and after such period any errors found will be deemed to be waived by
the affected party.
4. Any amounts due for gas delivered hereunder remaining unpaid after the
due date for such payment shall bear interest at the lesser of the highest
lawful interest rate or the prime rate charged by Norwest Bank of Denver plus
two percent (2%) until paid.
5. Each party shall have access to and the right to audit during regular
business days and business hours, upon reasonable notice, all measurement,
billing, computation and payment records maintained by the other party which
relate to gas received under this Agreement. All records will be maintained for
two (2) years after payment has been made for the month to which the records
pertain.
SECTION XI
COMMUNICATIONS
1. Notices and Addresses. Unless otherwise provided in this Agreement,
any notice (other than a Customer Order which may be sent by telefacsimile or
other electronic means), statement, demand, or payment called for is to be in
writing and shall be considered delivered when deposited in the U.S. Mail,
postage prepaid, telecopied/telefacsimilied or hand delivered to either party at
the address designated. Unless changed in writing, the addresses are:
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Company:
Payments:
Wire Transfer WESTAR TRANSMISSION COMPANY
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 00 076
Acct: # 101-0918-554
Notices and Correspondence:
WESTAR TRANSMISSION COMPANY
333 Clay Street, Suite 2000
Houston, TX 77002-9817
Attn: Transportation and Exchange
Telecopier No. (713) 739-6695
Telephone No. (713) 739-2900
Customer:
Notices and Correspondence:
ENERGAS COMPANY, a division of
Atmos Energy Corporation
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Statements: ENERGAS COMPANY, a division of
Atmos Energy Corporation
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Telecopier No. (214)788-3773
Telephone No. (214)788-3746
2. Operating Communications. Operating communications by telefacsimile
will be considered as duly delivered the day after transmittal.
3. Telefacsimile/Telecopy Transmission. All communications, including
Customer Orders, may be sent by telefacsimile/telecopy, and signatures appearing
on the telefacsimile/telecopy are binding on the signatory party.
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SECTION XII
MISCELLANEOUS
1. Waiver of Default. No waiver by Company or Customer of any default of
the other under this Agreement or a Customer Order shall operate as a waiver of
any future default, whether of a like or different character.
2. Assignment. This Agreement may not be assigned by either party
without consent of the other party, which consent shall not be unreasonably
withheld, unless assigned to an affiliate or subsidiary of a party. Such
assignment shall not relieve the assigning party of any of its obligations under
this Agreement.
3. Joint Preparation. This Agreement is deemed to be drafted and
prepared equally and jointly, regardless of which party prepared or submitted
the document to the other, and shall not be construed against one party or the
other as a result of the preparation, submittal or execution.
4. No Third-Party Beneficiary. Except for the parties, their successors
and assigns, no person, including without limitation, any joint operating
agreement party, any owner of a royalty interest, overriding royalty interest or
production right, any Transporter or Storer, shall have any rights as a third-
party beneficiary or otherwise under this Agreement or any Customer Order.
5. Severability. If any part of this Agreement or a Customer Order is
held to be void or unenforceable by any court or under any law, that part shall
be deemed stricken and all remaining provisions shall continue to be valid and
binding upon the parties.
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6. Laws, Rules and Regulations. This Agreement and all Customer Orders
are subject to all valid applicable federal, state and local laws, rules and
regulations of any governmental body or official having jurisdiction. The
parties are entitled to treat all laws, orders, rules and regulations issued by
any federal or state regulatory body as valid and may act in accordance
therewith until such time the same may be invalidated by final judgment in a
court of competent jurisdiction.
7. Modification. Any modification of terms or amendment of provisions of
this Agreement or a Customer Order will become effective only by written
agreement between the parties.
8. Minimal Creditworthiness. Company or Customer shall not be required
to perform, or continue to perform under this Agreement or a Customer Order in
the event (i) either party applies or has applied for bankruptcy, or (ii) one
party fails, in the good faith opinion of the other party, to demonstrate
minimal creditworthiness.
9. Taxes and Fees. To the extent permitted by law, Customer shall
reimburse Company for;
(a) any natural gas gathering, occupation, production, inventory,
severance or sales taxes, first use tax, gross receipt tax, or taxes
similar in nature or equivalent in effect which are now or hereafter
imposed or assessed against Company or any transporting entities by any
lawful authority as a result of the transportation of natural gas under
this Agreement or the production or gathering of such natural gas.
(b) any fees or charges by any Governmental agency which Company
incurs that are related to any service rendered to Customer under this
Agreement.
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10. Operating Conditions and Agreements. The services provided by Company
to Customer under this Agreement are subject to the various tariffs, statements
of compliance, statements of operating conditions, general terms and conditions,
transportation agreements, exchange agreements, and general operating conditions
of the various Entities at and between the Receipt Point(s) and the Delivery
Point(s).
11. Choice of Law and Venue. THIS AGREEMENT WILL BE INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
RECOURSE TO THE RULES OF CONFLICT OF LAWS.
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12. Confidentiality. The terms of this Agreement, including but not
limited to, price, rates or fees, the identified transporting pipelines,
Transporter(s), and cost of transportation, the quantities of gas, and all other
material terms shall be kept confidential by the parties, except to the extent
that any information must be disclosed to a third party as required by federal,
state or local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either party of its
obligations hereunder, ceases to be confidential.
COMPANY CUSTOMER
WESTAR TRANSMISSION COMPANY ENERGAS COMPANY, a division of
Atmos Energy Corporation
By: By:
-------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------- -------------------------
22
<PAGE>
CUSTOMER ORDER
COMPANY SHALL CAUSE THE FIRM TRANSPORTATION OF GAS AS FOLLOWS:
(BASE LOAD)
This Customer Order entered into on January 1, 1996, between WESTAR TRANSMISSION
COMPANY (Company), and ENERGAS COMPANY, a division of Atmos Energy Corporation
(Customer) is subject to, made a part of and is incorporated by reference into
the Gas Service Agreement dated January 1, 1996, between Company and Customer
(Agreement).
Term: January 1, 1996 through December 31, 2001
Type of Service: Firm transportation service.
Receipt Point(s): Interconnection facilities with Westar Transmission
Company, "Westar" and other mutually agreed to points on Red
River Pipeline, L.P., and AOG Gas Transmission Company L.P.,
subject to the operating limitations of these receipt facilities.
Delivery Point(s): All points of interconnection between Westar
Transmission Company and Customer where Customer receives gas as
of the date of the Agreement, for resale through certain of
Customer's distribution facilities.
Maximum Daily Quantity:
A. For the period beginning January 1, 1996 through December 31,
1996 - 13,661 MMBtu per day.
B. For the period beginning January 1, 1997 through December 31,
1997 - 75,000 MMBtu per day.
C. For the remainder of the Term under this Customer Order
100,000 MMBtu per day
D. Such Maximum Daily Quantities will not apply to confirmed
Imbalance Payback Quantities
Maximum Contract Quantity:
A. For the period beginning January 1, 1996 through December 31,
1996 5,000,000 MMBtu.
B. For the period beginning January 1, 1997 through December 31,
1997 up to 9,000,000 MMBtu.
C. For the remainder of the Term of this Customer Order - up to
13,500,000 MMBtu per calendar year thereafter.
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<PAGE>
Rate (as delivered): $0.2858 per Mcf
Special Provisions:
A. In the event the approved rate for transportation on the
Westar system (as that system is described in the Operating
Agreement) changes, then the $0.2858 per Mcf rate for
transportation will be replaced with the new rate which has
been approved by The Railroad Commission of Texas, which
notwithstanding the structure of such approved rate shall be
the cost of service rate expressed on a per unit of actual
throughput basis for the capacity used to provide the firm
transportation service.
B. If the City of Odessa elects, not to supply the gas
requirements of the City and certain of its environs, then
the Maximum Contract Quantity for 1997 shall become
10,000,000 MMBtu, and for the remaining term of the
Agreement the Maximum Contract Quantity shall become
15,000,000 MMBtu per calendar year.
COMPANY CUSTOMER
WESTAR TRANSMISSION COMPANY ENERGAS COMPANY, a division of
Atmos Energy Corporation
By: By:
------------------------ -----------------------
Name: Name:
------------------------ -----------------------
Title: Title:
------------------------ -----------------------
Date: Date:
------------------------ -----------------------
24
<PAGE>
EXHIBIT 10.6
GAS SERVICE AGREEMENT
(Service for Firm Transportation)
between
K N WESTEX GAS SERVICES COMPANY
"COMPANY"
and
ENERMART TRUST
(EnerMart Irrigation)
"CUSTOMER"
Dated: January 1, 1996
<PAGE>
INDEX
SECTION TITLE PAGE
I Definitions 1
II Customer Order 4
III Representation, Warranties Title
and Indemnities 5
IV Force Majeure 6
V Nominations and Scheduling 7
VI Quality of Gas 9
VII Term 10
VIII Remedies Upon Material Default 10
IX Measurement and Pressure 11
X Billings, Payments and Audit 12
XI Communications 13
XII Miscellaneous 14
Signatures 17
Customer Order 18
<PAGE>
GAS SERVICE AGREEMENT
(ENERMART-IRRIGATION)
THIS AGREEMENT, effective on January 1, 1996, between K N WESTEX GAS SERVICES
COMPANY, (Company), and ENERMART TRUST, (Customer), and for the consideration
stated, the parties agree as follows:
RECITALS
1. Customer and Company from time to time will enter into certain
arrangements whereby Company will provide Customer firm transportation service
as set forth in a "Customer Order".
2. Company has entered into contracts with various transporters,
marketing companies, storers, and other companies (Entity(ies)) in order to
effectuate the services which will be performed under any Customer Order.
3. Customer understands and agrees that any services provided under this
Agreement are subject to the various governmental filings by each Entity,
including, without limitation, compliance statements filed in accordance with
Part 284 of the Federal Energy Regulatory Commission's (FERC) regulations under
the Natural Gas Policy Act of 1978, as amended from time-to-time.
SECTION I
DEFINITIONS
1. "Firm Transportation" means, subject to force majeure, transportation
service on a non-interruptible basis.
2. "Day" means the period of twenty-four (24) consecutive hours,
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the next day. The reference date for any day is the calendar date
when the twenty-four (24) hour period began. "Business day" means a day
consisting of Monday through Friday, excluding federal holidays.
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<PAGE>
3. "Delivery Point(s)" means the outlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee described in a Customer Order.
4. "Gas" means natural gas with or without the removal of any hydrocarbon
or inert constituents after it is produced from a well, and includes gas
produced from a well producing gas only, from a well producing gas with
condensate, or from a well producing gas in association with oil.
5. "Customer Order" means a form described in general which is attached
as Exhibit A, and which evidences the agreement as to the terms of a particular
transaction for the service(s) provided under this Agreement.
6. "MCQ" or "Maximum Contract Quantity" means the maximum total contract
quantity of gas that may be received and delivered by Company during the term in
a Customer Order.
7. "MDQ" or "Maximum Daily Quantity" means during the term of a Customer
Order, the maximum daily quantity of gas that may be received and delivered by
Company during any day.
8. "Measuring Party" means a mutually agreeable party who will measure
the gas under an executed Customer Order. If no Measuring Party is designated,
then the Transporter immediately downstream of the Receipt Point(s) or
upstream of the Delivery Point(s) will be the Measuring Party.
9. "Month" means a period beginning at 7:00 a.m. CT on the first day of a
calendar month and ending at 7:00 a.m. CT on the first day of the next month.
2
<PAGE>
10. "Overrun" means any quantity of gas that exceeds the MDQ, and/or MCQ,
as agreed to between Company and Customer, and described in a Customer Order.
11. "Receipt Point(s)" means the inlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee, described in a Customer Order.
12. "Transporter(s)" means any pipeline on which any gas under this
Agreement is transported.
13. For payment purposes, the quantity of gas delivered and received
hereunder will be stated in Mcf. For balancing purposes, the quantity of gas
will be stated in MMBtu. For measurement purposes, the quantity of gas delivered
and received hereunder will be stated in Mcf and in MMBtu. The MMBtu quantity
will be derived by taking the measured volumes of gas in cubic feet multiplied
by their Gross Heating Value divided by one million (1,000,000). The pertinent
terms are as follows:
a) "Cubic foot of gas" means the volume of gas which occupies one (1)
cubic foot of space at a temperature of sixty degrees (60 degrees)
Fahrenheit and the referenced pressure base as set forth by the
Measuring Party.
b) "Mcf" means one thousand (1,000) cubic feet of gas and "Bcf" means one
billion (1,000,000,000) cubic feet of gas.
c) "Btu" means the amount of heat required to raise the temperature of
one avoirdupois pound of pure water from fifty-eight and five tenths
degrees (58.5 degrees) Fahrenheit to fifty-nine and five tenths
degrees (59.5 degrees) Fahrenheit at a constant pressure of fourteen
and sixty-five hundredths (14.65) pounds per square inch absolute.
d) "MMBtu" means one million (1,000,000) Btu.
e) "Gross Heating Value" means the number of Btu liberated by the
complete combustion, at constant pressure, of
3
<PAGE>
one (1) cubic foot of gas, at a base temperature of sixty degrees (60
degrees) Fahrenheit and a referenced pressure base as set forth by the
Measuring Party, with air of the same temperature and pressure of the
gas, after the products of combustion are cooled to the initial
temperature of the gas, and after the water resulting from combustion
is condensed to the liquid state. The Gross Heating Value of the gas
is to be corrected for the water vapor content of the gas being
delivered; provided, that if the water vapor content of the gas is
seven (7) pounds or less per one million (1,000,000) cubic feet, the
gas will be assumed to be dry and no correction will be made.
f) "Referenced pressure base" for measurement and determination of gas
volume and Gross Heating Value will be established by the Measuring
Party; however, the referenced pressure base is always to be the same
for gas volume and Gross Heating Value.
14. "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996, covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
15. "Imbalance" means the difference between the confirmed gas volumes
received at the Receipt Point(s) and the confirmed gas volumes delivered at the
Delivery Point(s).
SECTION II
CUSTOMER ORDER
1. Customer Order. The parties may enter into one or more agreements for firm
transportation service hereunder from time to time, and each such agreement
will be reflected in a Customer Order executed by both parties which will
constitute a supplement to and form a part of this Agreement, so that each
transaction involving this Agreement and a Customer Order
4
<PAGE>
constitutes a single, entire agreement between Customer and Company. Each
Customer Order will contain provisions regarding Term, Type of Service, Rate,
Receipt Point(s), Delivery Point(s), Quantity and any other obligations of
Customer and Company.
2. Conflict. If a conflict exists between a Customer Order and this Agreement,
the terms of the Customer Order will govern the applicable transaction. If a
conflict exists between two or more Customer Orders under this Agreement, the
Customer Order with the latest effective date will govern the applicable
transaction period.
SECTION III
REPRESENTATIONS, WARRANTIES, TITLE AND INDEMNITIES
1. Company. Company represents that it has, or will have, all contracts in place
necessary to provide the services described in each Customer Order, subject
to Paragraph 3 of the RECITALS and Paragraph 10. Operating Conditions and
Agreements. of Section XI MISCELLANEOUS .
2. Customer. Customer warrants that it has good title to or good right to the
gas delivered to Company under each applicable Customer Order, and that the
gas is free and clear of all liens, encumbrances, or adverse claims of any
kind. Customer indemnifies, saves and holds harmless, Company from all
claims, losses, causes of action, damages and expenses (including, but not
limited to attorney's fees and court costs) due to any adverse claims against
the Company for the gas delivered to Company by Customer. Customer warrants
that all gas delivered to Company for transportation hereunder is eligible
for transportation under any governmental authority having jurisdiction.
3. Control and Possession. Customer is in control and possession of the gas and
is responsible for and indemnifies Company
5
<PAGE>
against any injury or any damage caused thereby until the gas is delivered to
Company or its designee at the Receipt Point(s), except for any injury or
damage caused by Company. Responsibility for the gas passes to Company at the
Receipt Point(s), and then Company is in control and possession of the gas
and is responsible for, and indemnifies Customer against injury or damage
caused thereby, except for injury or damage caused by Customer. Likewise,
responsibility for the gas passes to Customer at the Delivery Point(s), and
then Customer is in control and possession of the gas.
4. Damages. Notwithstanding anything in this Agreement to the contrary, neither
party will be responsible to the other party for any incidental,
consequential, lost profit, punitive or exemplary damages for a breach of
this Agreement.
SECTION IV
FORCE MAJEURE
1. Force Majeure. In the event that either Company or Customer is
rendered unable, wholly or in part, by reason of an event of force majeure, to
perform its obligations under this Agreement, other than to make payment due
hereunder, and such party has given notice and full particulars of such force
majeure in writing to the other party as soon as possible after the occurrence
of the cause relied on, then the obligations of the parties, insofar as they are
affected by such force majeure, shall be suspended during the continuance of
such inability, but for no longer period, and such cause shall, insofar as
possible, be remedied with all reasonable dispatch.
The term "force majeure" in this Agreement means, without limitation; 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, arrests and restraints of the
government, either federal or state, civil or
6
<PAGE>
military, civil disturbances, explosions, breakage, breakdown or accident to
machinery, equipment or lines of pipe, the necessity of repairing, altering,
maintaining, inspecting, replacing, changing the size of, substituting or
removing machinery, equipment, pipelines, storage or plant facilities, and any
other causes, whether of the kind herein enumerated or otherwise, not reasonably
within the control of the party claiming suspension. Such term likewise includes
(i) in those instances where Customer or Transporter is required to obtain
servitudes, right-of-way grants, permits, exceptions or licenses to enable such
party to fulfill its obligations, the inability of such party to acquire, or the
delays on the part of such party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such servitudes, rights-of-way grants,
permits, exceptions or licenses, and (ii) in those instances where Customer or
Transporter is required to furnish materials and supplies for the purpose of
constructing or maintaining facilities or is required to secure permits or
permission from any governmental agency (federal, state or municipal, civil or
military) to enable such party to fulfill its obligations hereunder, the
inability of such party to acquire or the delays on the part of such party in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
such material 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 or a Transporter 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 the opposing party when such course is inadvisable in the
discretion of the party having the difficulty.
SECTION V
NOMINATIONS AND SCHEDULING
1. Nomination. For all quantities of gas that are to be scheduled
beginning on the first day of any month, Customer will
7
<PAGE>
provide written notice, in a form to be provided by Company, either via the
Company's electronic bulletin board or via telefacsimile, no later than eleven
(11:00) am CT three (3) business days prior to the month of delivery. For all
quantities that are to be scheduled or changed any day after the first day of
any month, Customer will provide either via the Company's electronic bulletin
board or via telefacsimile, notice by eleven (11:00) am CT on the day prior to
the day of the proposed change. Company may waive any part of the notice
requirement upon request if, in Company's sole judgment, operating conditions
permit such waiver. In addition to the information required on the nomination
form, Customer will specify whether the gas scheduled is current month
deliveries or imbalance payback quantities.
2. Confirmation Notice. Company shall provide Customer notice, by
Company's. electronic bulletin board or by telefacsimile, of all quantities of
gas requested by Customer that Company has confirmed for flow. Such notice shall
be provided not later than 4:00 p.m. CT on the day prior to the day of flow.
Company shall also provide Customer notice by Company's electronic bulletin
board or by telefacsimile, of all quantities of gas received by Company for
Customer's account. Such notice shall be provided not later than 4:00 p.m. CT on
the day after the day of flow only for gas received at those Receipt Points that
are electronically monitored by Company.
3. Rate of Flow. The gas to be received by Company's Transporter
hereunder shall be delivered by Customer at uniform hourly and daily rates of
flow as nearly as practicable, but it is recognized that due to operating
conditions the quantities of gas received and delivered may not be in balance on
any one particular day. However, the Company reserves the right to reduce the
confirmed nomination at the Delivery Point(s) in the event Customer's nominated
gas at the Receipt Point(s) is not concurrently made available to Company's
Transporter. Furthermore, in addition to the notices required under Section V,
8
<PAGE>
paragraph 2 above, Company and Customer shall immediately inform each other of
any changes to deliveries at the Delivery Point(s) and the Company reserves the
right to reduce the confirmed nomination at the Receipt Point(s) to a quantity
that is ratable to the then current volumes being delivered at the Delivery
Point(s).
4. Imbalances. In recognition that there may be an imbalance from time to
time the parties agree that prior to deliveries of gas hereunder, Company and
Customer shall agree on the balancing provisions of the transportation of gas
delivered hereunder at least sixty (60) days prior to January 1, 1999. The
parties shall first attempt to negotiate a "balancing service" to be provided by
the Company as mutually agreed by both parties. If the parties are unable to
agree on a "balancing service" provided by the Company, then Customer or
Customer's agent shall provide the "balancing service", in which case such
"balancing service" and all balancing of gas transported under a Customer Order
shall in accordance with the terms mutually agreed to by Company and Customer or
Customer's agent. In the event the parties are unable to agree on the terms for
balancing then, all balancing of gas transported under a Customer Order shall be
subject to the applicable balancing service rules of the Entity - Westar
Transmission Company as may be filed and in effect with a Regulatory Agency, or
in accordance with the filed compliance statement under Section 311 (a) (2) of
the Natural Gas Policy Act of 1978 ("NGPA") and the applicable regulations of
the Federal Energy Regulatory Commission. Nothing stated herein shall prevent
Customer from challenging or seeking to modify any such balancing service rules
filed with any such regulatory agency.
5. Imbalance Exchanges. In the event Company establishes an imbalance
exchange service program in conjunction with the transportation services
provided under this Agreement, Customer will be eligible to participate in the
program under the terms thereof.
9
<PAGE>
6. Upstream and Downstream Transporters. Customer shall make, or cause to
be made, all necessary arrangements with other pipelines or parties upstream of
the Receipt Point(s) or downstream of the Delivery Point(s) in order to
effectuate Company's receipt or delivery of Customer's gas. Company's
obligations are subject to Customer making such necessary arrangements set forth
in the immediately preceding sentence, and such arrangements must be coordinated
with Compa ny .
7. Third Party Imbalance Penalties. If on any day Customer or Company's
Transporter receives or delivers, or causes to be received or delivered, a
quantity or Btu content of gas that is greater or less than that nominated and
scheduled for receipt or delivery at the Receipt or Delivery Point(s), and such
deliveries cause Customer or Company to incur a penalty(ies), cashout cost(s),
fee(s), forfeiture(s) or charge(s) as levied by any transporter or
Transporter(s), upstream or downstream of the respective Receipt and Delivery
Point(s), the responsible party agrees to bear and pay such penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s). Customer and Company agree
to provide one another all information necessary to determine what event, or
which party caused the imbalance resulting in the imposition of penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s) by a transporter or
Transporter(s) at the Receipt or Delivery Point(s).
SECTION VI
QUALITY OF GAS
1. Specification. All natural gas delivered by Customer to Company(s)
Transporter at the Receipt Point(s) shall conform to the quality specifications
imposed from time to time by the most restrictive of the Transporter(s). All
natural gas redelivered by Company to Customer at the Delivery Point(s) shall be
governed by the Operating Agreement.
10
<PAGE>
2. Failure to Conform. If the gas tendered for receipt by Company from
Customer fails at any time to conform to the quality specifications set forth in
the Section titled Specification, then Company may refuse to accept the receipt
of the gas and will notify Customer. Customer shall make a diligent effort to
correct such failure within twenty-four (24) hours following any such notice,
and if Customer is not successful then Company in its sole discretion may (i)
request its Transporter to accept delivery of any non-conforming gas, or (ii)
continue to refuse to accept the non-conforming gas and Company's obligations
regarding such gas will be suspended. Non-conforming gas tendered by Company to
Customer at the Delivery Point(s) shall be governed by the Operating Agreement.
3. Odorization. Odorization shall be governed by the Operating Agreement.
SECTION VII
TERM
This Agreement is in effect on the Effective Date and will continue through
December 31, 2001 and provided, that this Agreement and any Customer Order will
continue in effect until the later of (i) the expiration of any outstanding
Customer Order, or (ii) for so long as it takes to change any nominations to any
transporter or Transporter(s) reflecting the cessation of the receipt and
delivery of gas under any Customer Order and iii) to resolve any outstanding
Imbalance Quantities.
SECTION VIII
REMEDIES UPON MATERIAL DEFAULT
1. If either party hereto shall fail to perform any material covenant or
obligation imposed upon it under this Agreement, than in such event the non-
defaulting party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The
11
<PAGE>
non-defaulting party shall cause a written notice to be served on the defaulting
party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting party
to terminate this Agreement if the default is not cured. The defaulting party
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and if
within such ten-day period, the defaulting party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no further force or
effect from and after the expiration of such ten-day period.
2. Any termination of this Agreement pursuant to the provisions of this
Article shall be (i) without prejudice to the rights of Company to collect any
amounts then due Company for gas delivered prior to the time of termination (ii)
without prejudice to the rights of Customer to receive any gas for which it has
paid but not received prior to the time of termination, and (iii) without waiver
of any other remedy to which the non-defaulting party may be entitled.
SECTION IX
MEASUREMENT AND PRESSURE
1. Measurement. Unless specified in a Customer Order to the contrary, the
measurement of gas and testing of measurement facilities will be governed by the
applicable measurement and testing provisions and procedures of the Measuring
Party. The parties agree to rely on correct information provided by the
12
<PAGE>
Measuring Party as to the quantity of gas measured at the Receipt and Delivery
Point(s).
2. Pressure. The gas delivered by Customer at the Receipt Point(s) shall
be delivered at a pressure sufficient to overcome the operating pressure
existing in Company's or its Transporter's facility from time to time; however,
in no event shall such delivery pressure exceed the maximum operating pressure
of the system receiving the gas. The gas delivered at the Delivery Point(s)
shall be delivered by Company's Transporter at the pressure existing from time-
to-time in Company's or Transporter's pipeline. Company's Transporter shall not
be obligated to install or operate compression facilities in order to effect
receipt or delivery of gas. Customer (or Customer's designee), any transporter
and Company's Transporter are completely and solely responsible for the
installation and maintenance of overpressure protection equipment on their own
pipeline(s), valve(s) and any other interconnection equipment.
SECTION X
BILLINGS, PAYMENTS AND AUDIT
1. On or before the fifteenth (15th) day of each Month, Company shall
render a statement to Customer giving the total quantity of gas, expressed in
Mcf and in MMBtu, received and delivered by Company's Transporter hereunder
during the preceding Month, any imbalances, and the monies due therefor. Such
statements are to be rendered in accordance with this Agreement, and shall
include any amounts due for tax reimbursement under the provisions of this
Agreement. In the event the total amount due Company cannot be determined on or
before the fifteenth (15th) day of the Month, Company shall nevertheless invoice
Customer for the amounts that are known and/or nominated by Customer, and when
the information is available Company shall invoice for actual amounts (or refund
any payment as necessary) as soon as practicable after such amount is
determined.
13
<PAGE>
2. Ten (10) days after the statement is received by Customer,
Customer shall make payment to Company by wire transfer per the
instructions set forth in the Article titled COMMUNICATIONS. If Customer
disputes the amount of any statement for any reason, Customer shall
notify Company of such dispute and shall be obligated to pay only the
undisputed portion of such statement on the due date. Customer shall pay
the disputed portion of the statement which is determined to be owing to
Company within fifteen (15) days after the date the dispute is resolved,
together with interest on such amount at the rate set forth in Paragraph 4
below, commencing on the original due date of the statement and continuing until
paid. If the statement shall have been paid in full and it shall be determined
that such disputed portion of the statement was paid in error, Company
shall refund such amount to Customer, together with interest at the rate
hereinafter set forth below over the period that Company had possession
of the money, within fifteen (15) days after resolution of the dispute.
3. All statements, bills, computations and payments shall be subject to
correction of any errors contained therein until two (2) years after date of
payment, and after such period any errors found will be deemed to be waived by
the affected party.
4. Any amounts due for gas delivered hereunder remaining unpaid after the
due date for such payment shall bear interest at the lesser of the highest
lawful interest rate or the prime rate charged by Norwest Bank of Denver plus
two percent (2%) until paid.
5. Each party shall have access to and the right to audit during regular
business days and business hours, upon reasonable notice, all measurement,
billing, computation and payment records maintained by the other party which
relate to gas received under this Agreement. All records will be maintained for
two (2) years after payment has been made for the month to which the records
pertain.
14
<PAGE>
SECTION XI
COMMUNICATIONS
1. Notices and Addresses. Unless otherwise provided in this Agreement,
any notice (other than a Customer Order which may be sent by telefacsimile or
other electronic means), statement, demand, or payment called for is to be in
writing and shall be considered delivered when deposited in the U.S. Mail,
postage prepaid, telecopied/telefacsimilied or hand delivered to either party at
the address designated. Unless changed in writing, the addresses are:
Company:
Payments:
Wire Transfer K N WESTEX GAS SERVICES COMPANY
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 00 076
Acct.: # 101-0918-554
Notices and Correspondence:
K N WESTEX GAS SERVICES COMPANY
333 Clay Street, Suite 2000
Houston, TX 77002-9817
Attn.: Transportation and Exchange
Telecopier No. (713) 739-6695
Telephone No. (713) 739-2900
Customer:
Notices and Correspondence:
ENERMART TRUST
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Statements:
ENERMART TRUST,
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Telecopier No. (214)788-3773
Telephone No. (214)788-3746
15
<PAGE>
2. Operating Communications. Operating communications by telefacsimile
will be considered as duly delivered the day after transmittal.
3. Telefacsimile/Telecopy Transmission. All communications, including
Customer Orders, may be sent by telefacsimile/telecopy, and signatures appearing
on the telefacsimile/telecopy are binding on the signatory party.
SECTION XII
MISCELLANEOUS
1. Waiver of Default. No waiver by Company or Customer of any default of
the other under this Agreement or a Customer Order shall operate as a waiver of
any future default, whether of a like or different character.
2. Assignment. This Agreement may not be assigned by either party
without consent of the other party, which consent shall not be unreasonably
withheld, unless assigned to an affiliate or subsidiary of a party. Such
assignment shall not relieve the assigning party of any of its obligations under
this Agreement.
3. Joint Preparation. This Agreement is deemed to be drafted and
prepared equally and jointly, regardless of which party prepared or submitted
the document to the other, and shall not be construed against one party or the
other as a result of the preparation, submittal or execution.
4. No Third-Party Beneficiary. Except for the parties, their successors
and assigns, no person, including without limitation, any joint operating
agreement party, any owner of a royalty interest, overriding royalty interest or
production right, any Transporter or Storer, shall have any rights as a third-
party beneficiary or otherwise under this Agreement or any Customer Order.
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5. Severability. If any part of this Agreement or a Customer Order is
held to be void or unenforceable by any court or under any law, that part shall
be deemed stricken and all remaining provisions shall continue to be valid and
binding upon the parties.
6. Laws, Rules and Regulations. This Agreement and all Customer Orders
are subject to all valid applicable federal, state and local laws, rules and
regulations of any governmental body or official having jurisdiction. The
parties are entitled to treat all laws, orders, rules and regulations issued by
any federal or state regulatory body as valid and may act in accordance
therewith until such time the same may be invalidated by final judgment in a
court of competent jurisdiction.
7. Modification. Any modification of terms or amendment of provisions of
this Agreement or a Customer Order will become effective only by written
agreement between the parties.
8. Minimal Creditworthiness. Company or Customer shall not be required
to perform, or continue to perform, any service under this Agreement or a
Customer Order in the event either party (i) applies or has applied for
bankruptcy, or (ii) one party fails, in the good faith opinion of the other
party, to demonstrate minimal creditworthiness.
9. Taxes and Fees. To the extent permitted by law, Customer shall
reimburse Company for;
(a) any natural gas gathering, occupation, production, inventory,
severance or sales taxes, first use tax, gross receipt tax, or taxes
similar in nature or equivalent in effect which are now or hereafter
imposed or assessed against Company or any transporting entities by any
lawful authority as a result of the transportation of natural gas under
this Agreement or the production or gathering of such natural gas.
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(b) any fees or charges by any Governmental agency which Company
incurs that are related to any service rendered to Customer under this
Agreement.
10. Operating Conditions and Agreements. The services provided by Company
to Customer under this Agreement are subject to the various tariffs, statements
of compliance, statements of operating conditions, general terms and conditions,
transportation agreements, exchange agreements, and general operating conditions
of the various Entities at and between the Receipt Point(s) and the Delivery
Point(s).
11. Choice of Law and Venue. THIS AGREEMENT WILL BE INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
RECOURSE TO THE RULES OF CONFLICT OF LAWS.
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12. Confidentiality. The terms of this Agreement, including but not
limited to, price, rates or fees, the identified transporting pipelines,
Transporter(s), and cost of transportation, the quantities of gas, and all other
material terms shall be kept confidential by the parties, except to the extent
that any information must be disclosed to a third party as required by federal,
state or local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either party of its
obligations hereunder, ceases to be confidential.
COMPANY CUSTOMER
K N WESTEX GAS SERVICES ENERMART TRUST, a division of
COMPANY Atmos Energy Corporation
By: By:
----------------------------- -----------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
----------------------------- -----------------------------
19
<PAGE>
CUSTOMER ORDER
COMPANY SHALL CAUSE THE TRANSPORTATION OF GAS AS FOLLOWS:
(ENERMART-IRRIGATION)
This Customer Order entered into on January 1, 1996 between K N WESTEX GAS
SERVICES COMPANY (Company), and ENERMART TRUST (Customer) is subject to, made a
part of and is incorporated by reference into the Gas Service Agreement dated
January 1, 1996, between Company and Customer.
Term: January 1, 1999 through December 31, 2001
Type of Service: Company shall arrange for firm transportation service
as required under the Gas Sales Agreement dated March 1, 1996
between K N Marketing , L.P. and ENERMART TRUST.
Receipt Point(s): Interconnection facilities with K N Energy, Inc.'s
Buffalo Wallow facilities, subject to the operating limitations
of these receipt facilities.
Delivery Point(s): All Points of Interconnection between Westar
Transmission Company and Customer where Customer receives gas for
resale through certain of its facilities
Maximum Daily Quantity: Requirements to supply Customer's irrigation
needs. Not to exceed 30,000 MMBtu's per day.
Maximum Contract Quantity: For the term of this Customer Order the
Maximum Contract Quantity shall be limited by the Maximum
Contract Quantity set forth in the Customer Order entered into
between EnerMart Trust (EnerMart) and Westar Transmission Company
(Westar), and volumes transported hereunder shall be included in
the determination of the Maximum Contract Quantity of the
EnerMart and Westar Customer Order.
Rate (as delivered): $0.2858 per Mcf
Special Provisions: In the event that the approved rate for firm
transportation on the Westar system (as that system is described
in the Operating Agreement) changes, then the $0.2858 per Mcf
rate for transportation will be replaced with the new rate which
has been approved by the Railroad Commission of Texas, which
notwithstanding the structure of such approved rate shall be the
cost of service rate expressed on a per unit of actual throughput
basis for the capacity used to provide the firm transportation
service.
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COMPANY CUSTOMER
K N WESTEX GAS SERVICES ENERMART TRUST, a division of Atmos
COMPANY Energy Corporation
By: By:
----------------------------- -----------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
----------------------------- -----------------------------
21
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Exhibit 10.7
GAS SERVICE AGREEMENT
(Service for Firm Transportation)
between
WESTAR TRANSMISSION COMPANY
"COMPANY"
and
ENERMART TRUST
(Enermart Irrigation)
"CUSTOMER"
Dated: January 1, 1996
<PAGE>
INDEX
SECTION TITLE PAGE
I Definitions 1
II Customer Order 4
III Representation, Warranties Title
and Indemnities 5
IV Force Majeure 6
V Nominations and Scheduling 7
VI Quality of Gas 9
VII Term 10
VIII Remedies Upon Material Default 10
IX Measurement and Pressure 11
X Billings, Payments and Audit 12
XI Communications 13
XII Miscellaneous 14
Signatures 17
Customer Order 18
<PAGE>
GAS SERVICE AGREEMENT
(ENERMART-IRRIGATION)
THIS AGREEMENT, effective on January 1, 1996, between WESTAR TRANSMISSION
COMPANY, (Company), and ENERMART TRUST, (Customer), and for the consideration
stated, the parties agree as follows:
RECITALS
1. Customer and Company from time to time will enter into certain
arrangements whereby Company will provide Customer firm transportation service
as set forth in a "Customer Order".
2. Company has entered into contracts with various transporters,
marketing companies, storers, and other companies (Entity(ies)) in order to
effectuate the services which will be performed under any Customer Order.
3. Customer understands and agrees that any services provided under this
Agreement are subject to the various governmental filings by each Entity,
including, without limitation, compliance statements filed in accordance with
Part 284 of the Federal Energy Regulatory Commission's (FERC) regulations under
the Natural Gas Policy Act of 1978, as amended from time-to-time.
SECTION I
DEFINITIONS
1. "Firm Transportation" means, subject to force majeure, transportation
service on a non-interruptible basis.
2. "Day" means the period of twenty-four (24) consecutive hours,
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at
7:00 a.m. CT on the next day. The reference date for any day is the calendar
date when the twenty-four (24) hour period began. "Business day" means a day
consisting of Monday through Friday, excluding federal holidays.
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3. "Delivery Point(s)" means the outlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee described in a Customer Order.
4. "Gas" means natural gas with or without the removal of any hydrocarbon
or inert constituents after it is produced from a well, and includes gas
produced from a well producing gas only, from a well producing gas with
condensate, or from a well producing gas in association with oil.
5. "Customer Order" means a form described in general which is attached
as Exhibit A, and which evidences the agreement as to the terms of a particular
transaction for the service(s) provided under this Agreement.
6. "MCQ" or "Maximum Contract Quantity" means the maximum total contract
quantity of gas that may be received and delivered by Company during the term in
a Customer Order.
7. "MDQ" or "Maximum Daily Quantity" means during the term of a Customer
Order, the maximum daily quantity of gas that may be received and delivered by
Company during any day.
8. "Measuring Party" means a mutually agreeable party who will measure
the gas under an executed Customer Order. If no Measuring Party is designated,
then the Transporter immediately downstream of the Receipt Point(s) or upstream
of the Delivery Point(s) will be the Measuring Party.
9. "Month" means a period beginning at 7:00 a.m. CT on the first day of a
calendar month and ending at 7:00 a.m. CT on the first day of the next month.
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10. "Overrun" means any quantity of gas that exceeds the MDQ, and/or MCQ,
as agreed to between Company and Customer, and described in a Customer Order.
11. "Receipt Point(s)" means the inlet flange of Company's or
Transporter's facilities at the interconnection point with the facilities of
Customer or Customer's designee, described in a Customer Order.
12. "Transporter(s)" means any pipeline on which any gas under this
Agreement is transported.
13. For payment purposes the quantity of gas delivered and received
hereunder will be stated in Mcf. For balancing purposes the quantity of gas
will be stated in MMBtu. For measurement purposes, the quantity of gas
delivered and received hereunder will be stated in Mcf and in MMBtu. The MMBtu
quantity will be derived by taking the measured volumes of gas in cubic feet
multiplied by their Gross Heating Value divided by one million (1,000,000). The
pertinent terms are as follows:
(a) "Cubic foot of gas" means the volume of gas which occupies one (1)
cubic foot of space at a temperature of sixty degrees (60 degrees)
Fahrenheit and the referenced pressure base as set forth by the Measuring
Party.
(b) "Mcf" means one thousand (1,000) cubic feet of gas and "Bcf" means
one billion (1,000,000,000) cubic feet of gas.
(c) "Btu" means the amount of heat required to raise the temperature
of one avoirdupois pound of pure water from fifty-eight and five tenths
degrees (58.5 degrees) Fahrenheit to fifty-nine and five tenths degrees
(59.5 degrees) Fahrenheit at a constant pressure of fourteen and sixty-five
hundredths (14.65) pounds per square inch absolute.
(d) "MMBtu" means one million (1,000,000) Btu.
(e) "Gross Heating Value" means the number of Btu liberated by the
complete combustion, at constant pressure, of one (1) cubic foot of gas, at
a base temperature of sixty
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degrees (60 degrees) Fahrenheit and a referenced pressure base as set
forth by the Measuring Party, with air of the same temperature and pressure
of the gas, after the products of combustion are cooled to the initial
temperature of the gas, and after the water resulting from combustion is
condensed to the liquid state. The Gross Heating Value of the gas is to be
corrected for the water vapor content of the gas being delivered; provided,
that if the water vapor content of the gas is seven (7) pounds or less per
one million (1,000,000) cubic feet, the gas will be assumed to be dry and
no correction will be made.
(f) "Referenced pressure base" for measurement and determination of
gas volume and Gross Heating Value will be established by the Measuring
Party; however, the referenced pressure base is always to be the same for
gas volume and Gross Heating Value.
14. "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996, covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
15. "Imbalance" means the difference between the confirmed gas volumes
received at the Receipt Point(s) and the confirmed gas volumes delivered at the
Delivery Point(s).
SECTION II
CUSTOMER ORDER
1. Customer Order. The parties may enter into one or more agreements for
firm transportation service hereunder from time to time, and each such agreement
will be reflected in a Customer Order executed by both parties which will
constitute a supplement to and form a part of this Agreement, so that each
transaction involving this Agreement and a Customer Order constitutes a single,
entire agreement between Customer and Company. Each
4
<PAGE>
Customer Order will contain provisions regarding Term, Type of Service, Rate,
Receipt Point(s), Delivery Point(s), Quantity and any other obligations of
Customer and Company.
2. Conflict. If a conflict exists between a Customer Order and this
Agreement, the terms of the Customer Order will govern the applicable
transaction. If a conflict exists between two or more Customer Orders under
this Agreement, the Customer Order with the latest effective date will govern
the applicable transaction period.
SECTION III
REPRESENTATIONS, WARRANTIES, TITLE AND INDEMNITIES
1. Company. Company represents that it has, or will have, all contracts
in place necessary to provide the services described in each Customer Order,
subject to Paragraph 3 of the RECITALS and Paragraph 10. Operating Conditions
and Agreements. of Section XI MISCELLANEOUS.
2. Customer. Customer warrants that it has good title to or good right
to the gas delivered to Company under each applicable Customer Order, and that
the gas is free and clear of all liens, encumbrances, or adverse claims of any
kind. Customer indemnifies, saves and holds harmless, Company from all claims,
losses, causes of action, damages and expenses (including, but not limited to
attorney's fees and court costs) due to any adverse claims against the Company
for the gas delivered to Company by Customer. Customer warrants that all gas
delivered to Company for transportation hereunder is eligible for transportation
under any governmental authority having jurisdiction.
3. Control and Possession. Customer is in control and possession of the
gas and is responsible for and indemnifies Company against any injury or any
damage caused thereby until the gas is delivered to Company or its designee at
the Receipt
5
<PAGE>
Point(s), except for any injury or damage caused by Company.
Responsibility for the gas passes to Company at the Receipt Point(s), and then
Company is in control and possession of the gas and is responsible for, and
indemnifies Customer against injury or damage caused thereby, except for injury
or damage caused by Customer. Likewise, responsibility for the gas passes to
Customer at the Delivery Point(s), and then Customer is in control and
possession of the gas.
4. Damages. Notwithstanding anything in this Agreement to the contrary,
neither party will be responsible to the other party for any incidental,
consequential, lost profit, punitive or exemplary damages for a breach of this
Agreement.
SECTION IV
FORCE MAJEURE
1. Force Majeure. In the event that either Company or Customer is
rendered unable, wholly or in part, by reason of an event of force majeure, to
perform its obligations under this Agreement, other than to make payment due
hereunder, and such party has given notice and full particulars of such force
majeure in writing to the other party as soon as possible after the occurrence
of the cause relied on, then the obligations of the parties, insofar as they are
affected by such force majeure, shall be suspended during the continuance of
such inability, but for no longer period, and such cause shall, insofar as
possible, be remedied with all reasonable dispatch.
The term "force majeure" in this Agreement means, without limitation; 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, arrests and restraints of the
government, either federal or state, civil or military, civil disturbances,
explosions, breakage, breakdown or accident to machinery, equipment or lines of
pipe, the necessity
6
<PAGE>
of repairing, altering, maintaining, inspecting, replacing, changing the size
of, substituting or removing machinery, equipment, pipelines, storage or plant
facilities, and any other causes, whether of the kind herein enumerated or
otherwise, not reasonably within the control of the party claiming suspension.
Such term likewise includes (i) in those instances where Customer or Transporter
is required to obtain servitudes, right-of-way grants, permits, exceptions or
licenses to enable such party to fulfill its obligations, the inability of such
party to acquire, or the delays on the part of such party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such servitudes,
rights-of-way grants, permits, exceptions or licenses, and (ii) in those
instances where Customer or Transporter is required to furnish materials and
supplies for the purpose of constructing or maintaining facilities or is
required to secure permits or permission from any governmental agency (federal,
state or municipal, civil or military) to enable such party to fulfill its
obligations hereunder, the inability of such party to acquire or the delays on
the part of such party in acquiring, at reasonable cost and after the exercise
of reasonable diligence, such material 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 or a Transporter 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 the opposing party when such
course is inadvisable in the discretion of the party having the difficulty.
SECTION V
NOMINATIONS AND SCHEDULING
1. Nomination. For all quantities of gas that are to be scheduled beginning
on the first day of any month, Customer will provide written notice, in a form
to be provided by Company, either via the Company's electronic bulletin board or
via
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<PAGE>
telefacsimile, no later than eleven (11:00) am CT three (3) business days prior
to the month of delivery. For all quantities that are to be scheduled or changed
any day after the first day of any month, Customer will provide either via the
Company's electronic bulletin board or via telefacsimile, notice by eleven
(11:00) am CT on the day prior to the day of the proposed change. Company may
waive any part of the notice requirement upon request if, in Company's sole
judgment, operating conditions permit such waiver. In addition to the
information required on the nomination form, Customer will specify whether the
gas scheduled is current month deliveries or imbalance payback quantities.
2. Confirmation Notice. Company shall provide Customer notice, by
Company's electronic bulletin board or by telefacsimile, of all quantities of
gas requested by Customer that Company has confirmed for flow. Such notice
shall be provided not later than 4:00 p.m. CT on the day prior to the day of
flow. Company shall also provide Customer notice by Company's electronic
bulletin board or by telefacsimile of all quantities of gas received by Company
for Customer's account. Such notice shall be provided not later than 4:00 p.m.
CT on the day after the day of flow only for gas received at those Receipt
Points that are electronically monitored by Company
3. Rate of Flow. The gas to be received by Company's Transporter hereunder
shall be delivered by Customer at uniform hourly and daily rates of flow as
nearly as practicable, but it is recognized that due to operating conditions the
quantities of gas received and delivered may not be in balance on any one
particular day. However, the Company reserves the right to reduce the confirmed
nomination at the Delivery Point(s) in the event Customer's nominated gas at the
Receipt Point(s) is not concurrently made available to Company or its
Transporter. Furthermore, in addition to the notices required under Section V,
paragraph 2 above, Company and Customer shall immediately inform each other of
any changes to deliveries at the Delivery Point(s) and the Company reserves the
right to reduce the confirmed
8
<PAGE>
nomination at the Receipt Point(s) to a quantity that is ratable to the then
current volumes being delivered at the Delivery Point(s).
4. Imbalances. In recognition that there may be an imbalance from time
to time the parties agree that prior to deliveries of gas hereunder, Company and
Customer shall agree on the balancing provisions of the transportation of gas
delivered hereunder at least sixty (60) days prior to January 1, 1999. The
parties shall first attempt to negotiate a "balancing service" to be provided by
the Company as mutually agreed by both parties. If the parties are unable to
agree on a "balancing service" provided by the Company, then Customer or
Customer's agent shall provide the "balancing service", in which case such
"balancing service" and all balancing of gas transported under a Customer Order
shall in accordance with the terms mutually agreed to by Company and Customer or
Customer's agent. In the event the parties are unable to agree on the terms for
balancing then, all balancing of gas transported under a Customer Order shall be
subject to the applicable balancing service rules of the Entity - Westar
Transmission Company as may be filed and in effect with a Regulatory Agency, or
in accordance with the filed compliance statement under Section 311 (a) (2) of
the Natural Gas Policy Act of 1978 ("NGPA") and the applicable regulations of
the Federal Energy Regulatory Commission. Nothing stated herein shall prevent
Customer from challenging or seeking to modify any such balancing service rules
filed with any such regulatory agency.
5. Imbalance Exchanges. In the event Company establishes an imbalance
exchange service program in conjunction with the transportation services
provided under this Agreement, Customer will be eligible to participate in the
program under the terms thereof.
6. Upstream and Downstream Transporters. Customer shall make, or cause
to be made, all necessary arrangements with other pipelines or parties upstream
of the Receipt Point(s) or downstream of the Delivery Point(s) in order to
effectuate
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<PAGE>
Company's receipt or delivery of Customer's gas. Company's obligations are
subject to Customer making such necessary arrangements set forth in the
immediately preceding sentence, and such arrangements must be coordinated with
Company.
7. Third Party Imbalance Penalties. If on any day Customer or Company's
Transporter receives or delivers, or causes to be received or delivered, a
quantity or Btu content of gas that is greater or less than that nominated and
scheduled for receipt or delivery at the Receipt or Delivery Point(s), and such
deliveries cause Customer or Company to incur a penalty(ies), cashout cost(s),
fee(s), forfeiture(s) or charge(s) as levied by any transporter or
Transporter(s), upstream or downstream of the respective Receipt and Delivery
Point(s), the responsible party agrees to bear and pay such penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s). Customer and Company agree
to provide one another all information necessary to determine what event, or
which party caused the imbalance resulting in the imposition of penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s) by a transporter or
Transporter(s) at the Receipt or Delivery Point(s).
SECTION VI
QUALITY OF GAS
1. Specification. All natural gas delivered by Customer to Company(s)
Transporter at the Receipt Point(s) shall conform to the quality specifications
imposed from time to time by the most restrictive of the Transporter(s). All
natural gas redelivered by Company to Customer at the Delivery Point(s) shall be
governed by the Operating Agreement.
2. Failure to Conform. If the gas tendered for receipt by Company from
Customer fails at any time to conform to the quality specifications set forth in
the Section titled Specification, then Company may refuse to accept the receipt
of the gas and will notify Customer. Customer shall make a diligent effort to
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<PAGE>
correct such failure within twenty-four (24) hours following any such notice,
and if Customer is not successful then Company in its sole discretion may (i)
request its Transporter to accept delivery of any non-conforming gas, or (ii)
continue to refuse to accept the non-conforming gas and Company's obligations
regarding such gas will be suspended. Non-conforming gas tendered by Company to
Customer at the Delivery Point(s) shall be governed by the Operating Agreement.
3. Odorization. Odorization shall be governed by the Operating
Agreement.
SECTION VII
TERM
This Agreement is in effect on the Effective Date and will continue through
December 31, 2001 and provided, that this Agreement and any Customer Order will
continue in effect until the later of (i) the expiration of any outstanding
Customer Order, or (ii) for so long as it takes to change any nominations to any
transporter or Transporter(s) reflecting the cessation of the receipt and
delivery of gas under any Customer Order and iii) to resolve any outstanding
Imbalance Quantities.
SECTION VIII
REMEDIES UPON MATERIAL DEFAULT
1. If either party hereto shall fail to perform any material covenant or
obligation imposed upon it under this Agreement, than in such event the non-
defaulting party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The non-
defaulting party shall cause a written notice to be served on the defaulting
party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting party
to terminate this Agreement if the default is not cured. The defaulting party
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<PAGE>
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and if
within such ten-day period, the defaulting party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no further force or
effect from and after the expiration of such ten-day period.
2. Any termination of this Agreement pursuant to the provisions of this
Article shall be (i) without prejudice to the rights of Company to collect any
amounts then due Company for gas delivered prior to the time of termination (ii)
without prejudice to the rights of Customer to receive any gas for which it has
paid but not received prior to the time of termination, and (iii) without waiver
of any other remedy to which the non-defaulting party may be entitled.
SECTION IX
MEASUREMENT AND PRESSURE
1. Measurement. Unless specified in a Customer Order to the contrary,
the measurement of gas and testing of measurement facilities will be governed by
the applicable measurement and testing provisions and procedures of the
Measuring Party. The parties agree to rely on correct information provided by
the Measuring Party as to the quantity of gas measured at the Receipt and
Delivery Point(s).
2. Pressure. The gas delivered by Customer at the Receipt Point(s) shall
be delivered at a pressure sufficient to overcome the operating pressure
existing in Company's or its Transporter's
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facility from time to time; however, in no event shall such delivery pressure
exceed the maximum operating pressure of the system receiving the gas. The gas
delivered at the Delivery Point(s) shall be delivered by Company or its
Transporter at the pressure existing from time-to-time in Company's or
Transporter's pipeline. Company or Transporter shall not be obligated to install
or operate compression facilities in order to effect receipt or delivery of gas.
Customer (or Customer's designee), any transporter and Company and Transporter
are completely and solely responsible for the installation and maintenance of
overpressure protection equipment on their own pipeline(s), valve(s) and any
other interconnection equipment.
SECTION X
BILLINGS, PAYMENTS AND AUDIT
1. On or before the fifteenth (15th) day of each Month, Company shall
render a statement to Customer giving the total quantity of gas, expressed in
Mcf and in MMBtu, received and delivered by Company's Transporter hereunder
during the preceding Month, any imbalances, and the monies due therefor. Such
statements are to be rendered in accordance with this Agreement, and shall
include any amounts due for tax reimbursement under the provisions of this
Agreement. In the event the total amount due Company cannot be determined on or
before the fifteenth (15th) day of the Month, Company shall nevertheless invoice
Customer for the amounts that are known and/or nominated by Customer, and when
the information is available Company shall invoice for actual amounts (or refund
any payment as necessary) as soon as practicable after such amount is
determined.
2. Ten (10) days after the statement is received by Customer, Customer
shall make payment to Company by wire transfer per the instructions set forth in
the Article titled COMMUNICATIONS. If Customer disputes the amount of any
statement for any reason, Customer shall notify Company of such dispute and
shall be obligated to pay only the undisputed portion of such
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statement on the due date. Customer shall pay the disputed portion of the
statement which is determined to be owing to Company within fifteen (15) days
after the date the dispute is resolved, together with interest on such amount at
the rate set forth in Paragraph 4 below, commencing on the original due date of
the statement and continuing until paid. If the statement shall have been paid
in full and it shall be determined that such disputed portion of the statement
was paid in error, Company shall refund such amount to Customer, together with
interest at the rate hereinafter set forth below over the period that Company
had possession of the money, within fifteen (15) days after resolution of the
dispute.
3. All statements, bills, computations and payments shall be subject to
correction of any errors contained therein until two (2) years after date of
payment, and after such period any errors found will be deemed to be waived by
the affected party.
4. Any amounts due for gas delivered hereunder remaining unpaid after the
due date for such payment shall bear interest at the lesser of the highest
lawful interest rate or the prime rate charged by Norwest Bank of Denver plus
two percent (2%) until paid.
5. Each party shall have access to and the right to audit during regular
business days and business hours, upon reasonable notice, all measurement,
billing, computation and payment records maintained by the other party which
relate to gas received under this Agreement. All records will be maintained for
two (2) years after payment has been made for the month to which the records
pertain.
SECTION XI
COMMUNICATIONS
1. Notices and Addresses. Unless otherwise provided in this Agreement,
any notice (other than a Customer Order which may be sent by telefacsimile or
other electronic means), statement,
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<PAGE>
demand, or payment called for is to be in writing and shall be considered
delivered when deposited in the U.S. Mail, postage prepaid, telecopied/
telefacsimilied or hand delivered to either party at the address designated.
Unless changed in writing, the addresses are:
Company:
Payments:
Wire Transfer WESTAR TRANSMISSION COMPANY
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 00 076
Acct.: # 101-0918-554
Notices and Correspondence:
WESTAR TRANSMISSION COMPANY
333 Clay Street, Suite 2000
Houston, TX 77002-9817
Attn.: Transportation and Exchange
Telecopier No. (713) 739-6695
Telephone No. (713) 739-2900
Customer:
Notices and Correspondence:
ENERMART TRUST
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Statements: ENERMART TRUST,
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Telecopier No. (214)788-3773
Telephone No. (214)788-3746
2. Operating Communications. Operating communications by telefacsimile
will be considered as duly delivered the day after transmittal.
3. Telefacsimile/Telecopy Transmission. All communications, including
Customer Orders, may be sent by telefacsimile/telecopy, and signatures appearing
on the telefacsimile/telecopy are binding on the signatory party.
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SECTION XII
MISCELLANEOUS
1. Waiver of Default. No waiver by Company or Customer of any default of
the other under this Agreement or a Customer Order shall operate as a waiver of
any future default, whether of a like or different character.
2. Assignment. This Agreement may not be assigned by either party
without consent of the other party, which consent shall not be unreasonably
withheld, unless assigned to an affiliate or subsidiary of a party. Such
assignment shall not relieve the assigning party of any of its obligations under
this Agreement.
3. Joint Preparation. This Agreement is deemed to be drafted and
prepared equally and jointly, regardless of which party prepared or submitted
the document to the other, and shall not be construed against one party or the
other as a result of the preparation, submittal or execution.
4. No Third-Party Beneficiary. Except for the parties, their successors
and assigns, no person, including without limitation, any joint operating
agreement party, any owner of a royalty interest, overriding royalty interest or
production right, any Transporter or Storer, shall have any rights as a third-
party beneficiary or otherwise under this Agreement or any Customer Order.
5. Severability. If any part of this Agreement or a Customer Order is
held to be void or unenforceable by any court or under any law, that part shall
be deemed stricken and all remaining provisions shall continue to be valid and
binding upon the parties.
6. Laws, Rules and Regulations. This Agreement and all Customer Orders
are subject to all valid applicable federal,
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state and local laws, rules and regulations of any governmental body or official
having jurisdiction. The parties are entitled to treat all laws, orders, rules
and regulations issued by any federal or state regulatory body as valid and may
act in accordance therewith until such time the same may be invalidated by final
judgment in a court of competent jurisdiction.
7. Modification. Any modification of terms or amendment of provisions of
this Agreement or a Customer Order will become effective only by written
agreement between the parties.
8. Minimal Creditworthiness. Company or Customer shall not be required
to perform, or continue to perform, any service under this Agreement or a
Customer Order in the event either party (i) applies or has applied for
bankruptcy, or (ii) one party fails, in the good faith opinion of the other
party, to demonstrate minimal creditworthiness.
9. Taxes and Fees. To the extent permitted by law, Customer shall
reimburse Company for;
(a) any natural gas gathering, occupation, production, inventory,
severance or sales taxes, first use tax, gross receipt tax, or taxes
similar in nature or equivalent in effect which are now or hereafter
imposed or assessed against Company or any transporting entities by any
lawful authority as a result of the transportation of natural gas under
this Agreement or the production or gathering of such natural gas.
(b) any fees or charges by any Governmental agency which Company
incurs that are related to any service rendered to Customer under this
Agreement.
10. Operating Conditions and Agreements. The services provided by Company
to Customer under this Agreement are subject to the various tariffs, statements
of compliance, statements of operating conditions, general terms and conditions,
transportation agreements, exchange agreements, and general
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operating conditions of the various Entities at and between the Receipt Point(s)
and the Delivery Point(s).
11. Choice of Law and Venue. THIS AGREEMENT WILL BE INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
RECOURSE TO THE RULES OF CONFLICT OF LAWS.
12. Confidentiality. The terms of this Agreement, including but not
limited to, price, rates or fees, the identified transporting pipelines,
Transporter(s), and cost of transportation, the quantities of gas, and all other
material terms shall be kept confidential by the parties, except to the extent
that any information must be disclosed to a third party as required by federal,
state or local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either party of its
obligations hereunder, ceases to be confidential.
COMPANY CUSTOMER
WESTAR TRANSMISSION COMPANY ENERMART TRUST, a division of
Atmos Energy Corporation
By: By:
------------------------ --------------------------
Name: Name:
---------------------- ------------------------
Title: Title:
--------------------- -----------------------
Date: Date:
---------------------- ------------------------
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CUSTOMER ORDER
COMPANY SHALL CAUSE THE TRANSPORTATION OF GAS AS FOLLOWS:
(ENERMART-IRRIGATION)
This Customer Order entered into on January 1, 1996 between WESTAR TRANSMISSION
COMPANY (Company), and ENERMART TRUST (Customer) is subject to, made a part of
and is incorporated by reference into the Gas Service Agreement dated January 1,
1996, between Company and Customer.
Term: January 1, 1999 through December 31, 2001
Type of Service: Firm transportation service as required under the Gas
Sales Agreement dated March 1, 1996 between K N Marketing , L.P.
and ENERMART TRUST
Receipt Point(s): Interconnection facilities with Westar Transmission
Company, "Westar" and other mutually agreed to points on Red
River Pipeline, L.P. and AOG Gas Transmission Company, L.P.,
subject to the operating limitations of these receipt facilities.
Delivery Point(s): All Points of Interconnection between Westar
Transmission Company and Customer where Customer receives gas for
resale through certain of its facilities
Maximum Daily Quantity: Requirements to supply Customer's irrigation
needs. Not to exceed 225,000 MMBtu per day.
Maximum Contract Quantity: Requirements to supply Customer's irrigation
needs as set forth in the Gas Sales Agreement effective March 1,
1996 between K N Marketing, L.P. and ENERMART TRUST
Rate (as delivered): $0.2858 per Mcf
Special Provisions: In the event that the approved rate for firm
transportation on the Westar system (as that system is described
in the Operating Agreement) changes, then the $0.2858 per Mcf
rate for transportation will be replaced with the new rate which
has been approved by the Railroad Commission of Texas, which
notwithstanding the structure of such approved rate shall be the
cost of service rate expressed on a per unit of actual throughput
basis for the capacity used to provide the firm transportation
service.
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COMPANY CUSTOMER
WESTAR TRANSMISSION COMPANY ENERMART TRUST
By: By:
Name: Name:
Title: Title:
Date: Date:
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EXHIBIT 10.8
GAS SERVICE AGREEMENT
(Service for Firm Transportation)
between
K N WESTEX GAS SERVICES COMPANY
"COMPANY"
and
ENERMART TRUST
(Large Volume Industrials)
"CUSTOMER"
Dated: January 1, 1996
<PAGE>
INDEX
SECTION TITLE PAGE
I Definitions 1
II Customer Order 3
III Representation, Warranties, Title
and Indemnities 3
IV Force Majeure 4
V Nominations and Scheduling 4
VI Quality of Gas 7
VII Term 7
VIII Remedies Upon Material Default 8
IX Measurement and Pressure 8
X Billings, Payments and Audit 9
XI Communications 9
XII Miscellaneous 11
<PAGE>
GAS SERVICE AGREEMENT
(ENERMART)
THIS AGREEMENT, effective on January 1, 1996, between K N WESTEX GAS SERVICES
COMPANY, (Company), and ENERMART TRUST, a Pennsylvania Business Trust,
(Customer), and for the consideration stated, the parties agree as follows:
RECITALS
1. Customer and Company from time to time will enter into certain
arrangements whereby Company will provide Customer firm transportation service
as set forth in a "Customer Order".
2. Company has entered into contracts with various transporters,
marketing companies, storers, and other companies (Entity(ies)) in order to
effectuate the services which will be performed under any Customer Order.
3. Customer understands and agrees that any services provided by Company
are subject to the various governmental filings by each Entity, including,
without limitation, compliance statements filed in accordance with Part 284 of
the Federal Energy Regulatory Commission's (FERC) regulations under the Natural
Gas Policy Act of 1978, as amended from time-to-time.
SECTION I
DEFINITIONS
1. "Firm Transportation" means, subject to force majeure, transportation
service on a non-interruptible basis.
2. "Day" means the period of twenty-four (24) consecutive hours,
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at
7:00 a.m. CT on the next day. The reference date for any day is the calendar
date when the twenty-four (24) hour period began. "Business day" means a day
consisting of Monday through Friday.
3. "Delivery Point(s)" means the outlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee described in a Customer Order.
4. "Gas" means natural gas with or without the removal of any hydrocarbon
or inert constituents after it is produced from a well, and includes gas
produced from a well producing gas only, from a well producing gas with
condensate, or from a well producing gas in association with oil.
5. "Customer Order" means a form described in general which is attached
as Exhibit A, and which evidences the agreement
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as to the terms of a particular transaction for the service(s) provided under
this Agreement.
6. "MCQ" or "Maximum Contract Quantity" means the maximum total contract
quantity of gas that may be received and delivered by Company during the term in
a Customer Order.
7. "MDQ" or "Maximum Daily Quantity" means during the term of a Customer
Order, the maximum daily quantity of gas that may be received and delivered by
Company during any day.
8. "Measuring Party" means a mutually agreeable party who will measure
the gas under an executed Customer Order. If no Measuring Party is designated,
then the Transporter immediately downstream of the Receipt Point(s) or upstream
of the Delivery Point(s) will be the Measuring Party.
9. "Month" means a period beginning at 7:00 a.m. CT on the first day of a
calendar month and ending at 7:00 a.m. CT on the first day of the next month.
10. "Overrun" means any quantity of gas that exceeds the MDQ, MSQ and/or
MCQ, as agreed to between Company and Customer, and described in a Customer
Order.
11. "Receipt Point(s)" means the inlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee, described in a Customer Order.
12. "Transporter(s)" means any pipeline on which any gas under this
Agreement is transported.
13. For payment purposes, the quantity of gas delivered and received
hereunder will be stated in Mcf. For balancing purposes the quantity of gas
will be stated in MMBtu. For measurement purposes, the quantity of gas
delivered and received hereunder stated in MMBtu and Mcf, is derived by taking
the measured volumes of gas in cubic feet multiplied by their Gross Heating
Value divided by one million (1,000,000). The pertinent terms are as follows:
(a) "Cubic foot of gas" means the volume of gas which occupies one (1)
cubic foot of space at a temperature of sixty degrees (60 degrees) Fahrenheit
and the referenced pressure base as set forth by the Measuring Party.
(b) "Mcf" means one thousand (1,000) cubic feet of gas and "Bcf" means
one billion (1,000,000,000) cubic feet of gas.
(c) "Btu" means the amount of heat required to raise the temperature
of one avoirdupois pound of pure water from fifty-eight and five tenths degrees
(58.5 degrees) Fahrenheit to fifty-nine and five tenths degrees (59.5 degrees)
Fahrenheit at a constant
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pressure of fourteen and sixty-five hundredths (14.65) pounds per square inch
absolute.
(d) "MMBtu" means one million (1,000,000) Btu.
(e) "Gross Heating Value" means the number of Btu liberated by the
complete combustion, at constant pressure, of one (1) cubic foot of gas, at a
base temperature of sixty (60) degrees Fahrenheit and a referenced pressure base
as set forth by the Measuring Party, with air of the same temperature and
pressure of the gas, after the products of combustion are cooled to the initial
temperature of the gas, and after the water resulting from combustion is
condensed to the liquid state. The Gross Heating Value of the gas is to be
corrected for the water vapor content of the gas being delivered; provided, that
if the water vapor content of the gas is seven (7) pounds or less per one
million (1,000,000) cubic feet, the gas will be assumed to be dry and no
correction will be made.
(f) "Referenced pressure base" for measurement and determination of
gas volume and Gross Heating Value will be established by the Measuring Party;
however, the referenced pressure base is always to be the same for gas volume
and Gross Heating Value.
14. "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996, covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
SECTION II
CUSTOMER ORDER
1. Customer Order. The parties may enter into one or more agreements for
firm transportation service hereunder from time to time, and each such agreement
will be reflected in a Customer Order executed by both parties which will
constitute a supplement to and form a part of this Agreement, so that each
transaction involving this Agreement and a Customer Order constitutes a single,
entire agreement between Customer and Company. Each Customer Order will contain
provisions regarding price, Receipt Point(s), Delivery Point(s), quantity, term
and any other obligations of Customer and Company.
2. Conflict. If a conflict exists between a Customer Order and this
Agreement, the terms of the Customer Order will govern the applicable
transaction. If a conflict exists between two or more Customer Orders under
this Agreement, the Customer Order with the latest effective date will govern
the applicable transaction period.
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SECTION III
REPRESENTATIONS, WARRANTIES, TITLE AND INDEMNITIES
1. Company. Company represents that it has, or will have, all contracts
in place necessary to provide the services described in each Customer Order,
subject to Paragraph 3 of the RECITALS and Paragraph 10. Operating Conditions
and Agreements. of Section XI MISCELLANEOUS.
2. Customer. Customer warrants that it has good title to or good right
to the gas delivered to Company under each applicable Customer Order, and that
the gas is free and clear of all liens, encumbrances, or adverse claims of any
kind. Customer indemnifies, saves and holds harmless, Company from all claims,
losses, causes of action, damages and expenses (including, but not limited to
attorney's fees and court costs) due to any adverse claims against the Company
for the gas delivered to Company by Customer. Customer warrants that all gas
delivered to Company for transportation hereunder is eligible for transportation
under any governmental authority having jurisdiction.
3. Control and Possession. Customer is in control and possession of the
gas and is responsible for and indemnifies Company against any injury or any
damage caused thereby until the gas is delivered to Company or its designee at
the Receipt Point(s), except for any injury or damage caused by Company.
Responsibility for the gas passes to Company at the Receipt Point(s), and then
Company is in control and possession of the gas and is responsible for, and
indemnifies Customer against injury or damage caused thereby, except for injury
or damage caused by Customer. Likewise, responsibility for the gas passes to
Customer at the Delivery Point(s), and then Customer is in control and
possession of the gas.
4. Damages. Notwithstanding anything in this Agreement to the contrary,
neither party will be responsible to the other party for any incidental,
consequential, lost profit, punitive or exemplary damages for a breach of this
Agreement.
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SECTION IV
FORCE MAJEURE
1. Force Majeure. In the event that either Company or Customer is
rendered unable, wholly or in part, by reason of an event of force majeure, to
perform its obligations under this Agreement, other than to make payment due
hereunder, and such party has given notice and full particulars of such force
majeure in writing to the other party as soon as possible after the occurrence
of the cause relied on, then the obligations of the parties, insofar as they are
affected by such force majeure, shall be suspended during the continuance of
such inability, but for no longer period, and such cause shall, insofar as
possible, be remedied with all reasonable dispatch.
The term "force majeure" in this Agreement means, without limitation, 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, arrests and restraints of the
government, either federal or state, civil or military, civil disturbances,
explosions, breakage, breakdown or accident to machinery, equipment or lines of
pipe, the necessity of repairing, altering, maintaining, inspecting, replacing,
changing the size of, substituting or removing machinery, equipment, pipelines,
storage or plant facilities, and any other causes, whether of the kind herein
enumerated or otherwise, not reasonably within the control of the party claiming
suspension. Such term likewise includes (i) in those instances where Customer
or Transporter is required to obtain servitudes, right-of-way grants, permits,
exceptions or licenses to enable such party to fulfill its obligations, the
inability of such party to acquire, or the delays on the part of such party in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
such servitudes, rights-of-way grants, permits, exceptions or licenses, and (ii)
in those instances where Customer or Transporter is required to furnish
materials and supplies for the purpose of constructing or maintaining facilities
or is required to secure permits or permission from any governmental agency
(federal, state or municipal, civil or military) to enable such party to fulfill
its obligations hereunder, the inability of such party to acquire or the delays
on the part of such party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such material 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 or a Transporter
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 the opposing party when
such course is inadvisable in the discretion of the party having the difficulty.
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SECTION V
NOMINATIONS AND SCHEDULING
1. Nomination. For all quantities of gas that are to be scheduled
beginning on the first day of any month, Customer will provide written notice,
in a form to be provided by Company, either via the Company's electronic
bulletin board or via telefacsimile, no later than eleven (11:00) am CT three
(3) business days prior to the month of delivery. For all quantities that are
to be scheduled or changed any day after the first day of any month, Customer
will provide either via the Company's electronic bulletin board or via
telefacsimile, notice by eleven (11:00) am CT on the day prior to the day of the
proposed change. Company may waive any part of the notice requirement upon
request if, in Company's sole judgment, operating conditions permit such waiver.
In addition to the information required on the nomination form, Customer will
specify whether the gas scheduled is current month deliveries or imbalance
payback quantities.
2. Confirmation Notice. Company shall provide Customer notice, by
Company's electronic bulletin board or by telefacsimile, of all quantities of
gas requested by Customer that Company has "confirmed" with Customer's
suppliers, designees, and/or other transporters for flow. Such notice shall be
provided not later than 4:00 p.m. CT on the day prior to the day of flow.
Company shall also provide Customer notice, by Company's electronic bulletin
board or by telefacsimile, of all quantities of gas received by Company for
Customer's account. Such notice shall be provided not later than 4:00 p.m. CT
on the day after the day of flow for only gas received at those Receipt Points
that are electronically monitored by Company.
3. Monthly Balancing Requirements. The balancing provisions herein have
been established and are provided to Customer by Company in recognition that the
gas being transported by Customer will be delivered to markets that typically
have a uniform consumption of gas. In any given month, any quantities of gas
received by Company from Customer (or its designee) at the Receipt Point(s) or
delivered to Customer by Company at the Delivery Point(s) that is not equal to
the "confirmed" quantities at the respective Receipt Point(s) and Delivery
Point(s) is an "Imbalance Quantity". Company shall provide a monthly statement
to Customer showing the previous month's volume activity "confirmed" at both the
Receipt Point(s) and the Delivery Point(s) and the resulting Imbalance Quantity.
Customer will then have forty five (45) days following such statement (Payback
Period) to schedule with Company the quantities of gas necessary to reduce the
Imbalance Quantity to zero. Any imbalance remaining after the Payback Period,
will be cashed out as follows:
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For such remaining monthly Imbalance Quantity where receipts of gas at the
Receipt Point(s) are less than deliveries taken by Customer at the Delivery
Point(s), Company will invoice Customer and Customer shall pay for the
extra gas delivered to Customer one hundred and ten percent (110%) of the
"Index Basket", for the respective month of delivery, on a per MMBtu basis.
For such remaining monthly Imbalance Quantity where deliveries of gas at
the Delivery Point(s) are less than receipts of gas at the Receipt
Point(s), Company will pay Customer for the extra gas delivered by Customer
to Company ninety percent (90%) of the "Index Basket" for the month of
delivery, on a per MMBtu basis.
The "Index Basket" referred to in above shall be equal to the sum of the
"prices" stated in dollars per MMBtu of: (i) fifty percent (50%) of the
arithmetic average of the index prices listed in each edition of Natural Gas
Week, published during the applicable calendar month by Oil Daily Company in the
table titled "Gas Price Report", under the column labeled "Delivered to
Pipeline", "This Week" for Texas West Spot, and (ii) twenty-five percent (25%)
of the first publication in the applicable month of Inside F.E.R.C.'s Gas Market
Report, published by McGraw-Hill, Inc. for Panhandle Eastern Pipeline Co.,
Texas, Oklahoma (Mainline) under the heading "Prices of Spot Gas Delivered to
Pipeline" under the category labeled "Index", and (iii) twenty-five percent
(25%) of the index price published in the first edition of the month in Natural
Gas Intelligence Gas Price Index for the applicable calendar month, identified
in the table entitled "SPOT GAS PRICES" under the column entitled "Contract
Index", the "Intrastate Avg." for the "West Texas/Permian" gas.
4. Rate of Flow. The gas to be received by Company's transporter
hereunder shall be delivered by Customer at uniform daily rates of flow as
nearly as practicable, but it is recognized that due to operating conditions the
quantities of gas received and delivered may not be in balance on any one
particular day. On days when the quoted price from Enron Capital and Trade,
Texas Intrastate desk, for gas delivered to Company's system the same day in the
Waha supply area exceeds the price of the of the index price published in the
first edition of the month in Natural Gas Intelligence Gas Price Index for the
applicable calendar month, identified in the table entitled "SPOT GAS PRICES"
under the column entitled "Contract Index", the "Intrastate Avg." for the "West
Texas/Permian" by more than $0.50 per MMBtu, and there is a difference in the
quantity of MMBtu between the nominated and confirmed Receipt Point(s) daily
quantities and the actual quantities being delivered by Customer or its designee
at the Receipt Point(s), Company shall notify Customer by telephone and
telefacsimile of such difference, and Company shall have the right to request
Customer to correct the
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difference within twenty four (24) hours of notification. Customer may correct
such situation by adjusting its nominations to match actual Receipt Point(s)
daily quantities. If Customer fails to correct the situation within twenty four
(24) hours of such notification, then Company shall have the right to charge
Customer up to $0.50 per MMBtu on any remaining and continuing difference in the
quantity of MMBtu between the nominated and confirmed Receipt Point(s) daily
quantities and the actual quantities being delivered by Customer or its designee
at the Receipt Point(s), until such time that the difference is corrected.
5. Imbalance Exchanges. In the event Company establishes an imbalance
exchange service program in conjunction with the transportation services
provided under this Agreement, Customer will be eligible to participate in the
program under the terms thereof.
6. Upstream and Downstream Transporters. Customer shall make, or cause
to be made, all necessary arrangements with other pipelines or parties upstream
of the Receipt Point(s) or downstream of the Delivery Point(s) in order to
effectuate Company's receipt or delivery of Customer's gas. Company's
obligations are subject to Customer making such necessary arrangements set forth
in the immediately preceding sentence, and such arrangements must be coordinated
with Company.
7. Third Party Imbalance Penalties. If on any day Customer or Company's
Transporter receives or delivers, or causes to be received or delivered, a
quantity or Btu content of gas that is greater or less than that nominated and
scheduled for receipt or delivery at the Receipt or Delivery Point(s), and such
deliveries cause Customer or Company to incur a penalty(ies), cashout cost(s),
fee(s), forfeiture(s) or charge(s) as levied by any transporter or
Transporter(s), upstream or downstream of the respective receipt and Delivery
Point(s), the responsible party agrees to bear and pay such penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s). Customer and Company agree
to provide one another all information necessary to determine what event, or
which party caused the imbalance resulting in the imposition of penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s) by a transporter or
Transporter(s) at the Receipt or Delivery Point(s).
SECTION VI
QUALITY OF GAS
1. Specification. All natural gas delivered by Customer to Company(s)
Transporter at the Receipt Point(s) shall conform to the quality specifications
imposed from time to time by the most restrictive of the Transporter(s). All
natural gas
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redelivered by Company to Customer at the Delivery Point(s) shall be governed by
the Operating Agreement.
2. Failure to Conform. If the gas tendered for receipt by Company from
Customer fails at any time to conform to the quality specifications set forth in
the Section titled Specifications, then Company may refuse to accept the receipt
of the gas and will notify Customer. Customer shall make a diligent effort to
correct such failure within twenty-four (24) hours following any such notice,
and if Customer is not successful then Company in its sole discretion may (i)
request its Transporter to accept delivery of any non-conforming gas, or (ii)
continue to refuse to accept the non-conforming gas and Company's obligations
regarding such gas will be suspended. Non-conforming gas tendered by Company to
Customer at the Delivery Point(s) shall governed by the Operating Agreement.
3. Odorization. Odorization shall be governed by the Operating
Agreement.
SECTION VII
TERM
This Agreement is in effect on the effective date and will continue through
December 31, 2001; provided, that this Agreement and any Customer Order will
continue in effect until the later of (i) the expiration of any outstanding
Customer Order, or (ii) for so long as it takes to change any nominations to any
transporter or Transporter(s) reflecting the cessation of the receipt and
delivery of gas under any Customer Order.
SECTION VIII
REMEDIES UPON MATERIAL DEFAULT
1. If either party hereto shall fail to perform any material covenant or
obligation imposed upon it under this Agreement, than in such event the non-
defaulting party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The non-
defaulting party shall cause a written notice to be served on the defaulting
party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting party
to terminate this Agreement if the default is not cured. The defaulting party
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and if
within such ten-day period, the defaulting party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and
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effect. In the event that the defaulting party fails to remedy or remove the
cause or causes or to indemnify the non-defaulting party for any and all
consequences of such breach within such ten-day period, this Agreement shall be
terminated and of no further force or effect from and after the expiration of
such ten-day period.
2. Any termination of this Agreement pursuant to the provisions of this
Article shall be (i) without prejudice to the rights of Company to collect any
amounts then due Company for gas delivered prior to the time of termination (ii)
without prejudice to the rights of Customer to receive any gas for which it has
paid but not received prior to the time of termination, and (iii) without waiver
of any other remedy to which the non-defaulting party may be entitled.
SECTION IX
MEASUREMENT AND PRESSURE
1. Measurement. Unless specified in a Customer Order to the contrary,
the measurement of gas and testing of measurement facilities will be governed by
the applicable measurement and testing provisions and procedures of the
Measuring Party. The parties agree to rely on correct information provided by
the Measuring Party as to the quantity of gas measured at the Receipt and
Delivery Point(s).
2. Pressure. The gas delivered by Customer at the Receipt Point(s) shall
be delivered at a pressure sufficient to overcome the operating pressure
existing in Company's or its Transporter's facility from time to time; however,
in no event shall such delivery pressure exceed the maximum operating pressure
of the system receiving the gas. The gas delivered at the Delivery Point(s)
shall be delivered by Company's Transporter at the pressure existing from time-
to-time in Company's or Transporter's pipeline. Company's Transporter shall not
be obligated to install or operate compression facilities in order to effect
receipt or delivery of gas. Customer (or Customer's designee), any transporter
and Company's Transporter are completely and solely responsible for the
installation and maintenance of overpressure protection equipment on their own
pipeline(s), valve(s) and any other interconnection equipment.
SECTION X
BILLINGS, PAYMENTS AND AUDIT
1. On or before the fifteenth (15th) day of each Month, Company shall
render a statement to Customer giving the total quantity of gas, expressed in
Mcf and in MMBtu's, received and delivered by Company's Transporter hereunder
during the preceding Month and the monies due therefor. Such statements are to
be rendered in accordance with this Agreement, and shall include any
10
<PAGE>
amounts due for tax reimbursement under the provisions of this Agreement. In the
event the total amount due Company cannot be determined on or before the
fifteenth (15th) day of the Month, Company shall nevertheless invoice Customer
for the amounts that are known and/or are nominated by Customer, and when the
information is available Company shall invoice for actual amounts (or refund any
payment as necessary) as soon as practicable after such amount is determined.
2. Ten (10) days after the statement is received by Customer, Customer
shall make payment to Company by wire transfer per the instructions set forth in
the Article titled "COMMUNICATIONS". If Customer disputes the amount of any
statement for any reason, Customer shall notify Company of such dispute and
shall be obligated to pay only the undisputed portion of such statement on the
due date. Customer shall pay the disputed portion of the statement which is
determined to be owing to Company within fifteen (15) days after the date the
dispute is resolved, together with interest on such amount at the rate set forth
in Paragraph 4 below, commencing on the original due date of the statement and
continuing until paid. If the statement shall have been paid in full and it
shall be determined that such disputed portion of the statement was paid in
error, Company shall refund such amount to Customer, together with interest at
the rate hereinafter set forth below over the period that Company had possession
of the money, within fifteen (15) days after resolution of the dispute.
3. All statements, bills, computations and payments shall be subject to
correction of any errors contained therein until two (2) years after date of
payment, and after such period any errors found will be deemed to be waived by
the affected party.
4. Any amounts due for gas delivered hereunder remaining unpaid after the
due date for such payment shall bear interest at the lesser of the highest
lawful interest rate or the prime rate charged by Norwest Bank of Denver plus
two percent (2%) until paid.
5. Each party shall have access to and the right to audit during regular
business days and business hours, upon reasonable notice, all measurement,
billing, computation and payment records maintained by the other party which
relate to gas received under this Agreement. All records will be maintained for
two (2) years after payment has been made for the month to which the records
pertain.
SECTION XI
COMMUNICATIONS
1. Notices and Addresses. Unless otherwise provided in this Agreement,
any notice (other than a Customer Order which may be sent by telefacsimile or
other electronic means), statement,
11
<PAGE>
demand, or payment called for is to be in writing and shall be considered
delivered when deposited in the U.S. Mail, postage prepaid,
telecopied/telefacsimilied or hand delivered to either party at the address
designated. Unless changed in writing, the addresses are:
Company:
Payments:
Wire Transfer K N WESTEX GAS SERVICES COMPANY
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 00 076
Acct: # 101-0918-554
Notices and Correspondence:
K N WESTEX GAS SERVICES COMPANY
333 Clay Street, Suite 2000
Houston, TX 77002-9817
Attn: Contract Administration
Telecopier No. (713) 739-6695
Telephone No. (713) 739-2900
Customer:
Notices and Correspondence:
ENERMART TRUST
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Statements: ENERMART TRUST
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Telecopier No. (214)788-3773
Telephone No. (214)788-3746
2. Operating Communications. Operating communications by telefacsimile
will be considered as duly delivered the day after transmittal.
3. Telefacsimile/Telecopy Transmission. All communications, including
Customer Orders, may be sent by telefacsimile/telecopy, and signatures appearing
on the telefacsimile/telecopy are binding on the signatory party.
12
<PAGE>
SECTION XII
MISCELLANEOUS
1. Waiver of Default. No waiver by Company or Customer of any default of
the other under this Agreement or a Customer Order shall operate as a waiver of
any future default, whether of a like or different character. Company shall not
be required to perform any service on behalf of Customer, if Customer fails to
comply with all of the terms of this Agreement.
2. Assignment. This Agreement may not be assigned by either party
without consent of the other party, which consent shall not be unreasonably
withheld, unless assigned to an affiliate or subsidiary of a party. Such
assignment shall not relieve the assigning party of any of its obligations under
this Agreement.
3. Joint Preparation. This Agreement is deemed to be drafted and
prepared equally and jointly, regardless of which party prepared or submitted
the document to the other, and shall not be construed against one party or the
other as a result of the preparation, submittal or execution.
4. No Third-Party Beneficiary. Except for the parties, their successors
and assigns, no person, including without limitation, any joint operating
agreement party, any owner of a royalty interest, overriding royalty interest or
production right, any Transporter or Storer, shall have any rights as a third-
party beneficiary or otherwise under this Agreement or any Customer Order.
5. Severability. If any part of this Agreement or a Customer Order is
held to be void or unenforceable by any court or under any law, that part shall
be deemed stricken and all remaining provisions shall continue to be valid and
binding upon the parties.
6. Laws, Rules and Regulations. This Agreement and all Customer Orders
are subject to all valid applicable federal, state and local laws, rules and
regulations of any governmental body or official having jurisdiction. The
parties are entitled to treat all laws, orders, rules and regulations issued by
any federal or state regulatory body as valid and may act in accordance
therewith until such time the same may be invalidated by final judgment in a
court of competent jurisdiction.
7. Modification. Any modification of terms or amendment of provisions of
this Agreement or a Customer Order will become effective only by written
agreement between the parties.
8. Release of Dedication. Each of Customer's markets shall be released
from any requirement or dedication to transport gas on Company's system as
defined in the Amendment dated January 1, 1996 to the Gas Sales Agreement dated
January 1, 1992 between K N Marketing L.P. and Enermart Trust ninety (90) days
prior to the expiration date of that market's Gas Sales Order as defined in
13
<PAGE>
Exhibit A of the Amendment. Such release shall only apply to those expiration
dates which occur after January 1,1997.
9. Minimal Creditworthiness. Company or Customer shall not be required
to perform, or continue to perform, any service under this Agreement or a
Customer Order in the event either party (i) applies or has applied for
bankruptcy, or (ii) one party fails, in the good faith opinion of the other
party, to demonstrate minimal creditworthiness.
10. Taxes and Fees. To the extent permitted by law, Customer shall
reimburse Company for:
(a) any natural gas gathering, occupation, production, inventory,
severance or sales taxes, first use tax, gross receipt tax, or taxes similar in
nature or equivalent in effect which are now or hereafter imposed or assessed
against Company or any transporting entities by any lawful authority as a result
of the transportation of natural gas under this Agreement or the production or
gathering of such natural gas.
(b) any fees or charges by any Governmental agency which Company
incurs that are related to any service rendered to Customer under this
Agreement.
11. Operating Conditions and Agreements. The services provided by Company
to Customer under this Agreement are subject to the various tariffs, statements
of compliance, statements of operating conditions, general terms and conditions,
transportation agreements, exchange, agreement and general operating conditions
of the various Entities at and between the Receipt Point(s) and the Delivery
Point(s).
12. Choice of Law and Venue. THIS AGREEMENT WILL BE INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
RECOURSE TO THE RULES OF CONFLICT OF LAWS.
13. Confidentiality. The terms of this Agreement, including but not
limited to, price, rates or fees, the identified transporting pipelines,
Transporter(s), and cost of transportation, the quantities of gas, and all other
material terms shall be kept confidential by the parties, except to the extent
that any information must be disclosed to a third party as required by federal,
state or local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either party of its
obligations hereunder, ceases to be confidential.
14
<PAGE>
COMPANY CUSTOMER
K N WESTEX GAS SERVICES COMPANY ENERMART TRUST, a division of
Atmos Energy Corporation
By: By:
------------------------ ------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------ ------------------------
15
<PAGE>
CUSTOMER ORDER
COMPANY SHALL CAUSE THE TRANSPORTATION OF GAS AS FOLLOWS:
(ENERMART-LARGE VOLUME INDUSTRIALS)
This Customer Order entered into on January 1, 1996 between K N WESTEX GAS
SERVICES COMPANY (Company), and ENERMART TRUST (Customer) is subject to, made a
part of and is incorporated by reference into the Gas Service Agreement dated
January 1, 1996, between Company and Customer.
Term: January 1, 1999 through December 31, 2001
Type of Service: Company shall arrange for firm transportation service
as required under the Gas Sales Agreement dated January 1, 1992,
but effective August 1, 1991 between K N Marketing , L.P.
(formerly Anthem Energy Company, L.P.) and ENERMART TRUST.
Receipt Point(s): Interconnection facilities with K N Energy, Inc.'s
Buffalo Wallow facilities, subject to the operating limitations
of these receipt facilities.
Delivery Point(s): All Points of Interconnection between Westar
Transmission Company and Customer where Customer receives gas for
resale through certain of its facilities
Maximum Daily Quantity: Requirements to supply Customer's industrial sales
needs. Not to exceed 5,000 MMBtu's per day.
Maximum Contract Quantity: For the term of this Customer Order the
Maximum Contract Quantity shall be limited by the Maximum
Contract Quantity set forth in the Customer Order entered into
between EnerMart Trust (EnerMart) and Westar Transmission Company
(Westar), and volumes transported hereunder shall be included in
the determination of the Maximum Contract Quantity of the
EnerMart and Westar Customer Order.
Rate (as delivered): $0.2858 per Mcf
Special Provisions: In the event that the approved rate for firm
transportation on the Westar system (as that system is described
in the Operating Agreement) changes, then the $0.2858 per Mcf
rate for transportation will be replaced with the new rate which
has been approved by the Railroad Commission of Texas, which
notwithstanding the structure of such approved rate shall be the
cost of service
1
<PAGE>
rate expressed on a per unit of actual throughput basis for the
capacity used to provide the firm transportation service.
COMPANY CUSTOMER
K N WESTEX GAS SERVICES COMPANY ENERMART TRUST, a division of
Atmos Energy Corporation
By: By:
------------------------ ------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------ ------------------------
2
<PAGE>
EXHIBIT 10.9
AMENDMENT TO GAS SALES AGREEMENT
(Industrials)
THIS AMENDMENT, entered into this 1st day of January, 1996, by and between
K N MARKETING, L.P. a Texas Limited Partnership (Seller - formerly Anthem Energy
Company, L.P.) and EnerMart Trust, a Texas Corporation (Buyer).
W I T N E S S E T H
WHEREAS, Seller and Buyer have entered into that certain Gas Sales
Agreement, dated January 1, 1992, but effective August 1, 1991, covering the gas
requirements for certain commercial and industrial EnerMart customers, and
WHEREAS, Seller and Buyer desire to amend the Agreement:
NOW, THEREFORE, for and in consideration of the mutual covenant and
agreement herein contained, Seller and Buyer do hereby mutually agree as
follows:
I.
Article V Price shall be deleted in its entirety and shall be replaced as
follows:
Buyer shall pay Seller the price(s) specified in each of the Gas Sales
Order(s) listed on the attached Exhibit A for the remaining term(s) of
each such Gas Sales Order. At least ninety (90) days prior to the
expiration of any Gas Sales Order(s), the parties will meet to
redetermine the price and other applicable terms. Should the parties
not reach an agreement on such price and term then Buyer will
transport a quantity of gas to supply Buyer's gas requirements which
had previously been supplied under such Gas Sales Order(s) to the
respective Delivery Point(s) thereunder.
Any such transportation will be under either one of those certain Gas
Services Agreements between K N Westex Gas Services Company and
EnerMart Trust, dated January 1, 1996, or between Westar Transmission
Company and EnerMart Trust dated January 1, 1996.
1
<PAGE>
II.
The provisions under Article VI TERM shall be deleted in their entirety and
shall be replaced as follows:
This Agreement shall become effective August 1, 1991 and continue through
December 31, 2001; provided, however, that the provisions hereof shall continue
to apply to any Gas Sales Order entered into between Seller and Buyer prior to
the date of termination of this Agreement until any and all such Gas Sales
Orders terminate.
III.
The Parties hereby agree that all provisions under this Agreement,
including, but not limited to Article VII, governing quality, measurement,
testing, equipment, pressure, and any other operational matters shall be
replaced and superseded by the respective provisions of the Operating Agreement.
The "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996 covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
Except as modified by this Amendment, all terms and conditions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the month, day, and year first
above written.
BUYER: SELLER:
ENERMART TRUST K N MARKETING, L. P.
by its General Partner,
American Pipeline Company
By: By:
------------------------------- -------------------------------
Signature Signature
Name: Name:
----------------------------- -----------------------------
Typed/Printed Typed/Printed
Title: Title:
---------------------------- ----------------------------
2
<PAGE>
EXHIBIT 10.10
GAS SALES AGREEMENT
(Base Load)
between
K N MARKETING, L.P.
as "Seller"
and
ENERGAS COMPANY,
a division of Atmos Energy Corporation
as "Buyer"
Dated: January 1, 1996
State of TEXAS
<PAGE>
INDEX
ARTICLE TITLE PAGE
I Definitions.................................... 1
II Quantity....................................... 2
III Delivery Points................................ 3
IV Price and Taxes................................ 4
V Term........................................... 6
VI Notices........................................ 6
VII Measuring Equipment and Testing................ 7
VIII Measurement Specifications..................... 7
IX Quality........................................ 7
X Delivery Pressure.............................. 8
XI Billing, Payment and Audit..................... 8
XII Notification of Curtailment.................... 9
XIII Possession and Responsibility for Gas.......... 9
XIV Title.......................................... 10
XV Force Majeure.................................. 10
XVI Financial Responsibility....................... 11
XVII Governmental Regulations....................... 12
XVIII Entire Agreement............................... 13
XIX Confidentiality................................ 13
XX Successors and Assigns......................... 14
XXI Maintenance of Facilities...................... 14
XXII Indemnification................................ 14
XXIII Third Party Transportation..................... 15
XXIV Headings....................................... 15
XXV Waiver......................................... 15
XXVI Amendments..................................... 15
XXVII Remedies Upon Material Default................. 16
XXVIII Miscellaneous.................................. 16
Signatures..................................... 17
Exhibit "A" - Exemption Certificate............ A-1
<PAGE>
GAS SALES AGREEMENT
(Base Load)
THIS AGREEMENT, dated and effective this 1st day of January, 1996, (the
"Effective Date") by and between K N MARKETING, L.P., a Texas Limited
Partnership, hereinafter called "Seller", and ENERGAS COMPANY, a division of
Atmos Energy Corporation, a Texas Corporation, hereinafter called "Buyer";
W I T N E S S E T H
WHEREAS, Seller is the owner of a firm supply of natural gas from which
Seller will have available for sale certain volumes of natural gas and Seller
desires to sell such firm supplies of gas to Buyer; and
WHEREAS, Seller has made certain transportation arrangements with pipeline
companies which operate natural gas transmission systems ("Transporter(s)"); and
WHEREAS, Buyer desires to purchase from Seller volumes of firm natural gas
for resale through Buyer's natural gas distribution facilities in the state of
Texas where Seller sells gas to Buyer as of December 31, 1995 ("Buyer's
Facilities") in accordance with the terms and conditions of this Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1. "Buyer" means the Party who is purchasing and receiving gas
volumes under this Agreement.
Section 2. "Seller" means the Party who is selling and delivering gas
volumes under this Agreement.
Section 3. "Party" or "Parties" means Buyer and/or Seller hereunder, acting
by and through duly authorized representatives.
1
<PAGE>
Section 4. "Day" means the period of twenty-four consecutive hours
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the following calendar day. The reference date for any day should be
the calendar date upon which such twenty-four (24) hour period began.
Section 5. "Month" means the period commencing at 7:00 a.m. CT on the first
day of a calendar month and ending at 7:00 a.m. CT on the first day of the
following calendar month.
Section 6. "Mcf" means the quantity of gas occupying a volume of one
thousand (1000) cubic feet at a temperature of sixty degrees (60 degrees)
Fahrenheit and an absolute pressure of fourteen and sixty-five hundredths pounds
per square inch (14.65 psia).
Section 7. "Base Load Requirements" means the firm gas purchase or firm
transportation requirements of Buyer up to and including a total quantity of
fifteen (15) million MMBtu per calendar year to serve Buyer's customers through
Buyer's Facilities during each calendar year of this Agreement.
Section 8. "Btu" means the amount of heat required to raise the temperature
of one avoirdupois pound of pure water from fifty-eight and five tenths degrees
(58.5 degrees) Fahrenheit at a constant pressure of fourteen and sixty-five
hundredths (14.65) pounds per square inch absolute ("psia").
Section 9. "MMBtu" means one million (1,000,000) Btu.
Section 10. "Operating Agreement" means the agreement between Westar
Transmission Company ("Westar") and Energas Company, dated December 1, 1996
covering measurement equipment and testing, measurement specifications,
pressures, quality, maintenance of facilities, and other operational matters.
ARTICLE II
QUANTITY
Section 1. Seller will sell and deliver and Buyer will purchase and/or
transport Buyer's Base Load Requirements during
2
<PAGE>
each calendar year of this Agreement as set forth below. Quantities of gas
comprising the Base Load Requirements will be counted as the first gas
quantities delivered by Seller through each of the Delivery Point(s) to Buyer
each month. Buyer shall purchase under this Agreement a minimum quantity of
natural gas of ten (10) million MMBtu during 1996. In the event the City of
Odessa elects to supply the requirements for the City of Odessa and part of the
Odessa environs for the months of November and December of 1996, then Buyer's
purchase requirements of the Base Load Requirements shall be reduced in the
month of November, 1996 by an amount of one hundred and thirty-five thousand
(135,000) MMBtu and in the month of December, 1996 by an amount of two hundred
and twenty-five thousand (225,000) MMBtu. Buyer shall purchase under this
Agreement a minimum quantity of natural gas of four and one half (4.5) million
MMBtu during 1997. In the event any other of Buyer's municipality markets during
1997 elect to supply the natural gas requirements for such municipality markets,
then Buyer's purchase requirements of the Base Load Requirements will be reduced
by an amount equal to the amount supplied by such municipality markets. If Buyer
does not take the quantity of gas Buyer elected to purchase during any month(s)
in 1996 and 1997, then the quantity which Buyer has the right to transport in
the next calendar year under this Agreement will be reduced by a quantity equal
to the difference in the quantity nominated and the quantity actually taken
during the applicable month. Buyer shall transport under either one of those
certain Gas Service Agreements between Buyer and KN Westex Gas Services Company
dated January 1, 1996 or between Buyer and Westar Transmission Company dated
January 1 , 1996 (collectively referred to hereafter as "Service Agreement"),
that portion of Buyer's Base Load Requirements that Buyer elects not to purchase
from Seller hereunder.
Section 2. It is expressly understood and agreed that all gas sold to
Buyer is to be used by Buyer to serve only those end use customers who are
served by Buyer's Facilities, and any other use of the gas ("Other Use Gas") by
Buyer will constitute a
3
<PAGE>
material breach of this Agreement, in which case, without limiting any other
remedies available to Seller, Seller may immediately cease delivering Other Use
Gas to Buyer at the Delivery Point(s).
ARTICLE III
DELIVERY POINT(S)
Section 1. The delivery of gas hereunder shall be subject to the
Operating Agreement and shall be at the outlet flange of Transporter(s)'
Facilities, at all points of interconnection between Transporter(s) facilities
and Buyer, where Buyer receives natural gas from Seller as of December 31, 1995,
or subsequently at any other mutually agreed to point(s) to be agreed to in
writing by the Parties ("Delivery Point(s)").
ARTICLE IV
PRICE AND TAXES
Section 1. The price of gas purchased and sold under this Agreement,
delivered to Buyer at the Delivery Point(s), shall be as follows:
A.
1. For the period January 1, 1996 through July 31, 1996, the price
shall be calculated on an Mcf basis and for each Mcf of gas will be
equal to the "First Index Basket" (defined below), plus $0.59 per
Mcf.
2. The "First Index Basket" referred to in subsection A.1) shall be
equal to the arithmetic average of the "prices" stated in dollars
per MMBtu in each publication for the delivery month as reported in
(i) Natural Gas Week, published by Oil Daily Company in the table
titled "Gas Price Report", in the column labeled "Delivered to
Pipeline", "This Week" for Texas West Spot, and
4
<PAGE>
(ii) Inside F.E.R.C.'s Gas Market Report, published by McGraw-Hill,
Inc. for Panhandle Eastern Pipeline Co., Texas, Oklahoma (Mainline)
under the heading "Prices of Spot Gas Delivered to Pipeline" (per
MMBtu) under the category labeled "Index".
B. For the period August 1, 1996 through December 31, 1996, the price
shall be calculated on an MMBtu basis and for each MMBtu will be equal
to the "Index Basket" (defined below), plus $0.3042 per MMBtu, plus
Westar's transportation rate of $0.2858 per Mcf.
C. For 1997, the price for each MMBtu will be equal to the "Index Basket",
plus (i) if Buyer elects to purchase less than ten (10) million MMBtu,
$0.3042 per MMBtu, plus $0.2858 per Mcf (or the rate described in
subsection D below), (ii) if Buyer elects to purchase ten (10) million
MMBtu or more, but less than fifteen (15) million MMBtu, $0.1842 per
MMBtu, plus $0.2858 per Mcf (or the rate described in subsection D
below), or (iii) if Buyer elects to purchase fifteen (15) million
MMBtu, $0.1342 per MMBtu, plus $0.2858 per Mcf (or the rate described
in subsection D below).
D. In the event the approved rate for transportation on the Westar system
(as that system is described in the Operating Agreement) changes, then
the $0.2858 per Mcf rate for transportation will be replaced with the
new rate which has been approved by The Railroad Commission of Texas,
which notwithstanding the structure of such approved rate shall be the
cost of service rate expressed on a per unit of actual throughput basis
for the capacity used to provide the firm transportation service.
E. Commencing January 1, 1998, and each January 1 thereafter for the
remaining term of this Agreement, Buyer shall have the option to
purchase at a mutually agreeable price from Seller all or any portion
of
5
<PAGE>
Buyer's Base Load Requirements, and Buyer shall transport that portion
of Buyer's Base Load Requirements that Buyer elects not to purchase
from Seller hereunder during each calendar year under the Service
Agreement.
F. The "Index Basket" referred to in B. and C. above shall be equal to the
sum of the "prices" stated in dollars per MMBtu of: (i) fifty percent
(50%) of the arithmetic average of the index prices listed in each
edition of Natural Gas Week, published during the applicable calendar
month by Oil Daily Company in the table titled "Gas Price Report",
under the column labeled "Delivered to Pipeline", "This Week" for Texas
West Spot, and (ii) twenty-five percent (25%) of the first publication
in the applicable month of Inside F.E.R.C.'s Gas Market Report,
published by McGraw-Hill, Inc. for Panhandle Eastern Pipeline Co.,
Texas, Oklahoma (Mainline) under the heading "Prices of Spot Gas
Delivered to Pipeline" under the category labeled "Index", and (iii)
twenty-five percent (25%) of the index price published in the first
edition of the month in Natural Gas Intelligence Gas Price Index for
the applicable calendar month, identified in the table entitled "SPOT
GAS PRICES" under the column entitled "Contract Index", the "Intrastate
Avg." for the "West Texas/Permian" gas.
G. Should any of the indices or publications above become unavailable,
Buyer and Seller will use their best efforts to locate another source
of this information, or in the event that the information cannot be
obtained through another source, Buyer and Seller shall agree upon
another index to replace the index which has become unavailable.
H. For the months of October, November and December of 1996 only, in
addition to the prices specified above, Buyer shall pay Seller for the
first gas through the
6
<PAGE>
meter at the Delivery Point(s) hereunder an additional amount for the
specified volumes, as follows:
For October 1996 - 500,000 MMBtu - $0.82 per MMBtu
For November 1996 - 1, 365,000 MMBtu - $0.82 per MMBtu
For December 1996 - 1,775,000 MMBtu - $0.82 per MMBtu
Section 2. In addition to the price to be paid for gas delivered
hereunder, Buyer agrees to reimburse Seller for gross receipts taxes, sales
taxes, and other similar taxes, which are lawfully imposed on Seller because of
the sale or delivery of gas to Buyer hereunder or the gas itself. Statements
for such tax reimbursement shall be rendered and paid as provided in accordance
with the billing and payments provisions of this Agreement. All taxes levied on
such gas after delivery and lawfully imposed on Buyer shall be paid by Buyer.
If Buyer claims an exemption from state sales taxes or desires to pay any
applicable sales taxes directly to the taxing authority, Buyer will execute the
"Exemption Certificate" attached hereto as Exhibit "A" or such other evidence of
exemption as may be required by Seller. Applicable rulings or orders of
governmental representatives in charge of the administration of any law or
ordinance increasing, decreasing or creating any tax shall be binding and
conclusive upon Buyer until such time as the invalidity thereof has been finally
established by the decision of a court of competent jurisdiction. Buyer shall
be entitled to reimbursement from Seller to the extent of any payments made by
it to Seller for taxes pursuant to this Article which may subsequently be
refunded to Seller by the taxing authority. Buyer shall not be obligated to
reimburse Seller for any ad valorem taxes on properties or for taxes which are
based upon or measured by the natural gasoline or other liquefied hydrocarbon
content extracted from the gas before delivery to Buyer.
7
<PAGE>
ARTICLE V
TERM
Section 1. This Agreement, regardless of when executed, is effective as
of the Effective Date, and shall continue thereafter, unless earlier terminated
pursuant to the provisions in other Sections of this Agreement, for a term
ending on December 31, 2001.
ARTICLE VI
NOTICES
Section 1. Any notice or statement (other than notices to be given under
the Price and Taxes Article of this Agreement which shall be by certified mail,
return receipt requested), to be given hereunder, unless otherwise specified
herein, shall be in writing and shall be deemed delivered as of the postmarked
date when deposited in the United States mail, postage prepaid, and addressed to
the respective Party at the following addresses or at such other addresses as a
Party may designate to the other in writing:
SELLER:
Notices: K N Marketing, L.P.
333 Clay Street, Suite 2000
Houston, TX 77002
Attention: Gas Sales & T&E
Administration
Wire Transfer: K N Marketing, L.P.
Norwest Banks Colorado, N.A.
Denver, Colorado
ABA# 102 000 076
A/c# 101-0918-554
BUYER:
Notices: ENERGAS COMPANY
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply
Statements: ENERGAS COMPANY
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply
8
<PAGE>
ARTICLE VII
MEASURING EQUIPMENT AND TESTING
Section 1. Measuring equipment and testing shall be governed by the
Operating Agreement.
ARTICLE VIII
MEASUREMENT SPECIFICATIONS
Section 1. Measurement specifications shall be governed by the Operating
Agreement.
ARTICLE IX
QUALITY
Section 1. Quality shall be governed by the Operating Agreement.
ARTICLE X
DELIVERY PRESSURE
Section 1. Delivery pressure shall be governed by the Operating
Agreement.
ARTICLE XI
BILLING, PAYMENT AND AUDIT
Section 1. On or before the fifteenth (15th) day of each Month, Seller
shall render a statement to Buyer giving the total quantity of gas, expressed in
MMBtu and Mcf, delivered and sold hereunder during the preceding Month and the
monies due therefor. Such statements are to be rendered in accordance with this
Agreement, and shall include any amounts due for tax reimbursement under the
provisions of this Agreement. In the event the total amount due Seller cannot
be determined on or before the fifteenth (15th) day of the Month, Seller shall
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<PAGE>
nevertheless invoice Buyer for the amounts that are known and/or are nominated
by Buyer, and when the information is available Seller shall invoice for actual
amounts (or refund any payment as necessary) as soon as practicable after such
amount is determined.
Section 2. Ten (10) days after the statement is received by Buyer, Buyer
shall make payment to Seller by wire transfer per the instructions set forth in
the Article titled NOTICES. If Buyer disputes the amount of any statement for
any reason, Buyer shall notify Seller of such dispute and shall be obligated to
pay only the undisputed portion of such statement on the due date. Buyer shall
pay the disputed portion of the statement which is determined to be owing to
Seller within fifteen (15) days after the date the dispute is resolved, together
with interest on such amount at the rate set forth in Section 4. below,
commencing on the original due date of the statement and continuing until paid.
If the statement shall have been paid in full and it shall be determined that
such disputed portion of the statement was paid in error, Seller shall refund
such amount to Buyer, together with interest at the rate hereinafter set forth
below over the period that Seller had possession of the money, within fifteen
(15) days after resolution of the dispute.
Section 3. All statements, bills, computations and payments shall be
subject to correction of any errors contained therein until two (2) years after
date of payment, and after such period any errors found will be deemed to be
waived by the affected Party.
Section 4. Any amounts due for gas delivered hereunder remaining unpaid
after the due date for such payment shall bear interest, at the lesser of the
highest lawful interest rate or the prime rate charged by Norwest Bank of Denver
plus two percent (2%), until paid.
Section 5. Each Party shall have access to and the right to audit during
regular business days and business hours, upon reasonable notice, all
measurement, billing, computation and payment records maintained by the other
Party which relate to the
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<PAGE>
gas received under this Agreement. All records will be maintained for two (2)
years after payment has been made for the month to which the records pertain.
ARTICLE XII
NOTIFICATION OF CURTAILMENT
Section 1. Seller and Buyer agree to provide each other with as early a
notice as is reasonably practical of any curtailment or cessation of deliveries
or receipts due to force majeure or pursuant to this Article.
Section 2. Gas delivered under this Agreement shall be subject to
curtailment when necessary to protect public health and safety. Such
curtailment shall be performed by Seller and/or Transporter in accordance with
Seller's and/or Transporter(s)' applicable procedures from time to time in
effect and/or on file with the appropriate regulatory agency, and shall not be
the basis for any claim for damages sustained by any Party.
Section 3. In the event a curtailment of deliveries shall become
necessary or advisable, Seller shall notify or cause Transporter(s) to notify
Buyer as soon as possible before actual curtailment, if possible, by telephone
or other means, of the nature, extent and probable duration of such curtailment.
Buyer shall resume the taking of gas within a reasonable length of time
following notification that gas is again available.
ARTICLE XIII
POSSESSION AND RESPONSIBILITY FOR GAS
Section 1. As between the Parties hereto, Seller shall be in exclusive
control and possession of the gas delivered hereunder and responsible for any
damage or injuries caused thereby until the same shall have been delivered to
Buyer at the Delivery Point(s) (except to the extent such damages or injuries
shall have been caused by the act or omission of Buyer), after which Buyer shall
be deemed to be in exclusive control and
11
<PAGE>
possession thereof and responsible for any such damages or injuries (except to
the extent such damages or injuries shall have been caused by the act or
omission of Seller). Each of the Parties hereto agree to indemnify, defend, and
hold the other Party harmless from and against any and all claims, liabilities,
damage, losses, costs, and expenses (including attorneys' fees) incurred by the
indemnified Party arising from or relating to any damages, losses, or injuries
for which the indemnifying Party is responsible pursuant to the foregoing
sentence.
ARTICLE XIV
TITLE
Section 1. Seller hereby warrants that (i) it has good title to all gas
delivered to Buyer hereunder, (ii) it has the right to sell such gas, and (iii)
all such gas is free from any and all liens, encumbrances, and adverse claims.
Seller agrees to indemnify, defend, and hold Buyer harmless from and against any
adverse claims asserted with respect to any gas delivered hereunder.
Section 2. Title to the gas shall pass from Seller to Buyer, upon the
delivery thereof, at the Delivery Point(s).
ARTICLE XV
FORCE MAJEURE
Section 1. In the event that either Seller or Buyer is rendered unable,
wholly or in part, by reason of an event of force majeure, to perform its
obligations under this Agreement, other than to make payment due hereunder, and
such Party has given notice and full particulars of such force majeure in
writing to the other Party as soon as possible after the occurrence of the cause
relied on, then the obligations of the Parties, insofar as they are affected by
such force majeure, shall be suspended during the continuance of such inability,
but for no longer period, and such cause shall, insofar as possible,
12
<PAGE>
be remedied with all reasonable dispatch. The term "force majeure" as employed
herein and for all purposes relating hereto 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, storms, hurricane warnings, crevasses, floods, washouts, arrests and
restraints of governments and people, civil disturbances, explosions, breakages
or accident to machinery or lines of pipe, the necessity for making repairs or
alterations to machinery or lines of pipe, freezing of wells or lines of pipe,
partial or entire failure of wells, inability of any Party hereto to obtain
necessary materials, supplies, or permits due to existing or future rules,
regulations, orders, laws or proclamations of governmental authorities (both
federal and state), including both civil and military, any failure due to force
majeure by any transporter(s) to deliver Seller's gas to Buyer's facilities or
thereafter to transport gas for Buyer, partial or entire failure of Seller's
source of supply, and any other causes whether of the kind herein enumerated or
otherwise, not within the control of the Party claiming suspension and which by
the exercise of due diligence such Party is unable to prevent or overcome; such
term shall likewise include (a) the inability of 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, any necessary servitudes, right-of-way grants,
permits or licenses, and (b) the inability of each Party to acquire, or the
delays on the part of such Party in acquiring at reasonable cost and after the
exercise of due diligence, any necessary materials and supplies (excluding
inability due to the cost of gas or the cost of transportation of gas), permits
and permissions. It is understood and agreed that the settlement of strikes,
lockouts or other industrial disturbances shall be entirely within the
discretion of the Party or Transporter having the difficulty and that the above
requirement that any force majeure shall be remedied by the exercise of due
diligence shall not require the settlement of strikes or lockouts by acceding to
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<PAGE>
the demands of the opposing party when such course is inadvisable in the
discretion of the Party having the difficulty.
ARTICLE XVI
FINANCIAL RESPONSIBILITY
Section 1. If, during the term of this Agreement, Seller, in good faith,
determines that the financial responsibility of Buyer has become impaired or
unsatisfactory, advance cash payment or other satisfactory security will be
given by Buyer upon demand by Seller, and delivery of gas may be withheld until
such payment or assurance is received. If such payment or assurance is not
received within fifteen (15) days of demand, Seller may terminate this Agreement
at any time effective upon the dispatch of written notice. Additionally, if
there are instituted by or against either Party hereunder proceedings in
bankruptcy or under any insolvency law, the other Party may terminate this
Agreement at any time.
Section 2. If, during the term of this Agreement, Buyer, in good faith,
determines that the financial responsibility of Seller has become impaired or
unsatisfactory, a corporate warranty or other satisfactory security will be
given by Seller upon demand by Buyer. If such assurance is not received within
fifteen (15) days of demand, Buyer may terminate this Agreement at any time
effective upon the dispatch of written notice.
ARTICLE XVII
GOVERNMENTAL REGULATIONS
Section 1. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, EXCEPT ANY RULE OR
PRINCIPLE OF THE LAWS OF THE STATE OF TEXAS WHICH WOULD REFER THE CONSTRUCTION
OF THIS AGREEMENT TO THE LAWS OF ANOTHER STATE. This Agreement shall be subject
to all valid laws, regulations or orders of duly constituted governmental
authorities having jurisdiction which are applicable
14
<PAGE>
to the subject matter hereof and effective from time to time. Seller and Buyer
agree to obtain, if possible, whatever authority is necessary, if any, to
effectuate the purchase or sale of gas hereunder in the event this Agreement and
the purchase or sale of gas hereunder for any reason becomes subject to the
jurisdiction of any governmental authority, which at the present time does not
have such jurisdiction.
Section 2. Notwithstanding any other provision of this Agreement,
if at any time during the term of this Agreement, any federal or state law or
any rule, order, opinion, enactment or regulation of any governmental authority
or of any court, prevents Buyer from including in its cost of service for
ratemaking purposes to its customers the full amount of any cost incurred under
this Agreement which Buyer has agreed to pay Seller hereunder, Buyer shall
immediately notify Seller in writing of the price that it is allowed to include
in its cost of service for ratemaking purposes for gas purchased under this
Agreement. Upon receiving such notification, Seller, at its sole discretion,
may choose to either amend the Agreement so that the Buyer can include in its
cost of service for ratemaking purposes the full price for gas sold under the
Agreement or terminate the Agreement. Seller shall notify Buyer of its choice
in writing within twenty-four (24) hours of receiving Buyer's notice.
Section 3. Notwithstanding any other provision of this Agreement, if at
any time during the term of this Agreement, any federal or state law or any
rule, order, opinion, enactment or regulation of any governmental authority or
of any court, prevents Seller from recovering from Buyer the full price for gas,
which Buyer has agreed to pay Seller hereunder, inclusive of any charges
assessed as a result of Buyer's failure to take gas, as set forth herein, then
Seller shall be excused from delivering gas, effective prospectively from the
date that Buyer receives written notice from Seller of the pertinent rule,
order, opinion, enactment or regulation. Each time that Seller invokes this
right to be excused from taking or delivering gas pursuant to this paragraph,
the Parties may renegotiate an acceptable price, or,
15
<PAGE>
at any time during renegotiation or in lieu of renegotiation, terminate this
Agreement immediately.
Section 4. In addition, if any federal or state law, rule, order,
opinion, enactment or regulation of any governmental authority or of any court,
prevents either Party from receiving the full benefits as bargained for under
this Agreement and in any way prevents either Party from exercising its right to
terminate or cease deliveries under this Agreement, this Agreement shall be
deemed to have terminated one (1) day prior to the attempted implementation of
such governmental action unless the Party whose benefit is diminished agrees to
waive this clause in writing in which case the Agreement shall be deemed to be
reinstated.
ARTICLE XVIII
ENTIRE AGREEMENT
Section 1. This Agreement contains the entire agreement of the Parties
with respect to the matters covered. No other agreement, statement or promise
not contained herein shall be binding or valid.
ARTICLE XIX
CONFIDENTIALITY
Section 1. The terms of this Agreement, including but not limited to the
price paid for gas, the identified transporting pipelines and cost of
transportation, the quantities of gas purchased and sold and all other material
terms shall be kept confidential by the Parties, except to the extent that any
information must be disclosed to a third Party as required by federal, state or
local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information
16
<PAGE>
is in the public domain, or which, through no breach by either Party of its
obligations herein, ceases to be confidential.
ARTICLE XX
SUCCESSORS AND ASSIGNS
Section 1. This Agreement may not be assigned by either Party without the
consent of the other Party, which consent shall not be unreasonably withheld,
unless assigned to an affiliate or subsidiary of a Party. Such assignment shall
not relieve the assigning Party of its obligations under this Agreement.
Section 2. Either Party may assign its rights, title, and interest in,
to, and under this Agreement to a trustee or trustees, individual or corporate,
as security for bonds or other obligations or securities, without such trustee
or trustees assuming or becoming in any respect obligated to perform the
obligations of the assignor under this Agreement, and, if any such trustee be a
corporation, without its being required to qualify to do business in any state
in which any performance of this Agreement may occur. However, such assignment
for security purposes shall not relieve the assigning Party of any of its
obligations under this Agreement.
Section 3. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the Parties hereto and their respective
successors and assigns, and is intended solely for the benefit of Seller and
Buyer and their respective successors and assigns, and not for the benefit of
any other person or entity not a Party hereto.
ARTICLE XXI
MAINTENANCE OF FACILITIES
Section 1. Maintenance of facilities shall be governed by the Operating
Agreement.
17
<PAGE>
ARTICLE XXII
INDEMNIFICATION
Section 1. Buyer and Seller shall each indemnify, defend, and save
harmless the other including their employees and agents from and against any and
all loss, damage, injury, liability, and claims for injury to or death of
persons (including any employee of Buyer or Seller), or for loss or damage to
property (including the property of Buyer or Seller), to the extent that such
losses, damages, injuries, or claims result from the negligence of the
indemnifying Party in its performance of its obligations arising pursuant to
this Agreement (including the installation, maintenance, and operation of
property, equipment, and facilities) or any other operations under this
Agreement.
ARTICLE XXIII
THIRD-PARTY TRANSPORTATION
Section 1. Buyer and Seller acknowledge that Seller will be obtaining
transportation from third parties in order to have the gas covered hereby
delivered to the Delivery Point(s). In the event such transportation is
interrupted or terminated by an event of force majeure as defined in Article XV,
Seller shall be fully excused for its failure to deliver gas hereunder.
ARTICLE XXIV
HEADINGS
Section 1. The descriptive headings of the provisions of this Agreement
are formulated and used for convenience only and shall not be deemed to affect
the meaning or construction of any such provisions.
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<PAGE>
ARTICLE XXV
WAIVER
Section 1. No waiver by either Party of any one or more defaults by the
other in the performance of the provisions of this Agreement shall operate or be
construed as a waiver of any other default or defaults, whether of a like or a
different character.
ARTICLE XXVI
AMENDMENTS
Section 1. The terms and conditions of this Agreement may not be amended
except by the written agreement of the Parties.
ARTICLE XXVII
REMEDIES UPON MATERIAL DEFAULT
Section 1. If either Party hereto shall fail to perform any material
covenant or obligation imposed upon it under this Agreement, then in such event
the non-defaulting Party may, at its option, terminate this Agreement upon
acting in accordance with the procedures hereafter set forth in this Section.
The non-defaulting Party shall cause a written notice to be served on the
defaulting Party, which notice shall state specifically the cause of terminating
this Agreement and shall declare it to be the intention of the non-defaulting
Party to terminate this Agreement if the default is not cured. The defaulting
Party shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and, if
within such ten-day period, the defaulting Party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting Party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting Party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting Party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no
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<PAGE>
further force or effect from and after the expiration of such ten-day period.
Section 2. Any termination of this Agreement pursuant to the provisions
of this Article shall be (i) without prejudice to the rights of Seller to
collect any amounts then due Seller for gas delivered prior to the time of
termination, (ii) without prejudice to the rights of Buyer to receive any gas
for which it has paid but not received prior to the time of termination, and
(iii) without waiver of any other remedy to which the non-defaulting Party may
be entitled.
ARTICLE XXVIII
MISCELLANEOUS
Section 1. This Agreement shall be deemed drafted and prepared equally
and jointly regardless of which Party prepared or submitted the Agreement to the
other.
Section 2. Buyer and Seller hereby cancel, supersede, and replace any and
all previous agreements between Buyer and Seller which include, cover, or
pertain in any manner to the delivery of gas to Buyer at the Delivery Points.
Section 3. Except for the Parties hereto and their successors and
assigns, no person, including without limitation any owner of a royalty or
overriding royalty interest, shall have any rights as a third Party beneficiary
or otherwise under this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed.
"BUYER" "SELLER
ENERGAS Company, a division of K N MARKETING, L.P.
Atmos Energy Corporation By its Managing General
Partner,
American Pipeline Company
By: By:
----------------------- -----------------------
20
<PAGE>
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
21
<PAGE>
EXHIBIT "A" to Gas Sales Agreement
dated January 1, 1996 between K N Marketing, L.P. ("Seller")
and ENERGAS COMPANY, a division of Atmos Energy Corporation
("Buyer")
EXEMPTION CERTIFICATE
For Natural Gas Delivered By
K N Marketing, L.P.
To ENERGAS COMPANY
Buyer's Direct Payment Permit Number:
----------------------
Buyer's Address: P.O. Box 650205, Dallas, Texas 75265-0205
The undersigned hereby claims an exemption from payment of taxes under Tax Code,
Vernon Texas Code Annotated, Chapter 151, for the purchase and delivery of
natural gas from Seller. The reason that Buyer is claiming this exemption is:
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
Buyer will be liable for payment of the Limited Sales and Use Tax if Buyer uses
the natural gas in some manner other than the reason listed above, and shall pay
the tax based on the price paid for the natural gas.
This exemption is claimed for, and this exemption certificate shall apply to,
all gas delivered to Buyer by Seller on and after the date hereof, and shall be
effective until revoked by written notice to Seller by Buyer. If this exemption
is disallowed for any reason by the State for any part or all of the gas
delivered, Buyer will accrue and pay direct to the State any tax and penalty
due.
Executed this the day of , 19 .
-------- ------------------ ---
By:
-----------------------------
Signature
Name:
-----------------------------
Type /Print
Title:
-----------------------------
<PAGE>
EXHIBIT 10.11
GAS SALES AGREEMENT
(Irrigation)
between
K N MARKETING, L.P.
as "Seller"
and
ENERMART TRUST
as "Buyer"
Dated: March 1, 1996
State of TEXAS
<PAGE>
I N D E X
ARTICLE TITLE PAGE
I Definitions 1
II Quantity 2
III Delivery Points 3
IV Price and Taxes 3
V Term 4
VI Notices 4
VII Measuring Equipment and Testing 5
VIII Measurement Specifications 5
IX Quality 5
X Delivery Pressure 6
XI Billing, Payment and Audit 6
XII Notification of Curtailment 7
XIII Possession and Responsibility for Gas 7
XIV Title 8
XV Force Majeure 8
XVI Financial Responsibility 9
XVII Governmental Regulations 10
XVIII Entire Agreement 11
XIX Confidentiality 11
XX Successors and Assigns 12
XXI Maintenance of Facilities 12
XXII Indemnification 13
XXIII Third Party Transportation 13
XXIV Headings 13
XXV Waiver 13
XXVI Amendments 14
XXVII Remedies Upon Material Default 14
XXVIII Miscellaneous 15
Signatures 15
Exhibit "A" - Exemption Certificate A-1
<PAGE>
GAS SALES AGREEMENT
(Irrigation)
THIS AGREEMENT, dated and effective this 1st day of March, 1996, (the
"Effective Date") by and between K N MARKETING, L.P., a Texas Limited
Partnership, hereinafter called "Seller", and ENERMART TRUST, a Pennsylvania
Business Trust, hereinafter called "Buyer";
W I T N E S S E T H
WHEREAS, Seller is the owner of a supply of firm natural gas from which
Seller will have available for sale certain volumes of natural gas; and
WHEREAS, Seller has made certain transportation arrangements with pipeline
companies which operate natural gas transmission systems ("Transporter(s)") ;
and
WHEREAS, Buyer desires to purchase volumes of firm natural gas to use as
fuel gas for its irrigation customers in accordance with the terms and
conditions of this Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1. "Buyer" means the Party who is purchasing and receiving gas
volumes under this Agreement.
Section 2. "Seller" means the Party who is selling gas volumes under this
Agreement.
Section 3. "Party" or "Parties" means Buyer and/or Seller hereunder,
acting by and through duly authorized representatives.
Section 4. "Day" means the period of twenty-four consecutive hours
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the following calendar day. The reference date for any day should be
the calendar date upon which such twenty-four (24) hour period began.
Section 5. "Month" means the period commencing at 7:00 a.m. CT on the
first day of a calendar month and ending at 7:00 a.m. CT on the first day of the
following calendar month.
<PAGE>
Section 6. "Mcf" means the quantity of gas occupying a volume of one
thousand (1000) cubic feet at a temperature of sixty (60) degrees Fahrenheit and
an absolute pressure of fourteen and sixty-five hundredths pounds per square
inch (14.65 psia).
Section 7. "Btu" means the amount of heat required to raise the temperature
of one avoirdupois pound of pure water from fifty-eight and five tenths degrees
(58.5 degrees) Fahrenheit to fifty-nine and five tenths (59.5 degrees)
Fahrenheit at a constant pressure of fourteen and sixty-five hundredths (14.65)
pounds per square inch absolute ("psia").
Section 8. "MMBtu" means one million (1,000,000) Btu.
Section 9. "Operating Agreement" means the agreement between Energas
Company, and Westar Transmission Company dated December 1, 1996, covering
measurement equipment and testing, measurement specifications, pressures,
quality, maintenance of facilities, and other operational matters.
ARTICLE II
QUANTITY
Section 1.
A. During the period March 1, 1996 through December 31, 1998, Seller will
sell and deliver and Buyer will purchase and receive all of Buyer's requirements
from Seller hereunder to serve all of Buyer's irrigation fuel gas markets
existing as of December 31, 1995.
B. Beginning January 1, 1999 and continuing through the remaining term of
this Agreement, Buyer shall have the option to either (i) purchase from Seller
all or any portion of Buyer's irrigation fuel gas requirements, or (ii)
transport any such portion of Buyer's irrigation fuel gas requirements not
purchased from Seller hereunder, under either one of those certain Gas Service
Agreements between EnerMart Trust and KN Westex Gas Services Company dated
January 1, 1996 or between EnerMart Trust and Westar Transmission Company dated
January 1, 1996.
Section 2. It is expressly understood and agreed that all gas sold to
Buyer is to be used by Buyer solely for Buyer's
2
<PAGE>
irrigation fuel gas markets, and any other use of the gas ("Other Use Gas") by
Buyer will constitute a material breach of this Agreement, in which case,
without limiting any other remedies available to Seller, Seller may immediately
cease delivering Other Use Gas to Buyer at the Delivery Point(s).
ARTICLE III
DELIVERY POINT(S)
Section 1. The delivery of gas hereunder shall be subject to the
Operating Agreement and shall be at the outlet flange of Transporter(s)
facilities at all points of interconnection between Transporter(s) facilities
and Buyer where Buyer receives irrigation fuel gas from Seller as of December
31, 1995, or subsequently at any other mutually agreeable point(s) to be agreed
to in writing by the Parties ("Delivery Point(s)").
ARTICLE IV
PRICE AND TAXES
Section 1. For the period beginning March 1, 1996 through February 28,
1997, the price of each Mcf of gas purchased and sold hereunder, delivered to
Buyer at the Delivery Point(s), shall be $2.117.
Section 2. At least ninety (90) days prior to each of the periods of (i)
March 1, 1997 through February 28, 1998, and (ii) March 1, 1998 through December
31, 1998, the Parties shall meet and negotiate in good faith to establish a
price on an MMBtu basis for gas purchased and sold hereunder, taking into
consideration the type and level of services provided by Seller and the
prevailing market conditions. Such mutually agreed to price shall be effective
on the applicable March 1.
Section 3. Beginning January 1, 1999, and for the remaining term of this
Agreement, the price payable by Buyer to Seller may be renegotiated for all or
any portion of Buyer's irrigation fuel gas requirements. Any portion of Buyer's
irrigation fuel gas requirements not purchased from Seller hereunder will be
transported under either one of those certain Gas Service Agreements between the
EnerMart Trust and KN Westex
3
<PAGE>
Gas Services Company dated January 1, 1996 or Westar Transmission Company.
Section 4. In addition to the price to be paid for gas delivered
hereunder, Buyer agrees to reimburse Seller for gross receipts taxes, sales
taxes, and other similar taxes, which are lawfully imposed on Seller because of
the sale or delivery of gas to Buyer hereunder or the gas itself. Statements
for such tax reimbursement shall be rendered and paid as provided in accordance
with the billing and payment provisions of this Agreement. All taxes levied on
such gas after delivery and lawfully imposed on Buyer shall be paid by Buyer.
If Buyer claims an exemption from state sales taxes or desires to pay any
applicable sales taxes directly to the taxing authority, Buyer will execute the
"Exemption Certificate" attached hereto as Exhibit "A" or such other evidence of
exemption as may be required by Seller. Applicable rulings or orders of
governmental representatives in charge of the administration of any law or
ordinance increasing, decreasing, or creating any tax shall be binding and
conclusive upon Buyer and Seller until such time as the invalidity thereof has
been finally established by the decision of a court of competent jurisdiction.
Buyer shall be entitled to reimbursement from Seller to the extent of any
payments made by it to Seller for taxes pursuant to this Article which may
subsequently be refunded to Seller by the taxing authority. Buyer shall not be
obligated to reimburse Seller for any ad valorem taxes on properties or for
taxes which are based upon or measured by the natural gasoline or other
liquefied hydrocarbon content extracted from the gas before delivery to Buyer.
ARTICLE V
TERM
Section 1. This Agreement, regardless of when executed, is effective as
of the Effective Date, and shall continue thereafter, unless earlier terminated
pursuant to the provisions in other Sections of this Agreement, for a term
ending on December 31, 2001.
4
<PAGE>
ARTICLE VI
NOTICES
Section 1. Any notice or statement (other than notices to be given under
the Price and Taxes Article of this Agreement which shall be by certified mail,
return receipt requested) to be given hereunder, unless otherwise specified
herein, shall be in writing and shall be deemed delivered as of the postmarked
date when deposited in the United States mail, postage prepaid, and addressed to
the respective Party at the following addresses or at such other addresses as a
Party may designate to the other in writing:
SELLER:
Notices: K N Marketing, L.P.
333 Clay Street, Suite 2000
Houston, TX 77002
Attention: Gas Sales & T&E
Administration
Wire Transfer: K N Marketing, L.P.
Norwest Banks Colorado, N.A.
Denver, Co
ABA# 102 000 076
A/C# 101-0918-554
BUYER:
Notices: ENERMART TRUST
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply
Statements: ENERMART TRUST
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply
ARTICLE VII
MEASURING EQUIPMENT AND TESTING
Section 1. Measuring equipment and testing shall be governed by the
Operating Agreement.
5
<PAGE>
ARTICLE VIII
MEASUREMENT SPECIFICATIONS
Section 1. Measurement specifications shall be governed by the Operating
Agreement.
ARTICLE IX
QUALITY
Section 1. Quality shall be governed by the Operating Agreement.
ARTICLE X
DELIVERY PRESSURE
Section 1. Delivery Pressure shall be governed by the Operating
Agreement.
ARTICLE XI
BILLING, PAYMENT AND AUDIT
Section 1. On or before the fifteenth (15th) day of each Month, Seller
shall render a statement to Buyer giving the total quantity of gas, expressed in
Mcf's or MMBtu's, as the case may be, delivered and sold hereunder during the
preceding Month and the monies due therefor. Such statements are to be rendered
in accordance with this Agreement, and shall include any amounts due for tax
reimbursement under the provisions of this Agreement. In the event the total
amount due Seller cannot be determined on or before the fifteenth (15th) day of
the Month, Seller shall nevertheless invoice Buyer for the amounts that are
known and/or are nominated by Buyer, and when the information is available
Seller shall invoice for actual amounts (or refund any payment as necessary) as
soon as practicable after such amount is determined.
Section 2. Ten (10) days after the statement is received by Buyer, Buyer
shall make payment to Seller by wire transfer per the instructions set forth in
the Article titled NOTICES. If Buyer disputes the amount of any statement for
any reason, Buyer shall notify Seller of such dispute and shall be obligated to
pay only the undisputed portion of such statement on the due date. Buyer shall
pay the disputed portion of the statement which is
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determined to be owing to Seller within fifteen (15) days after the date the
dispute is resolved, together with interest on such amount at the rate set forth
in Section 4. below, commencing on the original due date of the statement and
continuing until paid. If the statement shall have been paid in full and it
shall be determined that such disputed portion of the statement was paid in
error, Seller shall refund such amount to Buyer, together with interest at the
rate hereinafter set forth below over the period that Seller had possession of
the money, within fifteen (15) days after resolution of the dispute.
Section 3. All statements, bills, computations and payments shall be
subject to correction of any errors contained therein until two (2) years after
date of payment, and after such period any errors found will be deemed to be
waived by the affected Party.
Section 4. Any amounts due for gas delivered hereunder remaining unpaid
after the due date for such payment shall bear interest, at the lesser of the
highest lawful interest rate or the prime rate charged by Norwest Bank of Denver
plus two percent (2%), until paid.
Section 5. Each Party shall have access to and the right to audit during
regular business days and business hours, upon reasonable notice, all
measurement, billing, computation and payment records maintained by the other
Party which relate to the gas received under this Agreement. All records will
be maintained for two (2) years after payment has been made for the month to
which the records pertain.
ARTICLE XII
NOTIFICATION OF CURTAILMENT
Section 1. Seller and Buyer agree to provide each other with as early a
notice as is reasonably practical of any curtailment or cessation of deliveries
or receipts due to Force Majeure or pursuant to this Article.
Section 2. Gas delivered under this Agreement shall be subject to
curtailment when necessary to protect public health
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and safety. Such curtailment shall be performed by Seller and/or Transporter(s)
in accordance with Seller's and/or Transporter(s)' applicable procedures from
time to time in effect and/or on file with the appropriate regulatory agency,
and shall not be the basis for any claim for damages sustained by any Party.
Section 3. In the event a curtailment of deliveries shall become
necessary or advisable, Seller shall notify, or cause Transporter(s) to notify,
Buyer as soon as possible before actual curtailment, if possible, by telephone,
or other means, of the nature, extent and probable duration of such curtailment.
Buyer shall resume the taking of gas within a reasonable length of time
following notification that gas is again available.
ARTICLE XIII
POSSESSION AND RESPONSIBILITY FOR GAS
Section 1. As between the Parties hereto, Seller shall be in exclusive
control and possession of the gas delivered hereunder and responsible for any
damage or injuries caused thereby until the same shall have been delivered to
Buyer at the Delivery Point(s) (except to the extent such damages or injuries
shall have been caused by the act or omission of Buyer), after which Buyer shall
be deemed to be in exclusive control and possession thereof and responsible for
any such damages or injuries (except to the extent such damages or injuries
shall have been caused by the act or omission of Seller). Each of the Parties
hereto agree to indemnify, defend and hold the other Party harmless from and
against any and all claims, liabilities, damages, losses, costs, and expenses
(including attorneys' fees) incurred by the indemnified Party arising from or
relating to any damages, losses, or injuries for which the indemnifying Party is
responsible pursuant to the foregoing sentence.
ARTICLE XIV
TITLE
Section 1. Seller hereby warrants that (i) it has good title to all gas
delivered to Buyer hereunder, (ii) it has the right to sell such gas, and (iii)
all such gas is free from any
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and all liens, encumbrances, and adverse claims. Seller agrees to hold Buyer
harmless from and against any adverse claims asserted with respect to any gas
delivered hereunder.
Section 2. Title to the gas shall pass from Seller to Buyer, upon the
delivery thereof, at the Delivery Point(s).
ARTICLE XV
FORCE MAJEURE
Section 1. In the event that either Seller or Buyer is rendered unable,
wholly or in part, by reason of an event of force majeure, to perform its
obligations under this Agreement, other than to make payment due hereunder, and
such Party has given notice and full particulars of such force majeure in
writing to the other Party as soon as possible after the occurrence of the cause
relied on, then the obligation of the Parties, insofar as they are affected by
such force majeure, shall be suspended during the continuance of such inability,
but for no longer period, and such cause shall, insofar as possible, be remedied
with all reasonable dispatch. The term "force majeure" as employed herein and
for all purposes relating hereto 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,
storms, hurricane warnings, crevasses, floods, washouts, arrests and restraints
of governments and people, civil disturbances, explosions, breakages or accident
to machinery or lines of pipe, the necessity for making repairs or alterations
to machinery or lines of pipe, freezing of wells or lines of pipe, partial or
entire failure of wells, inability of any Party hereto to obtain necessary
materials, supplies (excluding inability due to the cost of gas or the cost of
transportation of gas), or permits due to existing or future rules, regulations,
orders, laws or proclamations of governmental authorities (both federal and
state), including both civil and military, any failure due to force majeure by
any transporter(s) to deliver Seller's gas to Buyer's facilities or thereafter
to transport gas for Buyer, partial or entire failure of Seller's
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source of supply, and any other causes whether of the kind herein enumerated or
otherwise, not within the control of the Party claiming suspension and which by
the exercise of due diligence such Party is unable to prevent or overcome; such
term shall likewise include (a) the inability of 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, any necessary servitudes, right-of-way grants,
permits or licenses, and (b) the inability of each Party to acquire, or the
delays on the part of such Party in acquiring at reasonable cost and after the
exercise of due diligence, any necessary materials and supplies, permits and
permissions. It is understood and agreed that the settlement of strikes,
lockouts or other industrial disturbances shall be entirely within the
discretion of the Party or a transporter having the difficulty and that the
above requirement that any force majeure shall be remedied by the exercise of
due diligence shall not require the settlement of strikes or lockouts by
acceding to the demands of the opposing Party when such course is inadvisable in
the discretion of the Party having the difficulty.
ARTICLE XVI
FINANCIAL RESPONSIBILITY
Section 1. If, during the term of this Agreement, Seller, in good faith,
determines that the financial responsibility of Buyer has become impaired or
unsatisfactory, advance cash payment or other satisfactory security will be
given by Buyer upon demand by Seller, and delivery of gas may be withheld until
such payment or assurance is received. If such payment or assurance is not
received within fifteen (15) days of demand, Seller may terminate this Agreement
at any time effective upon the dispatch of written notice. Additionally, if
there are instituted by or against either Party hereunder; proceedings in
bankruptcy or under any insolvency law, the other Party may terminate this
Agreement at any time.
Section 2. If, during the term of this Agreement, Buyer, in good faith,
determines that the financial responsibility of
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Seller has become impaired or unsatisfactory, a corporate warranty or other
satisfactory security will be given by Seller upon demand by Buyer. If such
assurance is not received within fifteen (15) days of demand, Buyer may
terminate this Agreement at any time effective upon the dispatch of written
notice.
ARTICLE XVII
GOVERNMENTAL REGULATIONS
Section 1. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, EXCEPT ANY RULE OR
PRINCIPLE OF THE LAWS OF THE STATE OF TEXAS WHICH WOULD REFER THE CONSTRUCTION
OF THIS AGREEMENT TO THE LAWS OF ANOTHER STATE. This Agreement shall be subject
to all valid laws, regulations or orders of duly constituted governmental
authorities having jurisdiction which are applicable to the subject matter
hereof and effective from time to time. Seller and Buyer agree to obtain, if
possible, whatever authority is necessary, if any, to effectuate the purchase,
sale or transportation of gas hereunder in the event this Agreement and the
purchase, sale or transportation of gas hereunder for any reason become subject
to the jurisdiction of any governmental authority, which at the present time
does not have such jurisdiction.
Section 2. Notwithstanding any other provision of this Agreement, if at
any time during the term of this Agreement, any federal or state law or any
rule, order, opinion, enactment or regulation of any governmental authority or
of any court, prevents Buyer from including in its cost of service for
ratemaking purposes to its customers the full amount of any cost incurred under
this Agreement which Buyer has agreed to pay Seller hereunder, Buyer shall
immediately notify Seller in writing of the price that it is allowed to include
in its cost of service for ratemaking purposes for gas purchased under this
Agreement. Upon receiving such notification, Seller, at its sole discretion,
may choose to either amend the Agreement so that the Buyer can include in its
cost of service for ratemaking purposes the full price for gas sold under the
Agreement or terminate the
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Agreement. Seller shall notify Buyer of its choice in writing within twenty-four
(24) hours of receiving Buyer's notice.
Section 3. Notwithstanding any other provision of this Agreement, if at
any time during the term of this Agreement, any federal or state law or any
rule, order, opinion, enactment or regulation of any governmental authority or
of any court, prevents Seller from recovering from Buyer the full price for gas,
which Buyer has agreed to pay Seller hereunder, inclusive of any charges
assessed as a result of Buyer's failure to take gas, as set forth herein, then
Seller shall be excused from delivering gas, effective prospectively from the
date that Buyer receives written notice from Seller of the pertinent rule,
order, opinion, enactment or regulation. Each time that Seller invokes this
right to be excused from taking or delivering gas pursuant to this paragraph,
the Parties may renegotiate an acceptable price, or, at any time during
renegotiation or in lieu of renegotiation, terminate this Agreement immediately.
Section 4. In addition, if any federal or state law, rule, order,
opinion, enactment or regulation of any governmental authority or of any court,
prevents either Party from receiving the full benefits as bargained for under
this Agreement and in any way prevents either Party from exercising its right to
terminate or cease deliveries under this Agreement, this Agreement shall be
deemed to have terminated one (1) day prior to the attempted implementation of
such governmental action unless the Party whose benefit is diminished agrees to
waive this clause in writing in which case the Agreement shall be deemed to be
reinstated.
ARTICLE XVIII
ENTIRE AGREEMENT
Section 1. This Agreement contains the entire agreement of the Parties
with respect to the matters covered. No other agreement, statement or promise
not contained herein shall be binding or valid.
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ARTICLE XIX
CONFIDENTIALITY
Section 1. The terms of this Agreement, including but not limited to the
price paid for gas, the identified transporting pipelines and cost of
transportation, the quantities of gas purchased and sold and all other material
terms shall be kept confidential by the Parties, except to the extent that any
information must be disclosed to a third Party as required by federal, state or
local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either Party of its
obligations herein, ceases to be confidential.
ARTICLE XX
SUCCESSORS AND ASSIGNS
Section 1. This Agreement may not be assigned by either Party without the
consent of the other Party, which consent shall not be unreasonably withheld,
unless assigned to an affiliate or subsidiary of a Party. Such assignment shall
not relieve the assigning Party of any of its obligations under this Agreement.
Section 2. Either Party may assign its rights, title, and interest in,
to, and under this Agreement to a trustee or trustees, individual or corporate,
as security for bonds or other obligations or securities, without such trustee
or trustees assuming or becoming in any respect obligated to perform the
obligations of the assignor under this Agreement, and, if any such trustee be a
corporation, without its being required to qualify to do business in any state
in which any performance of this Agreement may occur. However, such assignment
for security purposes shall not relieve the assigning Party of any of its
obligations under this Agreement.
Section 3. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the Parties hereto and their respective
successors and assigns, and is intended solely for the benefit of Seller and
Buyer and their respective
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successors and assigns, and not for the benefit of any other person or entity
not a Party hereto.
ARTICLE XXI
MAINTENANCE OF FACILITIES
Section 1. Maintenance of facilities shall be governed by the Operating
Agreement.
ARTICLE XXII
INDEMNIFICATION
Section 1. Buyer and Seller shall each indemnify, defend, and save
harmless the other including their employees and agents from and against any and
all loss, damage, injury, liability, and claims for injury to or death of
persons (including any employee of Buyer or Seller), or for loss or damage to
property (including the property of Buyer or Seller), to the extent that such
losses, damages, injuries or claims result from the negligence of the
indemnifying Party in its performance of its obligations arising pursuant to
this Agreement (including the installation, maintenance, and operation of
property, equipment, and facilities) or any other operations under this
Agreement.
ARTICLE XXIII
THIRD-PARTY TRANSPORTATION
Section 1. Buyer and Seller acknowledge that Seller will be obtaining
transportation from third Parties in order to have the gas covered hereby
delivered to the Delivery Point(s). In the event such transportation is
interrupted or terminated by an event of force majeure as defined in Article XV,
Seller shall be fully excused for its failure to deliver gas hereunder.
ARTICLE XXIV
HEADINGS
Section 1. The descriptive headings of the provisions of this Agreement
are formulated and used for convenience only and shall not be deemed to affect
the meaning or construction of any such provisions.
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ARTICLE XXV
WAIVER
Section 1. No waiver by either Party of any one or more defaults by the
other in the performance of the provisions of this Agreement shall operate or be
construed as a waiver of any other default or defaults, whether of a like or a
different character.
ARTICLE XXVI
AMENDMENTS
Section 1. The terms and conditions of this Agreement may not be amended
except by the written agreement of the Parties.
ARTICLE XXVII
REMEDIES UPON MATERIAL DEFAULT
Section 1. If either Party hereto shall fail to perform any material
covenant or obligation imposed upon under this Agreement, then in such event the
non-defaulting Party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The non-
defaulting Party shall cause a written notice to be served on the defaulting
Party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting Party
to terminate this Agreement if the default is not cured. The defaulting Party
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and, if
within such ten-day period, the defaulting Party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting Party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting Party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting Party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no
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further force or effect from and after the expiration of such ten-day period.
Section 2. Any termination of this Agreement pursuant to the provisions
of this Article shall be (i) without prejudice to the rights of Seller to
collect any amounts then due Seller for gas delivered prior to the time of
termination, (ii) without prejudice to the rights of Buyer to receive any gas
for which it has paid but not received prior to the time of termination, and
(iii) without waiver of any other remedy to which the non-defaulting Party may
be entitled.
ARTICLE XXVIII
MISCELLANEOUS
Section 1. This Agreement shall be deemed drafted and prepared equally
and jointly regardless of which Party prepared or submitted the Agreement to the
other.
Section 2. Buyer and Seller hereby cancel, supersede, and replace any and
all previous agreements which include, cover, or pertain in any manner to the
delivery of gas to Buyer at the Delivery Points.
Section 3. Except for the Parties hereto and their successors and
assigns, no person, including without limitation any owner of a royalty or
overriding royalty interest, shall have any rights as a third Party beneficiary
or otherwise under this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed.
"BUYER"
ENERMART TRUST
By:
---------------------------
Signature
Name:
---------------------------
Type / Print
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Title:
---------------------------
"SELLER"
K N MARKETING, L.P.
By its Managing General Partner,
American Pipeline Company
By:
---------------------------
Signature
Name:
---------------------------
Type / Print
Title:
---------------------------
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EXHIBIT "A" to Gas Sales Agreement
dated March 1, 1996 between K N Marketing, L.P. ("Seller")
and EnerMart Trust ("Buyer")
EXEMPTION CERTIFICATE
For Natural Gas Delivered By
K N Marketing, L.P. ("Seller")
To EnerMart Trust ("Buyer")
Buyer's Direct Payment Permit Number:
-----------------------------------------
Buyer's Address: P.O. Box 650205, Dallas, Texas 75265-0205
--------------------------------------------------------------
The undersigned hereby claims an exemption from payment of taxes under Tax Code,
Vernon Texas Code Annotated, Chapter 151, for the purchase and delivery of
natural gas from Seller.
The reason that Buyer is claiming this exemption is:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Buyer will be liable for payment of the Limited Sales and Use Tax if Buyer uses
the natural gas in some manner other than the reason listed above, and shall pay
the tax based on the price paid for the natural gas.
This exemption is claimed for, and this exemption certificate shall apply to,
all gas delivered to Buyer by Seller on and after the date hereof, and shall be
effective until revoked by written notice to Seller by Buyer. If this exemption
is disallowed for any reason by the State for any part or all of the gas
delivered, Buyer will accrue and pay direct to the State any tax and penalty
due.
Executed this the day of , 19 .
-------- ------------------ ----
By:
---------------------------------
Signature
Name:
---------------------------------
Type /Print
Title:
--------------------------------
A-1
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EXHIBIT 10.12
AMENDMENT TO GAS SALES AGREEMENT
THIS AMENDMENT, made and entered into as of the 1st day of January, 1996
(Effective Date), by and between WESTAR TRANSMISSION COMPANY, a Delaware
Corporation (Seller), and ENERGAS COMPANY, a division of Atmos Energy
Corporation, a Texas Corporation (Buyer);
W I T N E S S E T H
WHEREAS, Seller and Buyer are successors in interest to a Gas Sales
Agreement dated January 1, 1986, as amended (Agreement), between Westar
Transmission Company, and Energas Company; and
WHEREAS, Seller and Buyer now desire to make certain changes and
modifications to the Agreement which are more fully described below.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, Seller and Buyer do hereby mutually agree to amend
the Agreement on the Effective Date as follows:
I.
DEFINITIONS
All Sections of Article I shall be deleted in their entirety and replaced
with the following:
Section 1. "Buyer" means the party who is purchasing and receiving gas
volumes under this Agreement.
Section 2. "Seller" means the party who is selling and delivering gas
volumes under this Agreement.
Section 3. "Party" or "Parties" means Buyer and/or Seller hereunder,
acting by and through duly authorized representatives.
Section 4. "Day" means the period of twenty-four consecutive hours
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the following calendar day. The reference date for any day should be
the calendar date upon which such twenty-four (24) hour period began.
Section 5. "Month" means the period commencing at 7:00 a.m. CT on the
first day of a calendar month and ending at 7:00 a.m. CT on the first day of the
following calendar month.
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Section 6. "Mcf" means the quantity of gas occupying a volume of one
thousand (1000) cubic feet at a temperature of sixty (60) degrees Fahrenheit and
an absolute pressure of fourteen and sixty-five hundredths pounds per square
inch (14.65 psia).
Section 7. "Btu" means the amount of heat required to raise the
temperature of one avoirdupois pound of pure water from fifty-eight and five
tenths (58.5) degrees Fahrenheit to fifty-nine and five tenths (59.5) degrees
Fahrenheit at a constant pressure of fourteen and sixty-five hundredths (14.65)
pounds per square inch absolute (psia).
Section 8. "MMBtu" means one million (1,000,000) Btu.
Section 9. "Operating Agreement" means the agreement between Westar
Transmission Company and Energas Company, dated December 1, 1996, covering
measurement equipment and testing, measurement specifications, pressures,
quality, maintenance of facilities, and other operational matters.
Section 10. "Buyer's West Texas System" means Energas' West Texas System,
excluding Energas' Dalhart/Channing System and Energas' Fritch/Sanford System.
II.
QUANTITY
Sections 1, 2 and 3 of Article II shall be deleted in their entirety and
replaced with the following:
Section 1. If and to the extent any of Buyer's other suppliers of natural
gas fail to deliver any volumes of natural gas that such other suppliers are
obligated to deliver for Buyer's West Texas System requirements, Seller shall
sell to Buyer hereunder all of the natural gas requirements of Buyer on Buyer's
West Texas System.
III.
DELIVERY POINT(S)
Section 1 of Article III shall be deleted and replaced with the following:
Section 1. The delivery of gas hereunder shall be subject to the Operating
Agreement and shall be at the outlet flange of Seller's facilities, at all
points of interconnection between Seller's facilities and Buyer, where Seller
sells gas to Buyer as of December 31, 1995, or subsequently at any other
mutually agreed to point(s) to be agreed to in writing by the parties ("Delivery
Point(s)").
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IV.
DELIVERY PRESSURE
Section 1 of Article IV shall be deleted and replaced with the following:
Section 1. The delivery pressure shall be governed by Article V and
related provisions of the Operating Agreement.
V.
METERING
All Sections under Article V shall be deleted in their entirety and be
replaced with the following:
Section 1. Metering shall be governed by Article II and related provisions
of the Operating Agreement.
VI.
UNITS OF VOLUME
Section 1 of Article VI shall be deleted in its entirety and replaced with
the following:
Section 1. Units of volume shall be governed by Article III and related
provisions of the Operating Agreement.
VII.
MEASUREMENT
All Sections of Article VII are deleted in their entirety and replaced with
the following:
Section 1. All measurement of gas hereunder shall be governed by Article
III and related provisions of the Operating Agreement.
VIII.
PRICE
All Sections under Article VIII shall be deleted in their entirety and be
replaced with the following:
Section 1. The price per Mcf during the term of this Agreement shall equal
Seller's margin in effect on the date of delivery as approved by the appropriate
regulatory authority plus the Weighted Average Cost of Gas as defined in Article
VIII, Section 2, below.
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Section 2. The Weighted Average Cost of Gas for any month shall be
calculated by dividing the Available Gas Volume into the Gas Acquisition Cost.
The "Gas Acquisition Cost" shall be composed of:
A) Third Party (Non-affiliate) Purchases.
Amounts paid for the volumes delivered into the Seller's Transmission
System during such month at wellheads, at field lines, at plant
outlets, and at transmission lines under the provisions of the
applicable contract involved. "Amounts paid" shall also include the
amortization of prepayments based on actual gas deliveries of the gas
related to that prepayment; and
B) Affiliate Purchases.
Each purchase from an affiliate shall be priced at the lower of:
1) What the Seller actually paid the affiliate;
2) The AWACOG for such month calculated without consideration of
affiliate purchases;
3) The price for the same item or class of items which the supplying
affiliate sold to another affiliate or to a third party;
4) The Weighted Average Cost of Purchases (WACOP) from third parties
(non-affiliates) for such month; and
C) Exchange Receipts.
An amount calculated by multiplying the net gas received into Seller's
Transmission system during such month by the previous month's AWACOG.
The "Exchange Receipts" component shall be deleted from "Gas
Acquisition Cost" at the earlier of:
1) September 30, 1989 or
2) When the cumulative exchange receipts dollars used in the AWACOG
calculation for the period beginning October 1, 1988 equals the
value of the net exchange balance on September 30, 1988.
D) Storage Withdrawals.
An amount calculated by multiplying the total volume of
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<PAGE>
gas withdrawn from storage during the month by the AWACOG for the
month that the gas was injected into storage. This is in accordance
with the first-in first-out methodology for valuing working gas in
storage.
E) Delivery Costs.
The "Delivery Costs" shall be composed of the amounts paid for
delivery of gas into Seller's Transmission System for resale to Buyer
in situations where the supplier cannot make delivery into such
system, thus reflecting the cost of delivery to the initial point of
receipt into Seller's Transmission System. The "Delivery Cost" shall
also include amounts paid for transportation between points on
Seller's Transmission System when such off-system transportation is
required by:
1) Operational necessity and efficiency or
2) An emergency situation.
The "Available Gas Volumes" shall be composed of the following gas volumes
delivered into the Seller's Transmission System during such month:
AA) Third Party (Non-affiliate) Purchase Volumes.
Volumes delivered at wellheads, at field lines, at plant outlets and
at transmission lines under the provisions of the applicable contracts
involved; and
BB) Affiliate Purchase Volumes.
Volumes purchased by Seller from affiliates; and
CC) Exchange Receipts Volumes.
Volumes representing net gas received under gas exchange agreements.
The exchange receipts volumes shall be eliminated from the AWACOG
calculation simultaneously with the deletion of "Exchange Receipts" as
provided in "C)" above; and
DD) Storage Withdrawal Volumes.
Total storage gas volumes withdrawn.
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IX.
BILLING AND PAYMENT
All Sections under Article IX shall be deleted in their entirety and
replaced with the following:
Section 1. On or before the fifteenth(15th) day of each Month, Seller
shall render a statement to Buyer giving the total quantity of gas, expressed in
Mcf, delivered and sold hereunder during the preceding Month and the monies due
therefor. Such statements are to be rendered in accordance with this Agreement,
and shall include any amounts due for tax reimbursement under the provisions of
this Agreement. In the event the amount due Seller cannot be determined on or
before the fifteenth (15th) day of the Month, Seller shall nevertheless invoice
Buyer for the amounts that are known and/or are nominated by Buyer, and when the
information is available Seller shall invoice for actual amounts (or refund any
payment as necessary) as soon as practicable after such amount is determined.
Section 2. Ten (10) days after the statement is received by Buyer, Buyer
shall make payment to Seller by wire transfer per the instruction set forth in
the Article titled "NOTICES". If Buyer disputes the amount of any statement for
any reason, Buyer shall notify Seller of such dispute and shall be obligated to
pay only the undisputed portion of such statement on the due date. Buyer shall
pay the disputed portion of the statement which is determined to be owing to
Seller within fifteen (15) days after the date the dispute is resolved, together
with interest on such amount at the rate set forth in Section 4 below,
commencing on the original due date of the statement and continuing until paid.
If the statement shall have been paid in full and it shall be determined that
such disputed portion of the statement was paid in error, Seller shall refund
such amount to Buyer, together with interest at the rate hereinafter set forth
below over the period that Seller had possession of the money, within fifteen
(15) days after resolution of the dispute.
Section 3. All statements, bills, computations and payments shall be
subject to correction of any errors contained therein until two (2) years after
date of payment, and after such period any errors found will be deemed to be
waived by the affected party.
Section 4. Any amounts due for gas delivered hereunder remaining unpaid
after the due date for such payment shall bear interest, at the lesser of the
highest lawful interest rate or the prime rate charged by Norwest Bank of Denver
plus two percent (2%), until paid.
Section 5. Each party shall have access to and the right to audit during
regular business days and business hours, upon reasonable notice, all
measurement, billing, computation and payment records maintained by the other
party which relate to the gas received under this Agreement. All records will
be maintained for two (2) years after payment has been made for the month to
which the records pertain.
6
<PAGE>
X.
QUALITY
All Sections under Article X shall be deleted in their entirety and be
replaced with the following:
Section 1. Quality shall be governed by Article IV and related provisions
of the Operating Agreement.
XI.
FORCE MAJEURE
Section 2 of Article XII shall be amended by deleting the word "telegraph"
and replacing it with the words "telefacsimile or other electronic means".
XII.
NOTICES
Under Section 1 of Article XIII, everything following the word "addresses:"
shall be deleted, and the following shall be substituted therefor:
SELLER:
Notices: Westar Transmission Company
333 Clay Street, Suite 2000
Houston, Texas 77002
Attention: Gas Sales and T&E
Administration
Wire Transfer: Westar Transmission Company
Norwest Banks Colorado, N.A.
Denver, Colorado
ABA # 102 000 076
A/c # 101-0918-554
BUYER:
Notices: ENERGAS COMPANY
P.O. Box 650205
Dallas, Texas 75265-0205
Attn: Intrastate Gas Supply
Statements: ENERGAS COMPANY
P.O. Box 650205
Dallas, Texas 75265-0205
Attn: Intrastate Gas Supply
7
<PAGE>
XIII.
MAINTENANCE OF FACILITIES
Section 1 of Article XV shall be deleted in its entirety and be replaced
with the following:
Section 1. Maintenance of facilities shall be governed by Article VII and
related provisions of the Operating Agreement.
XIV.
DURATION OF AGREEMENT
Section 1 of Article XVI shall be deleted in its entirety and be replaced
with the following:
Section 1. This Agreement shall be effective as of the date hereof for
deliveries on and after January 1, 1986, and shall continue in full force and
effect until December 31, 2001; provided, that the term shall continue until
December 31, 2003 to provide backup gas service to that certain Gas Sales
Agreement entered into between KN Marketing L.P. and Energas on July 1, 1995 for
Energas' gas requirements for the Sanford/Fritch systems.
XV.
INDEMNIFICATION
Seller and Buyer hereby agree to add the following language to Article
XVII:
Section 2. In the event that deliveries to Buyer hereunder are interrupted
for any reason other than force majeure, as defined in Article XII, Section 1,
or pursuant to priority of service and curtailment standards promulgated by the
Railroad Commission of Texas, Seller shall reimburse Buyer for any out-of-pocket
expenses related to such interruption of deliveries.
XVI.
MISCELLANEOUS
Sections 3 and 5 of Article XVIII shall be deleted in their entirety and be
replaced with the following:
Section 3. [THIS SECTION LEFT INTENTIONALLY BLANK]
Section 5. [THIS SECTION LEFT INTENTIONALLY BLANK]
8
<PAGE>
XVII.
GOVERNMENTAL REGULATIONS
A new Section 3 shall be added to Article XIX as follows:
Section 3. Deliveries by Seller hereunder are subject to the curtailment
standards from time to time promulgated by the Railroad Commission of Texas (or
any successor regulatory agency) and which are applicable to Seller's
operations.
XVIII.
Buyer and Seller agree that all amendments to the Agreement entered into
between the parties between the dates January 1, 1986 and December 31, 1995, are
hereby deleted in their entirety and are no longer effective as of January 1,
1996; except for that certain amendment entitled "AGREEMENT" between Cabot Gas
Supply Corporation (CGSC) and Energas Company (Energas) dated December 9, 1988
wherein CGSC and Energas amended Section 3 of the "City Gate Rate Supply
Contract", which shall remain in full force and effect and be fully incorporated
into the Agreement. It is the intent of the parties that the Agreement, the
amendment dated December 9, 1988 entitled "Agreement", and this Amendment To Gas
Sales Agreement shall be the only three (3) documents as of the Effective Date
which reflect the agreement of the parties with respect to the matters described
herein.
Except as herein amended, the Agreement shall remain in full force and
effect in accordance with the terms thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the Effective Date.
BUYER: SELLER:
ENERGAS COMPANY WESTAR TRANSMISSION COMPANY
a division of Atmos Energy
Corporation
By: By:
--------------------------------- -------------------------------
Signature Signature
Name: Name:
------------------------------- -----------------------------
Typed/Printed Typed/Printed
Title: Title:
------------------------------ ----------------------------
9
<PAGE>
EXHIBIT 10.13
GAS SALES AGREEMENT
(Swing)
between
K N MARKETING, L.P.
as "Seller"
and
ENERGAS COMPANY,
a division of Atmos Energy Corporation
as "Buyer"
Dated: January 1, 1996
State of TEXAS
<PAGE>
INDEX
ARTICLE TITLE PAGE
1 Definitions......................................... 1
II Quantity............................................ 3
III Delivery Points..................................... 3
IV Price and Taxes..................................... 3
V Term................................................ 6
VI Notices............................................. 8
VII Measuring Equipment and Testing..................... 8
VIII Measuring Specifications............................ 8
IX Quality............................................. 9
X Delivery Pressure................................... 9
XI Billing, Payment and Audit.......................... 9
XII Notification of Curtailment......................... 10
XIII Possession and Responsibility for Gas............... 10
XIV Title............................................... 11
XV Force Majeure....................................... 11
XVI Financial Responsibility............................ 12
XVII Government Regulations.............................. 12
XVIII Entire Agreement.................................... 14
XIX Confidentiality..................................... 15
XX Successors and Assigns.............................. 15
XXI Maintenance of Facilities........................... 15
XXII Indemnification..................................... 16
XXIII Third Party Transportation.......................... 16
XXIV Headings............................................ 16
XXV Waiver.............................................. 16
XXVI Amendments.......................................... 16
XXVII Remedies Upon Material Default...................... 17
XXVIII Miscellaneous....................................... 17
Signatures.......................................... 18
Exhibit "A" - Exemption Certificate................. A-1
<PAGE>
GAS SALES AGREEMENT
(Swing)
THIS AGREEMENT, dated and effective this 1st day of January, 1996, (the
"Effective Date") by and between K N MARKETING, a Texas Limited Partnership,
hereinafter called "Seller", and ENERGAS COMPANY, a division of Atmos Energy
Corporation, a Texas Corporation, hereinafter called "Buyer";
WITNESSETH
WHEREAS, Seller is the owner of a supply of firm natural gas from which
Seller will have available for sale certain volumes of natural gas and Seller
desires to sell such firm supplies of gas to Buyer; and
WHEREAS, Seller has made certain transportation arrangements with pipeline
companies which operate natural gas transmission systems ("Transporter(s)"); and
WHEREAS, Buyer desires to purchase from Seller volumes of firm natural gas
for resale through certain of its distribution facilities in the state of Texas
where Seller sells gas to Buyer as of December 31, 1995, including Amarillo
Supplemental Requirements ("Buyer's Facilities") in accordance with the terms
and conditions of this Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1. "Buyer" means the Party who is purchasing and receiving gas
volumes under this Agreement.
Section 2. "Seller means the Party who is selling and delivering gas
volumes under this Agreement.
Section 3. "Party" or "Parties" means Buyer and/or Seller hereunder, acting
by and through duly authorized representatives.
Section 4. "Day" means the period of twenty-four consecutive hours
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the following
calendar day. The reference date for any day should be the calendar date upon
which such twenty-four (24) hour period began.
Section 5. "Month" means the period commencing at 7:00 a.m. CT on the first
day of a calendar month and ending at 7:00 a.m. CT on the first day of the
following calendar month.
Section 6. "Mcf" means the quantity of gas occupying a volume of one
thousand (1000) cubic feet at a temperature of sixty (60) degrees Fahrenheit and
an absolute pressure of fourteen and sixty-five hundredths pounds per square
inch (14.65 psia).
1
<PAGE>
Section 7. "Base Load Requirements" means the firm gas purchase or firm
transportation requirements of Buyer up to and including a total quantity of
fifteen (153 million MMBtu per calendar year as set forth in the Base Load
Agreement between the Parties dated January 1, 1996.
Section 8. "Swing Load Requirements" means the quantity of gas required by
Buyer in excess of Buyer's Base Load Requirements' up to Buyer's total system
requirements.
Section 9. "Btu" means the amount of heat required to raise the temperature
of one avoirdupois pound of pure water from fifty-eight and five tenths (58.5)
degrees Fahrenheit to fifty-nine and five tenths (59.5) degrees Fahrenheit at a
constant pressure of fourteen and sixty-five hundredths (14.65) pounds per
square inch absolute.
Section 10. "MMBtu" means one million (1,000,000) Btu.
Section 11. "Operating Agreement" means the agreement between Westar
Transmission Company ("Westar") and Energas Company, dated December 1, 1996,
covering measurement equipment and testing, measurement specifications,
pressures, quality, maintenance of facilities, and other operational matters.
Section 12. "No-Notice Load Requirements' means Swing Load Requirements
required by Buyer which exceeds a daily "Threshold Level". The Threshold Lever
is 135,000 MMBtu per day. The Threshold Level may be reviewed annually by both
Parties and adjusted upward or downward by mutual agreement to compensate for
changes in Buyer's Swing Load Requirements. Seller will estimate the No-Notice
Load Requirements on a daily basis by subtracting the Threshold Level from
Buyer's total estimated Swing Load Requirements sales. At the end of each month
Buyer's estimated No-Notice Load Requirements will be actualized by adjusting
the daily estimated volumes proportionally to Buyer's measured monthly Swing
Load Requirements sales.
Buyer's estimated Swing Load Requirements volume will be calculated daily
by deducting from Seller's estimate of the combined total daily sales and
transported volumes for Buyer and Buyer's affiliates EnerMart Trust (Enermart),
and Egasco, Inc., (Egasco) in the following manner:
A. The daily average volume of Buyer's Baseload Requirements purchased
from Seller.
B. Enermart industrial volumes will be deducted as an average daily
volume of the total monthly sales by Seller to or transportation for
Enermart for the applicable month; plus
C. Enermart's and Egasco's irrigation volumes will be deducted as
follows:
1. For the months of November through February, irrigation volumes be
deducted as an average daily volume of the actual total sales made
by Seller to Enermart and Egasco for the applicable month;
2. For the months of March through October, irrigation volumes will be
deducted according to Enermart's and Egasco's daily irrigation
forecasted volumes, which will be adjusted proportionally, so that
the sum of the daily forecast will be equal to the total actual
2
<PAGE>
irrigation sales made by Seller for the month.
D. Buyer's and Enermart's and Egasco's transportation volumes will be
deducted according to the confirmed volumes nominated at the
Delivery Point(s) on Westar Transmission Company's pipeline system.
Section 13. "Amarillo Supplemental Requirements" means requirements of
Buyer's Amarillo distribution system, less the quantity of gas purchased by
Buyer from the Fain Plant, or other suppliers for resale in the Amarillo
distribution system and less the quantity of supplemental supplies
purchased from others.
ARTICLE II
QUANTITY
Section 1. Commencing on the Effective Date of this Agreement Seller agrees
to sell and deliver to Buyer and Buyer agrees to purchase and receive firm
quantities of natural gas on a Swing Load Requirements and a No-Notice Load
Requirements basis to satisfy all of Buyer's natural gas requirements in Buyer's
West Texas Service area and any of Buyer's Amarillo Supplemental Requirements in
excess of Buyer's Base Load Requirements.
Section 2. It is expressly understood and agreed that all gas sold to Buyer
is to be used by Buyer to serve its end use customers solely within Buyer's
Facilities, and any other use of the gas ("Other Use Gas") by Buyer will
constitute a material breach of this Agreement, in which case, without limiting
any other remedies available to Seller, Seller may immediately cease delivering
Other Use Gas to Buyer at the Delivery Point(s).
ARTICLE III
DELIVERY POINT(S)
Section 1. The delivery of gas hereunder shall be subject to the Operating
Agreement and shall be at the outlet flange of Transporter(s)' facilities at all
points of interconnection between Transporter(s) facilities and Buyer, where
Buyer receives gas from Seller as of December 31, 1995, or subsequently at any
other mutually agreeable point(s) to be agreed to in writing by the Parties
("Delivery Point(s)").
ARTICLE IV
PRICE AND TAXES
Section 1. The price of gas purchased and sold hereunder as Swing Load
Requirements, delivered to Buyer at the Delivery Point(s), shall be determined
as follows:
A.
1. For the period January 1, 1996 through July 31, 1996, the price
shall be calculated on an Mcf
3
<PAGE>
basis and for each Mcf of gas will be equal to the "First Index
Basket" (defined below), plus $0.96 per Mcf.
2. The "First Index Basket" referred to in subsection 1) shall be
equal to the arithmetic average of the "prices" stated in dollars
per MMBtu in each publication for the delivery month as reported in
(i) Natural Gas Week, published by Oil Daily Company in the table
Gas Price Report", in the column labeled "Delivered to Pipeline",
"This Week' for Texas West Spot, and (ii) Inside F.E.R.C.'s Gas
Market Report, published by McGraw-Hill, Inc. for Panhandle Eastern
Pipeline Co., Texas, Oklahoma (Mainline) under the heading "Prices
of Spot Gas Delivered to Pipeline" (per MMBtu) under the category
labeled "Index".
B.
1. For the period August 1, 1996 through December 31, 2001, the price
shall be calculated on a MMBtu basis and each MMBtu of gas
purchased and sold shall be equal to the "Index Basket" plus:
a) for 1996- $0.6742 per MMBtu plus the Westar transportation rate
of S0.2858 per Mcf.
b) for 1997- S0.6342 per MMBtu plus the Westar transportation rate
of S0.2858 per Mcf.
c) for 199S S0.6042 per MMBtu plus the Westar transportation rate
of S0.2858 per Mcf.
d) for 1999 through 2001- S0.3042 per MMBtu plus the Westar
transportation rate of S0.2858 per Mcf.
2. In the event the approved rate for transportation on the Westar
system (as that system is described in the Operating Agreement)
changes, then the S0.2858 per Mcf rate for transportation will be
replaced with the new rate which has been approved by The Railroad
Commission of Texas, which notwithstanding the structure of such
approved rate shall be the cost of service rate expressed on a per
unit of actual throughput basis for the capacity used to provide
the firm transportation service.
3. The "Index Basket" referred to above shall be equal to the sum of
the "prices" stated in dollars per MMBtu of: (i) fifty percent
(50%) of the arithmetic average of the index prices listed in each
edition of Natural Gas Week, published during the applicable
calendar month by Oil Daily Company in the table titled "Gas Price
Report", under the column labeled "Delivered to Pipeline", "This
Week" for Texas West Spot, and (ii) twenty five percent (25%) of
the first publication in the applicable month of Inside F.E.R.C.'s
Gas Market Report, published by McGraw-Hill, Inc. for
4
<PAGE>
Panhandle Eastern Pipeline Co., Texas, Oklahoma (Mainline) under
the heading "Prices of Spot Gas Delivered to Pipeline" under the
category labeled "Index", and (iii) twenty five percent (25%) of
the index price published in the first edition of the month in
Natural Gas Intelligence Gas Price Index for the applicable
calendar month, identified in the table entitled "SPOT GAS PRICES"
under the column entitled "Contract lndex, the "Intrastate Avg."
for the "West Texas/Permian" gas.
Section 2. The price of gas sold hereunder as No-Notice Load
Requirements delivered to Buyer at the Delivery Point(s), shall be equal to
the Swing Load Requirements price, except on those days Critical Days) when
the "Gas Daily Index Basket" as published on such days, plus $0.225 per MMBtu,
plus the Westar transportation rate of $0.2858 per Mcf (or the transportation
rate described in section B.2 above) exceeds the Swing Load Requirements price.
On Critical Days, the price for No-Notice Load Requirements shall be the
arithmetic average of the "Gas Daily Index Basket" as published on the Critical
Day and as published on the subsequent business day (business day for purposes
of this Section 2 is defined as any day on which there is a Gas Daily
Publication), plus $0.225 per MMBtu, plus the Westar transportation rate of
S0.2858 per Mcf (or the transportation rate described in section B.2)
above).
For any non-business days (days on which there is no Gas Daily Publication)
in which No-Notice Load Requirements service is provided, the No-Notice Load
Requirements price will be the Swing Load Requirements price, except when the
"Gas Daily Index Basket" as published on the subsequent business day, plus
S0.225 per MMBtu, plus the Westar transportation rate of S0.2858 per Mcf (or the
transportation rate described in section B.2) above) exceeds the Swing Load
Requirements price, in which case the No-Notice Load Requirements price will be
the "Gas Daily Index Basket" as published on such subsequent business day, plus
$0.225 per MMBtu, plus the Westar transportation rate of $0.2858 per Mcf (or the
transportation rate described in section B.2) above).
"The Gas Daily Index Basket" is equal to the arithmetic average of the mid
point prices stated in dollars per MMBtu, as reported in Gas Daily, published by
Pasha Publications Inc. the Houston edition, in the table titled "Daily Price
Survey", in the category labeled "Permian Basin Area" in the column for the
"Daily Midpoint" under the heading "Delivery In" for "Tex intras, Waha area" and
the category labeled "North-Texas Panhandle" in the column for the "Daily
Midpoint" under the heading "Delivery In" for "Northern (Mid 10)".
The No-Notice Load Requirements pricing method shall remain in effect
through December 31, 1998. After that date that price will be subject to
renegotiation of both parties for the 1999 contract year and each contract year
through the remainder of the term. In the event the parties cannot agree on a
new
5
<PAGE>
pricing method for the applicable contract year, each party shall submit to
the other in writing the name of an individual to serve as an "arbitrator".
Such persons shall have at least fifteen (15) years of experience in the natural
gas business and shall not be employees or affiliates of the Buyer or Seller.
With fifteen (15) days of the selection of the two arbitrators, the two
arbitrators shall select a third arbitrator who shall have at least fifteen
(15) years of experience in the natural gas business and shall not be employees
or affiliates of the Buyer or Seller. If the two arbitrators are unable to
agree on a third arbitrator, the selection of the remaining arbitrator shall be
conducted pursuant to the rules of the American Arbitration Association
governing the selection of arbitrators when the parties have failed to do so.
Both parties may submit whatever information they wish to the three arbitrators
who shall set a meeting for the parties to present their respective arguments to
the arbitrators within thirty (30) days after the selection of the third
arbitrator. On or before fifteen days after the meeting the arbitrators shall
set the pricing method for the sale of gas as No-Notice Load Requirements for
the applicable contract year, and notify the parties orally followed by written
confirmation. The decision of the arbitrators shall be final and binding upon
the parties.
Section 3. Should any of the indices or publications above become
unavailable, Buyer and Seller will use their best efforts to locate another
source of this information, or in the event that the information cannot be
obtained through another source. Buyer and Seller shall agree upon another
index to replace the index which has become unavailable.
Section 4. In addition to the price to be paid for gas delivered
hereunder, 8uyer agrees to reimburse Seller for gross receipts taxes, sales
taxes, and other similar taxes, which are lawfully imposed on Seller because of
the sale or delivery of gas to Buyer hereunder or the gas itself. Statements for
such tax reimbursement shall be rendered and paid as provided in accordance with
the billing and payment provisions of this Agreement. All taxes levied on such
gas after delivery and lawfully imposed on Buyer shall be paid by Buyer. If
Buyer claims an exemption from state sales taxes or desires to pay any
applicable sales taxes directly to the taxing authority, Buyer will execute the
"Exemption Certificate attached hereto as Exhibit "A" or such other evidence of
exemption as may be required by Seller. Applicable rulings or orders of
governmental representatives in charge of the administration of any law or
ordinance increasing, decreasing or creating any tax shall be binding and
conclusive upon Buyer until such time as the invalidity thereof has been finally
established by the decision of a court of competent jurisdiction. Buyer shall be
entitled to reimbursement from Seller to the extent of any payments made by it
to Seller for taxes pursuant to this Article which may subsequently be refunded
to Seller by the taxing authority. Buyer shall not be obligated to reimburse
Seller for any ad valorem taxes on properties or for taxes which are based upon
or measured by the natural gasoline or other liquifiable
6
<PAGE>
hydrocarbon content extracted from the gas before delivery to Buyer.
ARTICLE V
TERM
Section 1. This Agreement, regardless of when executed, is effective as of
the Effective Date, and shall continue thereafter, unless earlier terminated
pursuant to the provisions in other Sections of this Agreement, for a term
ending on December 31, 2001.
ARTICLE VI
NOTICES
Section 1. Any notice or statement (other than notices to be given under
the Price and Taxes Article of this Agreement which shall be by certified mail,
return receipt requested) to be given hereunder, unless otherwise specified
herein, shall be in writing and shall be deemed delivered as of the postmarked
date when deposited in the United States mail, postage prepaid, and addressed to
the respective Party at the following addresses or at such other addresses as a
Party may designate to the other in writing:
SELLER:
Notices: K N Marketing. L.P.
333 Clay Street, Suite 2000
Houston, TX 77002
Attention: Gas Sales & T&E
Administration
Wire Transfer: K N Marketing, L P.
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 000 076
A/c# 101 -091 O554
BUYER:
Notices: ENERGAS COMPANY
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply
Statements: ENERGAS COMPANY
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply
7
<PAGE>
ARTICLE VII
MEASURING EQUIPMENT AND TESTING
Section 1. Measuring equipment and testing shall be governed by the
Operating Agreement.
ARTICLE VIII
MEASUREMENT SPECIFICATIONS
Section 1. Measurement specifications shall be governed by the Operating
Agreement.
ARTICLE IX
QUALITY
Section 1. Quality shall be governed by the Operating Agreement.
ARTICLE X
DELIVERY PRESSURE
Section 1. Delivery pressure shall be governed by the Operating Agreement.
ARTICLE Xl
B1LLING. PAYMENT AND AUDIT
Section 1. On or before the fifteenth (15th) day of each Month, Seller
shall render a statement to Buyer giving the total quantity of gas, expressed in
MMBtu and Mcf, delivered and sold hereunder during the preceding Month and the
monies due therefor. Such statements are to be rendered in accordance with this
Agreement, and shall include any amounts due for tax reimbursement under the
provisions of this Agreement. In the event the amount due Seller cannot be
determined on or before the fifteenth (15th) day of the Month, Seller shall
nevertheless invoice Buyer for the amounts that are known and/or are nominated
by Buyer, and when the information is available Seller shall invoice for actual
amounts (or refund any payment as necessary) as soon as practicable after such
amount is determined.
Section 2. Ten (10) days after the statement is received by Buyer, Buyer
shall make payment to Seller by wire transfer per the instruction set forth in
the Article titled NOTICES. If Buyer disputes the amount of any statement for
any reason, Buyer shall notify Seller of such dispute and shall be obligated to
pay only the undisputed portion of such statement on the due date. Buyer shall
pay the disputed portion of the statement which is determined to be owing to
Seller within fifteen (15) days after the date the dispute is resolved, together
with interest on such amount at the rate set forth in Section 4.
8
<PAGE>
below, commencing on the original due date of the statement and continuing until
paid. If the statement shall have been paid in full and it shall be determined
that such disputed portion of the statement was paid in error, Seller shall
refund such amount to Buyer, together with interest at the rate hereinafter set
forth below over the period that Seller had possession of the money, within
fifteen (15) days after resolution of the dispute.
Section 3. All statements, bills, computations and payments shall be
subject to correction of any errors contained therein until two (2) years after
date of payment, and after such period any errors found will be deemed to be
waived by the affected Party.
Section 4. Any amounts due for gas delivered hereunder remaining unpaid
after the due date for such payment shall bear interest, at the lesser of the
highest lawful interest rate or the prime rate charged by Norwest Bank of Denver
plus two percent (2%), until paid.
Section 5. Each Party shall have access to and the right to audit during
regular business days and business hours, upon reasonable notice, all
measurement, billing, computation and payment records maintained by the other
Party which relate to the gas received under this Agreement. All records will be
maintained for two (2) years after payment has been made for the month to which
the records pertain.
ARTICLE Xll
NOTIFICATION OF CURTAILMENT
Section 1. Seller and Buyer agree to provide each other with as early a
notice as is reasonably practical of any curtailment or cessation of deliveries
or receipts due to force majeure or pursuant to this Article.
Section 2. Gas delivered under this Agreement shall be subject to
curtailment when necessary to protect public health and safety. Such curtailment
shall be performed by Seller and/or Transporter in accordance with Seller's
and/or Transporter(s)' applicable procedures from time to time in effect and/or
on file with the appropriate regulatory agency, and shall not be the basis for
any claim for damages sustained by any Party.
Section 3. In the event a curtailment of deliveries shall become
necessary or advisable, Seller, shall notify or cause Transporter(s) to notify,
Buyer as soon as possible before actual curtailment, if possible, by telephone,
or other means, of the nature, extent and probable duration of such curtailment.
Buyer shall resume the taking of gas within a reasonable length of following
notification that gas is again available.
ARTICLE XlII
POSSESSION AND RESPONSIBILITY FOR GAS
Section 1. As between the Parties hereto, Seller shall be in exclusive
control and possession of the gas delivered
9
<PAGE>
hereunder and responsible for any damage or injuries caused thereby until the
same shall have been delivered to Buyer at the Delivery Point(s) (except to the
extent such damages or injuries shall have been caused by the act or omission of
Buyer), after which Buyer shall be deemed to be in exclusive control and
possession thereof and responsible for any such damages or injuries (except to
the extent such damages or injuries shall have been caused by the act or
omission of Seller). Each of the Parties hereto agrees to indemnify, defend, and
hold the other Party harmless from and against any and all claims, liabilities,
damages, losses, costs, and expenses (including attorneys' fees) incurred by the
indemnified Party arising from or relating to any damages, losses, or injuries
for which indemnifying Party is responsible pursuant to the foregoing sentence.
ARTICLE XIV
TITLE
Section 1. Seller hereby warrants that (i) it has good title to all gas
delivered to Buyer hereunder, (ii) it has the fight to sell such gas, and (iii)
all such gas is free from any and all liens, encumbrances, and adverse claims.
Seller agrees to indemnify, defend, and hold Buyer harmless from and against any
adverse claims asserted with respect to any gas delivered hereunder.
Section 2. Title to the gas shall pass from Seller to Buyer, upon the
delivery thereof, at the Delivery Point(s).
ARTICLE XV
FORCE MAJEURE
Section 1. In the event that either Seller or Buyer is rendered unable,
wholly or in part, by reason of an event of force majeure, to perform its
obligations under this Agreement, other than to make payment due hereunder, and
such Party has given notice and full particulars of such force majeure in
writing to the other Party as soon as possible after the occurrence of the cause
relied on, then the obligations of the Parties, insofar as they are affected by
such force majeure, shall be suspended during the continuance of such inability,
but for no longer period, and such cause shall, insofar as possible, be remedied
with all reasonable dispatch. The term "force majeure" as employed herein and
for all purposes relating hereto 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,
storms, hurricane wamings, crevasses, floods, washouts, arrests and restraints
of governments and people, civil disturbances, explosions, breakages or accident
to machinery or lines of pipe, the necessity for making repairs or alterations
to machinery or lines of pipe, freezing of wells or lines of pipe, partial or
entire failure of wells, inability of
10
<PAGE>
any Party hereto to obtain necessary materials, supplies, or permits due to
existing or future rules, regulations, orders, laws or proclamations of
governmental authorities (both federal and state' including both civil and
military, any failure due to force majeure by any Transporter(s) deliver
Seller's gas to Buyer's facilities or thereafter to transport gas for Buyer,
partial or entire failure of Seller's source of supply, and any other causes
whether of the kind herein enumerated or otherwise, not within the control of
the Party claiming suspension and which by the exercise of due diligence such
Party is unable to prevent or overcome; such term shall likewise include (a) the
inability of 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, any
necessary servitudes, right-of-way grants, permits or licenses, and (b) the
inability of each Party to acquire, or the delays on the part of such Party in
acquiring at reasonable cost and after the exercise of due diligence, any
necessary materials and supplies (excluding any inability due to the cost of gas
or the cost of transportation of gas), permits and permissions. It is understood
and agreed that the settlement of strikes, lockouts or other industrial
disturbances shall be entirely within the discretion of the Party or Transporter
having the difficulty and that the above requirement that any force majeure
shall be remedied by the exercise of due diligence shall not require the
settlement of strikes or lockouts by acceding to the demands of the opposing
party when such course is inadvisable in the discretion of the Party having the
difficulty.
ARTICLE XVI
FINANCIAL RESPONSIBILITY
Section 1. If, during the term of this Agreement, Seller, in good faith,
determines that the financial responsibility of Buyer has become impaired or
unsatisfactory, advance cash payment or other satisfactory security will be
given by Buyer upon demand by Seller, and delivery of gas may be withheld until
such payment or assurance is received. If such payment or assurance is not
received within fifteen (15) days of demand, Seller may terminate this Agreement
at any time effective upon the dispatch of written notice. Additionally, if
there are instituted by or against either Party hereunder proceedings in
bankruptcy or under any insolvency law, the other Party may terminate this
Agreement at any time.
Section 2. If, during the term of this Agreement, Buyer, in good faith,
determines that the financial responsibility of Seller has become impaired or
unsatisfactory, a corporate warranty or other satisfactory security will be
given by Seller upon demand by Buyer. If such assurance is not received within
fifteen (15) days of demand, Buyer may terminate this Agreement at any time
effective upon the dispatch of written notice.
11
<PAGE>
ARTICLE XVII
GOVERNMENTAL REGULATIONS
Section 1. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, EXCEPT ANY RULE OR
PRINCIPLE OF THE LAWS OF THE STATE OF TEXAS WHICH WOULD REFER THE CONSTRUCTION
OF THIS AGREEMENT TO THE LAWS OF ANOTHER STATE. This Agreement shall be subject
to all valid laws, regulations or orders of duly constituted governmental
authorities having jurisdiction which are applicable to the subject matter
hereof and effective from time to time. Seller and Buyer agree to obtain, if
possible, whatever authority is necessary, if any, to effectuate the purchase,
sale or transportation of gas hereunder in the event this Agreement and the
purchase, sale or transportation of gas hereunder for any reason become subject
to the jurisdiction of any governmental authority, which at the present time
does not have such jurisdiction.
Section 2. Notwithstanding any other provision of this Agreement, if at
any time during the term of this Agreement, any federal or state law or any
rule, order, opinion, enactment or regulation of any governmental authority or
of any court, prevents Buyer from including in its cost of service for
ratemaking purposes to its customers the full amount of any cost incurred under
this Agreement which Buyer has agreed to pay Seller hereunder, Buyer shall
immediately notify Seller in writing of the price that it is allowed to include
in its cost of service for ratemaking purposes for gas purchased under this
Agreement. Upon receiving such notification, Seller, at its sole discretion, may
choose to either amend the Agreement so that the Buyer can include in its cost
of service for ratemaking purposes the full price for gas sold under the
Agreement or terminate the Agreement. Seller shall notify Buyer of its choice in
writing within twenty-four (24) hours of receiving Buyer's notice.
Section 3. Notwithstanding any other provision of this Agreement, if at
any time during the term of this Agreement, any federal or state law or any
rule, order, opinion, enactment or regulation of any governmental authority or
of any court, prevents Seller from recovering from Buyer the full price for gas,
which Buyer has agreed to pay Seller hereunder, inclusive of any charges
assessed as a result of Buyer's failure to take gas, as set forth herein, then
Seller shall be excused from delivering gas, effective prospectively from the
date that Buyer receives written notice from Seller of the pertinent rule,
order, opinion, enactment or regulation. Each time that Seller invokes this
right to be excused from taking or delivering gas pursuant to this paragraph,
the Parties may renegotiate an acceptable price, or, at any time during
renegotiation or in lieu of renegotiation, terminate this Agreement immediately.
Section 4. In addition, if any federal or state law, rule, order,
opinion, enactment or regulation of any governmental authority or of any court
prevents, either Party from receiving the full benefits as bargained for under
this Agreement and in any way prevents either Party from exercising its right to
terminate or cease deliveries under this Agreement, this Agreement shall be
deemed to have terminated one (1) day prior
12
<PAGE>
to the attempted implementation of such governmental action unless the Party
whose benefit is diminished agrees to waive this clause in writing in which case
the Agreement shall be deemed to be reinstated.
ARTICLE XVIII
ENTIRE AGREEMENT
Section 1. This Agreement contains the entire agreement of the Parties
with respect to the matters covered. No other agreement, Statement or promise
not contained herein shall be binding or valid.
ARTICLE XIX
CONFIDENTIALITY
Section 1. The terms of this Agreement, including but not limited to the
price paid for gas, the identified transporting pipelines and cost of
transportation, the quantities of gas purchased and sold and all other material
terms shall be kept confidential by the Parties except to the extent that any
information must be disclosed to a third party as required by federal, state or
local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either Party of its
obligations herein, ceases to be confidential.
ARTICLE XX
SUCCESSORS AND ASSIGNS
Section 1. This Agreement may not be assigned by either Party without the
consent of the other Party, which consent shall not be unreasonably withheld,
unless assigned to an affiliate or subsidiary of a Party. Such assignment shall
not relieve the assigning Party of any of its obligations under this Agreement.
Section 2. Either Party may assign its rights, We, and interest in, to,
and under this Agreement to a trustee or trustees, individual or corporate, as
security for bonds or other obligations or securities, without such trustee or
trustees assuming or becoming in any respect obligated to perform the
obligations of the assignor under this Agreement, and, if any such trustee be a
corporation, without its being required to qualify to do business in any state
in which any performance of this Agreement may occur. However, such assignment
for security purposes shall not relieve the assigning
13
<PAGE>
Party of any of its obligations under this Agreement.
Section 3. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the Parties hereto and their respective
successors and assigns, and is intended solely for the benefit of Seller and
Buyer and their respective successors and assigns, and not for the benefit of
any other person or entity not a Party hereto.
ARTICLE XXI
MAINTENANCE OF FACILITIES
Section 1. Maintenance of facilities shall be governed by the Operating
Agreement.
ARTICLE XXII
INDEMNIFICATION
Section 1. Buyer and Seller shall each indemnify, defend, and save
harmless the other including their employees and agents from and against any and
all loss, damage, injury, liability, and claims for injury to or death of
persons (including any employee of Buyer or Seller), or for loss or damage to
property (including the property of Buyer or Seller), to the extent that such
losses, damages, injuries, or claims result from the negligence of the
indemnifying Party in its performance of its obligations arising pursuant to
this Agreement (including the installation, maintenance, and operation of
property, equipment, and facilities) or any other operations under this
Agreement.
ARTICLE XXIII
THIRD-PARTY TRANSPORTATION
Section 1. Buyer and Seller acknowledge that Seller will be obtaining
transportation from third parties in order to have the gas covered hereby
delivered to the Delivery Point(s). In the event such third party transportation
is interrupted or terminated by an event of force majeure as defined in Article
XV, Seller shall be fully excused for its failure to deliver gas hereunder.
ARTICLE XXIV
HEADINGS
Section 1. The descriptive headings of the provisions of this Agreement
are formulated and used for convenience only and shall not be deemed to affect
the meaning or construction of any such provisions.
14
<PAGE>
ARTICLE XXV
WAIVER
Section 1. No waiver by either Party of any one or more defaults by the
other in the performance of the provisions of this Agreement shall operate or be
construed as a waiver of any other default or defaults, whether of a like or a
different character.
ARTICLE XXVI
AMENDMENTS
Section 1. The terms and conditions of this Agreement may not be amended
except by the written agreement of the Parties.
ARTICLE XXVII
REMEDIES UPON MATERIAL DEFAULT
Section 1. If either Party hereto shall fail to perform any material
covenant of obligation imposed upon it under this Agreement, then in such event
the non-defaulting Party may, at its option, terminate this Agreement upon
acting in accordance with the procedures hereafter set forth in this Section.
The non-defaulting Party shall cause a written notice to be served on the
defaulting Party, which notice shall state specifically the cause of terminating
this Agreement and shall declare it to be the intention of the non-defaulting
Party to terminate this Agreement if the default is not cured. The defaulting
Party shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes and fully indemnifies the non-defaulting
Party for any and all consequences of such breach, then such termination notice
shall be withdrawn and this Agreement shall continue in full force and effect.
In the event that the defaulting Party fails to remedy or remove the cause or
causes or indemnify the non-defaulting Party for any and all consequences of
such breach within such ten-day period, this Agreement shall be terminated and
of no further force or effect from and after the expiration of such ten-day
period.
Section 2. Any termination of this Agreement pursuant to the provisions
of this Article shall be (i) without prejudice to the rights of Seller to
collect any amounts then due Seller for gas delivered prior to the time of
termination, (ii) without prejudice to the rights of Buyer to receive any gas
for which it has paid but not received prior to the time of termination, and
(iii) without waiver of any other remedy to which the non-defaulting Party may
be entitled.
15
<PAGE>
ARTICLE XXVIII
MISCELLANEOUS
Section 1. This Agreement shall be deemed drafted and prepared equally
jointly regardless of which Party prepared or submitted the Agreement to the
other.
Section 2. Except for the Parties hereto and their successors and
assigns, no person, including without limitation any owner of a royalty or
overriding royalty interest, shall have any rights as a third party beneficiary
or otherwise under this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed.
"BUYER" "SELLER"
ENERGAS Company, KN MARKETING, L.P.
a division of By its Managing
Atmos Energy Corporation General Partner
American Pipeline Company
By: By:
------------------------------ -------------------
Name: Name:
------------------------------ -------------------
Title: Title:
------------------------------ -------------------
16
<PAGE>
EXHIBIT "A" to Gas Sales Agreement
dated January 1,1996 between K N MARKETING, L.P. ("Seller')
and ENERGAS COMPANY, a division of Atmos Energy Corporation
("Buyer")
EXEMPTION CERTIFICATE
For Natural Gas Delivered By
K N MARKETING, L.P. ("Seller")
To ENERGAS COMPANY ("Buyer")
Buyer's Direct Payment Permit Number:
-------------------------
Buyer's Address: P.O. Box 650205, Dallas, Texas 75265-0205
The undersigned hereby claims an exemption from payment of taxes under Tax Code,
Vernon Texas Code Annotated, Chapter 151, for the purchase and delivery of
natural gas from Seller.
The reason that Buyer is claiming this exemption is:
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Buyer will be liable for payment of the Limited Sales and Use Tax if Buyer uses
the natural gas in some manner other than the reason listed above, and shall pay
the tax based on the price paid for the natural gas.
This exemption is claimed for, and this exemption certificate shall apply to,
all gas delivered to Buyer by Seller on and after the dab hereof, and shall be
effective until revoked by written notice to Seller by Buyer. If this exemption
is disallowed for any reason by the State for any part or all of the gas
delivered, Buyer will accrue and pay direct to the State any tax and penalty
due.
Executed this the day of ,19 .
----- ----------------- -----
By:
-------------------------
Signature
Name:
-------------------------
Type /Print
Title:
-------------------------
A-1
<PAGE>
EXHIBIT 10.14
GAS SERVICE AGREEMENT
(Service for Firm Transportation)
between
K N WESTEX GAS SERVICES COMPANY
"COMPANY"
and
ENERGAS COMPANY,
a division of Atmos Energy Corporation
"CUSTOMER"
Dated: January 1, 1996
<PAGE>
INDEX
SECTION TITLE PAGE
I Definitions.......................................... 1
II Customer Order....................................... 4
III Representation, Warranties Title and Indemnities..... 5
IV Force Majeure........................................ 6
V Nominations and Scheduling........................... 7
VI Quality of Gas....................................... 11
VII Term................................................. 11
VIII Remedies Upon Material Default....................... 12
IX Measurement and Pressure............................. 12
X Billings, Payments and Audit......................... 13
XI Communications....................................... 14
XII Miscellaneous........................................ 16
Signatures........................................... 18
Customer Order
<PAGE>
GAS SERVICE AGREEMENT
(ENERGAS)
THIS AGREEMENT, effective on January 1, 1998, between K N WESTEX GAS SERVICES
COMPANY, (Company), and ENERGAS COMPANY, a division of Atmos Energy Corporation
(Customer), and for the consideration stated, the parties agree as follows:
RECITALS
1. Customer and Company from time to time will enter into certain
arrangements whereby Company will provide Customer firm transportation service
as set forth in a "Customer Order".
2. Company has entered into contracts with various transporters, marketing
companies, and other companies (Entity(ies)) in order to effectuate the services
which will performed under any Customer Order.
3. Customer understands and agrees that any services provided under this
Agreement are subject to the various governmental filings by each Entity,
including, without limitation, compliance statements filed in accordance with
Part 284 of the Federal Energy Regulatory Commission's (FERC) regulations under
the Natural Gas Policy Act of 1978, as amended from time-to-time.
SECTION I
DEFINITIONS
1. "Firm Transportation" means, subject to force majeure, transportation
service on a non-interruptible basis.
2. "Day" means the period of twenty-four (24) consecutive hours,
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the next day. The reference date for any day is the calendar date
when the twenty-four (24) hour period began. "Business day" means a day
consisting of Monday through Friday, excluding federal holidays.
3. "Delivery Point(s)" means the outlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee described in a Customer Order.
4. "Gas" means natural gas with or without the removal of any hydrocarbon
or inert constituents after it is produced from a well, and includes gas
produced from a well producing gas only, from a well producing gas with
condensate, or from a well producing gas in association with oil.
5. "Customer Order" means a form described in general which is attached
as Exhibit A, and which evidences the
<PAGE>
agreement as to the terms of a particular transaction for the service(s)
provided under this Agreement.
6. "MCQ" or "Maximum Contract Quantity" means the maximum total contract
quantity of gas that may be received and delivered by Company during the term in
a Customer Order.
7. "HMDQ" or "Maximum Daily Quantity" means during the term of a Customer
Order, the maximum daily quantity of gas that may be received and delivered by
Company during any day.
8. "Measuring Party" means a mutually agreeable party who will measure
the gas under an executed Customer Order. If no Measuring Party is designated,
then the Transporter immediately downstream of the Receipt Point(s) or upstream
of the Delivery Point(s) will be the Measuring Party.
9. "Month" means a period beginning at 7:00 a.m. CT on the first day of a
calendar month and ending at 7:00 a.m. CT on the first day of the next month.
10. "Overrun" means any quantity of gas that exceeds the MDQ, and/or MCQ,
as agreed to between Company and Customer, and described in a Customer Order.
11. "Underdelivered" means a quantity of gas delivered by the Company to
the Delivery Point(s) for the Customer's account that is in excess of the amount
of gas received by the Company from the Customer at the Receipt Point(s).
12. "Overdelivered" means a quantity of gas delivered by the Customer at
the Receipt Point(s) for the Customer's account that is in excess of the amount
of gas delivered by the Company for the Customer's account at the Delivery
Point(s).
13. "Receipt Point(s)" means the inlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee, described in a Customer Order.
14. "Transporter(s)" means any pipeline on which any gas under this
Agreement is transported.
15. For payment purposes, the quantity and measurement of gas delivered
and received hereunder, will be stated in Mcf. For balancing purposes the
quantity for gas will be stated in MMBtu. For measurement purposes, the quantity
of gas delivered and received hereunder, will be stated in Mcf and in MMBtu. The
MMBtu quantity will be derived by taking the measured volumes of gas in cubic
feet multiplied by their Gross Heating Value divided by one million (1,000,000).
The pertinent terms are as follows:
<PAGE>
(a) "Cubic foot of gas" means the volume of gas which occupies one (1)
cubic foot of space at a temperature of sixty degrees (60) Fahrenheit
and the referenced pressure base as set forth by the Measuring Party.
(b) "Mcf" means one thousand (1,000) cubic feet of gas and "Bcf" means one
billion (1,000,000,000) cubic feet of gas.
(c) "Btu" means the amount of heat required to raise the temperature of
one avoirdupois pound of pure water from fifty-eight and five tenths
degrees (58.5) Fahrenheit to fifty-nine and five tenths degrees
(59.5) Fahrenheit at a constant pressure of fourteen and sixty-five
hundredths (14.65) pounds per square inch absolute.
(d) "MMBtu" means one million (1,000,000) Btu.
(e) "Gross Heating Value" means the number of Btu liberated by the
complete combustion, at constant pressure, of one (1) cubic foot of
gas, at a base temperature of sixty degrees (60) Fahrenheit and a
referenced pressure base as set fort by the Measuring Party, wit air
of the same temperature and pressure of the gas, after the products of
combustion are cooled to the initial temperature of the gas, and after
the water resulting from combustion is condensed to the liquid state.
The Gross Heating Value of the gas is to be corrected for the water
vapor content of the gas being delivered; provided, that if the water
vapor content of the gas is seven (7) pounds or less per one million
(1,000,000) cubic feet, the gas will be assumed to be dry and no
correction will be made.
(f) "Referenced pressure base" for measurement and determination of gas
volume and Gross Heating Value will be established by the Measurement
Party; however, the referenced pressure base is always to be the same
for gas volume and Gross Heating Value.
16. "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996, covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
17. "Imbalance" means the difference between the confirmed gas volumes
received at the Receipt Point(s) and the confirmed gas volumes delivered at the
Delivery Point(s).
SECTION II
CUSTOMER ORDER
<PAGE>
1. Customer Order. The parties may enter into one or more agreements for
firm transportation service hereunder from time to time, and each such agreement
will be reflected in a Customer Order executed by both parties which will
constitute a supplement to and form a part of this Agreement, so that each
transaction involving this Agreement and a Customer Order constitutes a single,
entire agreement between Customer and Company. Each Customer Order will contain
provisions regarding Term, Type of Service, Rate, Receipt Point(s), Delivery
Point(s), Quantity and any other obligations of Customer and Company.
2. Customer. If a conflict exists between a Customer Order and this
Agreement, the terms of the Customer Order will govern the applicable
transaction. If a conflict exists between two or more Customer Orders under this
Agreement, the Customer Order with the latest effective date will govern the
applicable transaction period.
SECTION III
REPRESENTATIONS, WARRANTIES, TITLE AND INDEMNITIES
1. Company. Company represents that it has, or will have, all contracts
in place necessary to provide the services described in each Customer Order,
subject to Paragraph 3 of the RECITALS and Paragraph 10. Operating Conditions
and Agreements of Section MISCELLANEOUS.
2. Customer. Customer warrants that it has good title to or good right to
the gas delivered to Company under each applicable Customer Order, and that the
gas is free and clear of all liens, encumbrances, or adverse claims of any kind.
Customer indemnifies, saves and holds harmless, Company from all claims, losses,
causes of action, damages and expenses (including, but not limited to attorney's
fees and court costs) due to any adverse claims against the Company for the gas
delivered to Company by Customer. Customer warrants that all gas delivered to
Company for transportation hereunder is eligible for transportation under any
governmental authority having jurisdiction.
3. Control and Possession. Customer is in control and possession of the
gas and is responsible for and indemnifies Company against any injury or any
damage caused thereby until the gas is delivered to Company or its designee at
the Receipt Point(s), except for any injury or damage caused by Company.
Responsibility for the gas passes to Company at the Receipt Point(s), and then
Company is in control and possession of the gas and is responsible for, and
indemnifies Customer against injury or damage caused thereby, except for injury
or damage caused by Customer. Likewise, responsibility for the gas passes
<PAGE>
to Customer at the Delivery Point(s), and then Customer is in control and
possession of the gas.
4. Damages. Notwithstanding anything in this Agreement to the contrary,
neither party will be responsible to the other party for any incidental,
consequential, lost profit, punitive or exemplary damages for a breach of this
Agreement.
SECTION IV
FORCE MAJEURE
1. Force Majeure. In the event that either Company or Customer is
rendered unable, wholly or in part, by reason of an event of force majeure, to
perform its obligations under this Agreement, other than to make payment due
hereunder, and such party has given notice and full particulars of such force
majeure in writing to the other party as soon as possible after the occurrence
of the cause relied on, then the obligations of the parties, insofar as they are
affected by such force majeure, shall be suspended during the continuance such
inability, but for no longer period, and such cause shall, insofar as possible,
be remedied with all reasonable dispatch.
The term "force majeure" in this Agreement means, without limitation; 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, arrests and restraints of the
government, either federal or state, civil or military, civil disturbances,
explosions, breakage, breakdown or accident to machinery, equipment or lines of
pipe, the necessity of repairing, altering, maintaining, inspecting, replacing,
changing the size of, substituting or removing machinery, equipment, pipelines,
storage or plant facilities, and any other causes, whether of the kind herein
enumerated or otherwise, not reasonably within the control of the party claiming
suspension. Such term likewise includes (i) in those instances where Customer or
Transporter is required to obtain servitudes, right-of-way grants, permits,
exceptions or licenses to enable such party to fulfill its obligations, the
inability of such party to acquire, or the delays on the part of such party in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
such servitudes, rights-of-way grants, permits, exceptions or licenses, and (ii)
in those instances where Customer or Transporter is required to furnish
materials and supplies for the purpose of constructing or maintaining facilities
or is required to secure permits or permission from any governmental agency
(federal, state or municipal, civil or military) to enable such party to fulfill
its obligations hereunder, the inability of such party to acquire or the delays
on the part of such party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such material and supplies, permits and
permissions. It is understood and agreed
<PAGE>
that the settlement of strikes or lockouts shall be entirely within the
discretion of the party or a Transporter 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 the opposing party when such course is inadvisable in the
discretion of the party having the difficulty.
SECTION V
NOMINATIONS AND SCHEDULING
1. Nomination. For all quantities of gas that are to be scheduled
beginning on the first day of any month, Customer will provide written notice,
in a form to be provided by Company, either via the Company's electronic
bulletin board or via facsimile, no later than eleven (11:00) am CT three (3)
business days prior to the month of delivery. For all quantities that are to be
scheduled or changed any day after the first day of any month, Customer will
provide either via the Company's electronic bulletin board or via facsimile,
notice by eleven (11:00) am CT on the day prior to the day of the proposed
change. Company may waive any part of the notice requirement upon request if, in
Company's sole judgment, operating conditions permit such waiver. In addition
to the information required on the nomination form, Customer will specify
whether the gas scheduled is current month deliveries or Imbalance Payback
Quantities (defined below). The volumes will be allocated through the meters in
the following order (i) Imbalance Payback Quantity, (ii) Base Load Requirements
- - Energas transportation, (iii) Base Load Requirements- Energas/KN Marketing,
L.P. sales, (iv) Swing Load Requirements- Energas/KN Marketing, LP. sales.
2. Confirmation Notice. Company shall provide Customer notice, by
Company's electronic bulletin board or by telefacsimile, of all quantities of
gas requested by Customer that Company has confirmed for flow. Such notice shall
be provided not later than 4:00 p.m. CT on the day prior to the day of flow.
Company shall also provide Customer notice by Company's electronic bulletin
board or by telefacsimile, of all quantities of gas received by Company for
Customer's account. Such notice shall be provided not later than 4:00 p.m. CT on
the day after the day of flow for only gas received at those Receipt Points
that are electronically monitored by Company.
3. Rate of Flow. The gas to be received by Company's Transporter
hereunder shall be delivered by Customer at uniform hourly and daily rates of
flow as nearly as practicable, but it is recognized that due to operating
conditions the quantities of gas received and delivered may not be in balance on
any one particular day. However, the Company reserves the right to reduce the
confirmed nomination at the Delivery Point(s) in the event Customer's nominated
gas at the Receipt Point(s) is not concurrently made available to Company or its
Transporter.
<PAGE>
Furthermore, in addition to the notices required under Section V,
paragraph 2 above, Company and Customer shall immediately inform each other of
any changes to deliveries at the Delivery Point(s) and the Company reserves the
right to reduce the confirmed nomination at the Receipt Point(s) to a quantity
that is ratable to the then current volumes being delivered at the Delivery
Point(s), provided that the Customer can nominate volumes at the Receipt
Point(s) Imbalance Payback Quantity.
4. Imbalances. In any given month, any quantities of gas received by
Company from Customer (or its designee) at the Receipt Point(s) or delivered to
Customer by Company at the Delivery Point(s) that is less than or equal to a ten
percent (10%) variance with the confirmed quantities at the Receipt Point(s)
and/or Delivery Point(s) is an Imbalance Quantity". Company shall provide a
monthly statement to Customer showing the previous month's volume activity
confirmed at the Receipt Point(s) and the Delivery Point(s) and the resulting
Imbalance Quantity. Customer will then have until forty-five (45) days following
the receipt of such notification (Payback Period) to schedule with Company Fe
volumes necessary to reduce the Imbalance Quantity to zero (Imbalance Payback
Quantity).
5. Imbalance Exchanges. In the event Company establishes an imbalance
exchange service program in conjunction with the transportation services
provided under this Agreement, Customer will be eligible to participate in the
program under the terms thereof.
6. Cash Out. In the event there remains an Imbalance Quantity after the
Payback Period has expired, Company will cash out the remaining imbalance from
that transaction month for Underdelivered imbalances as set forth in Section
6A), and for Overdelivered imbalances as set forth in Section 6B). If
Customer's confirmed quantities of gas at the Delivery Point(s) are in excess of
ten percent (10%) of the confirmed quantities of gas at the Receipt Point(s)
(Underdelivery Quantities), or Customer's confirmed quantities of gas at the
Delivery Point(s) are less than ninety percent (90%) of the confirmed quantities
of gas at the Receipt Point(s) (Overdelivery Quantities), Company will invoice
and Customer will pay a cash out invoice as follows:
A) for Underdelivered imbalances or Underdelivery quantities the Cash Out
invoice shall be equal to the Underdelivered quantity times the "Index Basket"
plus:
(a) for 1996-$0.6742 per MMBtu plus the Westar Transmission Company
(Westar) transportation rate of $0.2858 per Mcf.
(b) for 1997-$0.6342 per MMBtu plus the Westar transportation rate of
$0.2858 per Mcf.
<PAGE>
(c) for 1998-$.6042 per MMBtu plus the Westar transportation rate of
$0.2858 per Mcf.
(d) for 1999 through 2001-$0.3042 per MMBtu plus the Westar
transportation rate of $0.2858 per Mcf.
(e) In the event the approved rate for transportation on the Westar
system (as that system is described in the Operating Agreement)
changes, then the $0.2858 per Mcf rate for transportation will be
replaced with the new rate which has been approved by The
Railroad Commission of Texas, which notwithstanding the structure
of such approved rate shall be the cost of service rate expressed
on a per unit of actual throughput basis for the capacity used to
provide the firm transportation service.
B) for Overdelivered imbalances or Overdelivery Quantities the cash out
invoice shall be equal to the Overdelivered quantity times ninety percent (90%)
of the "Index Basket".
The "Index Basket" referred to above shall be equal to the sum of the "prices"
stated in dollars per MMBtu of: (i) fifty percent (50%) of the arithmetic
average of the index prices listed in each edition of Natural Gas Week,
published during the applicable calendar month by Oil Daily Company in the table
titled "Gas Price Report", under the column labeled "Delivered to Pipeline",
"This Week" for Texas West Spot, and (ii) twenty five percent (25%) of the first
publication in the applicable month of Inside F.E.R.C.'s Gas Market Report,
published by McGraw-Hill, Inc. for Panhandle Eastern Pipeline Co., Texas,
Oklahoma (Mainline) under the heading "Prices of Spot Gas Delivered to Pipeline"
under the category labeled "Index", and (iii) twenty five percent (25%) of the
index price published in the first edition of the month in Natural Gas
Intelligence Gas Price Index for the applicable calendar month, identified in
the table entitled "SPOT GAS PRICES" under the column entitled "Contract Index",
the "Intrastate Avg." for the "West Texas/Permian" gas.
C) Should any of the indices or publications above become unavailable,
Customer and Company will use their best efforts to locate another source of
this information, or in the event that the information cannot be obtained
through another source, Customer and Company shall agree upon another index to
replace the index which has become unavailable.
7. Upstream and Downstream Transporters. Customer shall make, or cause to
be made, all necessary arrangements with other pipelines or parties upstream of
the Receipt Point(s) or downstream of the Delivery Point(s) in order to
effectuate Company's receipt or delivery of Customer's gas. Company's
<PAGE>
obligations are subject to Customer making such necessary arrangements set forth
in the immediately preceding sentence, and such arrangements must be coordinated
with Company.
8. Third Party Imbalance Penalties. If on any day Customer or Company's
Transporter receives or delivers, or causes to be received or delivered, a
quantity or Btu content of gas that is greater or less than that nominated and
scheduled for receipt or delivery at the Receipt or Delivery Point(s), and such
deliveries cause Customer or Company to incur a penalty(ies), cashout cost(s),
fee(s), forfeiture(s) or charge(s) as levied by any transporter or
Transporter(s), upstream or downstream of the respective Receipt and Delivery
Point(s), the responsible party agrees to bear and pay such penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s). Customer and Company agree
to provide one another all information necessary to determine what event, or
which party caused the imbalance resulting in the imposition of penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s) by a transporter or
Transporter(s) at the Receipt or Delivery Point(s).
SECTION VI
QUALITY OF GAS
1. Specification. All natural gas delivered by Customer to Company at the
Receipt Point(s) shall conform to the quality specifications imposed from time
to time by the most restrictive of the Transporter(s). All natural gas
redelivered by Company to Customer at the Delivery Point(s) shall be governed by
the Operating Agreement.
2. Failure to Conform. If the gas tendered for receipt by Company from
Customer fails at any time to conform to the quality specifications set forth in
the Section title Specification, then Company may refuse to accept the receipt
of the gas and will notify Customer. Customer shall make a diligent effort to
correct such failure within twenty-four (24) hours following any such notice,
and if Customer is not successful then Company in its sole discretion may (i)
request its Transporter to accept delivery of any non-conforming gas, or (ii)
continue to refuse to accept the non-conforming gas and Company's obligations
regarding such gas will be suspended. Non-conforming gas tendered by Company to
Customer at the Delivery Point(s) shall be governed by the Operating Agreement.
3. Odorization. Odorization shall be governed by the Operating Agreement.
SECTION VII
TERM
<PAGE>
This Agreement is in effect on the Effective Date and will continue through
December 31, 2001 and provided, that this Agreement and any Customer Order will
continue in effect until the later of O the expiration of any outstanding
Customer Order, or vi) for so long as it takes to change any nominations to any
transporter or Transporter(s) reflecting the cessation of the receipt and
delivery of gas under any Customer Order and iii) to resolve any outstanding
Imbalance Quantities.
SECTION VIII
REMEDIES UPON MATERIAL DEFAULT
1. If either party hereto shall fail to perform any material covenant or
obligation imposed upon it under this Agreement, than in such event the non-
defaulting party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The non-
defaulting party shall cause a written notice to be served on the defaulting
party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting party
to terminate this Agreement if the default is not cured. The defaulting party
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and if
within such ten-day period, the defaulting party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no further force or
effect from and after the expiration of such ten-day period.
2. Any termination of this Agreement pursuant to the provisions of this
Article shall be (i) without prejudice to the rights of Company to collect any
amounts then due Company for gas delivered prior to the time of termination (ii)
without prejudice to the rights of Customer to receive any gas for which it has
paid but not received prior to the time of termination, and (iii) without waiver
of any other remedy to which the non-defaulting party may be entitled.
SECTION IX
MEASUREMENT AND PRESSURE
1. Measurement. Unless specified in a Customer Order to the contrary, the
measurement of gas and testing of measurement facilities will be governed by the
applicable measurement and testing provisions and procedures of the Measuring
Party. The
<PAGE>
parties agree to rely on correct information provided by the Measuring Party as
to the quantity of gas measured at the Receipt and Delivery Point(s).
2. Pressure. The gas delivered by Customer at the Receipt Point(s) shall
be delivered at a pressure sufficient to overcome the operating pressure
existing in Company's or its Transporter's facility from time to time; however,
in no event shall such delivery pressure exceed the maximum operating pressure
of the system receiving the gas. The gas delivered at the Delivery Point(s)
shall be delivered by Company's Transporter at the pressure existing from time-
to-time in Company's or Transporter's pipeline. Company's Transporter shall not
be obligated to install or operate compression facilities in order to effect
receipt or delivery of gas. Customer (or Customer's designee), any transporter
and Company's Transporter are completely and solely responsible for the
installation and maintenance of overpressure protection equipment on their own
pipeline(s), valve(s) and any other interconnection equipment.
SECTION X
BILLINGS, PAYMENTS AND AUDIT
1. On or before the fifteenth (15th) day of each Month, Company shall
render a statement to Customer giving the total quantity of gas, expressed in
Mcf and in MMBtu, received and delivered by Company's Transporter hereunder
during the preceding Month, any imbalances, and the monies due therefor. Such
statements are to be rendered in accordance with this Agreement, and shall
include any amounts due for tax reimbursement under the provisions of this
Agreement. In the event the total amount due Company cannot be determined on or
before the fifteenth (15th) day of the Month, Company shall nevertheless invoice
Customer for the amounts that are known and/or nominated by Customer, and when
the information is available Company shall invoice for actual amounts (or refund
any payment as necessary) as soon as practicable after such amount is
determined.
2. Ten (10) days after the statement is received by Customer, Customer
shall make payment to Company by wire transfer per the instructions set forth in
the Article titled COMMUNICATIONS. If Customer disputes the amount of any
statement for any reason, Customer shall notify Company of such dispute and
shall be obligated to pay only the undisputed portion of such statement on the
due dab. Customer shall pay the disputed portion of the statement which is
determined to be owing to Company within fifteen (15) days after the date the
dispute is resolved, together with interest on such amount at the rate set forth
in Paragraph 4 below, commencing on the original due date of the statement and
continuing until paid. If the statement shall have been paid in full and it
shall be determined that such disputed portion of the statement was paid in
error,
<PAGE>
Company shall refund such amount to Customer, together with interest at the rate
hereinafter set forth below over the period that Company had possession of the
money, within fifteen (15) days after resolution of the dispute.
3. All statements, bills, computations and payments shall be subject to
correction of any errors contained therein until two (2) years after date of
payment, and after such period any errors found will be deemed to be waived by
the affected party.
4. Any amounts due for gas delivered hereunder remaining unpaid after the
due date for such payment shall bear interest at the lesser of the highest
lawful interest rate or the prime rate charged by Norwest Bank of Denver plus
two percent (2%) until paid.
5. Each party shall have access to and the right to audit during regular
business days and business hours, upon reasonable notice, all measurement,
billing, computation and payment records maintained by the other party which
relate to gas received under this Agreement. All records will be maintained for
two (2) years after payment has been made for the month to which the records
pertain.
SECTION XI
COMMUNICATIONS
1. Notices and Addresses. Unless otherwise provided in this Agreement,
any notice (other than a Customer Order which may be sent by telefacsimile or
other electronic means), statement, demand, or payment called for is to be in
writing and shall be considered delivered when deposited in the U.S. Mail,
postage prepaid, telecopied/telefacsimilied or hand delivered to either party at
the address designated. Unless changed in writing, the addresses are:
Company:
Payments:
Wire Transfer: K N WESTEX GAS SERVICES COMPANY
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 00 076
Acct: # 101-0918-554
Notices and Correspondence: K N WESTEX GAS SERVICES COMPANY
333 Clay Street, Suite 2000
Houston, TX 77002-9817
Attn: Transportation and Exchange
Telecopier No. (713) 739 6695
Telephone No. (713) 739 2900
Customer:
<PAGE>
Notices and Correspondence: ENERGAS COMPANY,
a division of Atmos Energy Corporation
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Statements: ENERGAS COMPANY,
a division of Atmos Energy Corporation
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Telecopier No. (214)788 3773
Telephone No. (214) 788 3746
2. Operating Communications. Operating communications by telefacsimile
will be considered as duly delivered the day after transmittal.
3. Telefacsimile/Telecopy Transmission. All communications, including
Customer Orders, may be sent by telefacsimile/telecopy, and signatures appearing
on the telefacsimile/telecopy are binding on the signatory party.
SECTION XII
MISCELLANEOUS
1. Waiver of Default. No waiver by Company or Customer of any default of
the other under this Agreement or a Customer Order shall operate as a waiver of
any future default, whether of a like or different character.
2. Assignment. This Agreement may not be assigned by either party without
consent of the other party, which consent shall not be unreasonably withheld,
unless assigned to an affiliate or subsidiary of a party. Such assignment shall
not relieve the assigning party of any of its obligations under this Agreement
3. Joint Preparation. This Agreement is deemed to be drafted and prepared
equally and jointly, regardless of which party prepared or submitted the
document to the other and shall not be construed against one party or the other
as a result of the preparation, submittal or execution.
4. No Third-Party Beneficiary. Except for the parties, their successors
and assigns, no person, including without limitation, any joint operating
agreement party, any owner of a royalty interest, overriding royalty interest or
production right, any Transporter or Storer, shall have any rights as a third-
party beneficiary or otherwise under this Agreement or any Customer Order.
<PAGE>
5. Severability. If any part of this Agreement or a Customer Order is
held to be void or unenforceable by any court or under any law, that part shall
be deemed stricken and all remaining provisions shall continue to be valid and
binding upon the parties.
6. Laws. Rules and Regulations. This Agreement and all Customer Orders
are subject to all valid applicable federal, state and local laws, rules and
regulations of any governmental body or official having jurisdiction. The
parties are entitled to treat all laws, orders, rules and regulations issued by
any federal or state regulatory body as valid and may act in accordance
therewith until such time the same may be invalidated by final judgment in a
court of competent jurisdiction.
7. Modification. Any modification of terms or amendment of provisions of
this Agreement or a Customer Order will become effective only by written
agreement between the parties.
8. Minimal Creditworthiness. Company or Customer shall not be required to
perform, or continue to perform under this Agreement or a Customer Order in the
event (i) either party applies or has applied for bankruptcy, or (ii) one party
fails, in the good faith opinion of the other party, to demonstrate minimal
creditworthiness.
9. Taxes and Fees. To the extent permitted by law, Customer shall
reimburse Company for;
(a) any natural gas gathering, occupation, production, inventory,
severance or sales taxes, first use tax, gross receipt tax, or taxes similar in
nature or equivalent ii effect which are now or hereafter imposed or assessed
against Company or any transporting entities by any lawful authority as a result
of the transportation of natural gas under this Agreement or the production or
gathering of such natural gas.
(b) any fees or charges by any Governmental agency which Company incurs
that are related to any service rendered to Customer under this Agreement.
10. Operating Conditions and Agreements. The services provided by Company
to Customer under this Agreement are subject to the various tariffs, statements
of compliance., statements of operating conditions, general terms and
conditions, transportation agreements, exchange agreements, and general
operating conditions of the various Entities at and between the Receipt Point(s)
and the Delivery Point(s).
11. Choice of Law and Venue. THIS AGREEMENT WILL BE INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
RECOURSE TO THE RULES OF CONFLICT OF LAWS.
<PAGE>
12. Confidentiality. The terms of this Agreement, including but not
limited to, price, rates or fees, the identified transporting pipelines,
Transporter(s), and cost of transportation, the quantities of gas, and all other
material terms shall be kept confidential by the parties, except to the extent
that any information must be disclosed to a third party as required by federal,
state or local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either party of its
obligations hereunder, ceases to be confidential.
<PAGE>
CUSTOMER ORDER
COMPANY SHALL CAUSE THE FIRM TRANSPORTATION OF GAS AS FOLLOWS:
(BASE LOAD)
This Customer Order entered into on January 1 1996 between K N WESTEX SERVICES
COMPANY (Company) and ENERGAS COMPANY a division of Atmos Energy Corporation
(Customer) is subject to made a part of and is incorporated by reference into
the Gas Service Agreement dated January 1 1996 between Company and Customer
(Agreement).
Term: January 1 1996 through December 31 2001
Type of Service: Company shall arrange for firm transportation
service.
Receipt Point(s): Interconnection facilities with K N Energy Inc.'s
Buffalo Wallow facilities subject to the operating
limitations of these receipt facilities.
Delivery Point(s): All points of interconnection between Westar
Transmission Company and Customer where Customer
receives gas as of the date of the Agreement, for
resale through certain of Customer's distribution
facilities.
Maximum Daily Quantity:
A. For the period beginning January 1, 1996
through December 31, 1996 - 13 ,661 MMBtu per day.
B. For the period beginning January 1, 1997
through December 31, 1997 - 25, 000 MMBtu per day.
C. For the remainder of the Term under this
Customer Order 30,000 MMBtu per day
D. Such Maximum Daily Quantities will not apply
to confirmed Imbalance Payback Quantities
Maximum Contract Quantity: For the term of this Customer Order the Maximum
Contract Quantity shall be limited by the Maximum
Contract Quantity set forth in the Customer Order
<PAGE>
entered into between Energas Company (Energas) and
Westar Transmission Company (Westar), and volumes
transported hereunder shall be included in the
determination of the Maximum Contract Quantity of
the Energas and Westar Customer Order.
Rate (as delivered): $0.2858 per Mcf
Special Provisions: In the event the approved rate for transportation
on the Westar system (as that system is described
in the Operating Agreement) changes then the
$0.2858 per Mcf rate for transportation will be
replaced with the new rate which has been approved
by The Railroad Commission of Texas which
notwithstanding the structure of such approved
rate shall be the cost of service rate expressed
on a per unit of actual throughput basis for the
capacity used to provide the firm transportation
service.
COMPANY CUSTOMER
KN WESTEX SERVICES ENERGAS COMPANY
a division of Atmos Energy Corporation
By: By:
- ------------------------------ ----------------------------------------
Name: Name:
- ------------------------------ ----------------------------------------
Title: Title:
- ------------------------------ ----------------------------------------
Date: Date:
- ------------------------------ ----------------------------------------
<PAGE>
EXHIBIT 10.15
GAS SERVICE AGREEMENT
(Service for Firm Transportation)
between
WESTAR TRANSMISSION COMPANY
"COMPANY"
and
ENERMART TRUST
(Large Volume Industrials)
"CUSTOMER"
Dated: January 1, 1996
<PAGE>
INDEX
SECTION TITLE PAGE
I Definitions 1
II Customer Order 3
III Representation, Warranties, Title and
Indemnities 3
IV Force Majeure 4
V Nominations and Scheduling 4
VI Quality of Gas 7
VII Term 7
VIII Remedies Upon Material Default 8
IX Measurement and Pressure 8
X Billings, Payments and Audit 9
XI Communications 9
XII Miscellaneous 11
<PAGE>
GAS SERVICE AGREEMENT
(ENERMART)
THIS AGREEMENT, effective on January 1, 1996, between WESTAR TRANSMISSION
COMPANY, (Company), and ENERMART TRUST, a Pennsylvania Business Trust,
(Customer), and for the consideration stated, the parties agree as follows:
RECITALS
1. Customer and Company from time to time will enter into certain
arrangements whereby Company will provide Customer firm transportation service
as set forth in a "Customer Order".
2. Company has entered into contracts with various transporters,
marketing companies, storers, and other companies (Entity(ies)) in order to
effectuate the services which will be performed under any Customer Order.
3. Customer understands and agrees that any services provided by Company
are subject to the various governmental filings by each Entity, including,
without limitation, compliance statements filed in accordance with Part 284 of
the Federal Energy Regulatory Commission's (FERC) regulations under the Natural
Gas Policy Act of 1978, as amended from time-to-time.
SECTION I
DEFINITIONS
1. "Firm Transportation" means, subject to force majeure, transportation
service on a non-interruptible basis.
2. "Day" means the period of twenty-four (24) consecutive hours,
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. CT on the next day. The reference date for any day is the calendar date
when the twenty-four (24) hour period began. "Business day" means a day
consisting of Monday through Friday.
3. "Delivery Point(s)" means the outlet flange of Company's transporter's
facilities at the interconnection point with the facilities of Customer or
Customer's designee described in a Customer Order.
4. "Gas" means natural gas with or without the removal of any hydrocarbon
or inert constituents after it is produced from a well, and includes gas
produced from a well producing gas only, from a well producing gas with
condensate, or from a well producing gas in association with oil.
5. "Customer Order" means a form described in general which is attached
as Exhibit A, and which evidences the
<PAGE>
agreement as to the terms of a particular transaction for the service(s)
provided under this Agreement.
6. "MCQ" or "Maximum Contract Quantity" means the maximum total contract
quantity of gas that may be received and delivered by Company during the term in
a Customer Order.
7. "MDQ" or "Maximum Daily Quantity" means during the term of a Customer
Order, the maximum daily quantity of gas that may be received and delivered by
Company during any day.
8. "Measuring Party" means a mutually agreeable party who will measure the
gas under an executed Customer Order. If no Measuring Party is designated, then
the Transporter immediately downstream of the Receipt Point(s) or upstream of
the Delivery Point(s) will be the Measuring Party.
9. "Month" means a period beginning at 7:00 a.m. CT on the first day of a
calendar month and ending at 7:00 a.m. CT on the first day of the next month.
10. "Overrun" means any quantity of gas that exceeds the MDQ, MSQ and/or
MCQ, as agreed to between Company and Customer, and described in a Customer
Order.
11. "Receipt Point(s)" means the inlet flange of Company's or
Transporter's facilities at the interconnection point with the facilities of
Customer or Customer's designee, described in a Customer Order.
12. "Transporter(s)" means any pipeline on which any gas under this
Agreement is transported.
13. For payment purposes, the quantity of gas delivered and received
hereunder will be stated in Mcf. For balancing purposes the quantity of gas will
be stated in MMBtu. For measurement purposes, the quantity of gas delivered and
received hereunder stated in MMBtu and Mcf, is derived by taking the measured
volumes of gas in cubic feet multiplied by their Gross Heating Value divided by
one million (1,000,000). The pertinent terms are as follows:
(a) "Cubic foot of gas" means the volume of gas which occupies one (1)
cubic foot of space at a temperature of sixty degrees (60 degrees) Fahrenheit
and the referenced pressure base as set forth by the Measuring Party.
(b) "Mcf" means one thousand (1,000) cubic feet of gas and "Bcf means one
billion (1,000,000,000) cubic feet of gas.
(c) "Btu" means the amount of heat required to raise the temperature of
one avoirdupois pound of pure water from fifty-eight and five tenths degrees
(58.5 degrees) Fahrenheit to fifty-nine and five tenths degrees (59.5 degrees)
Fahrenheit at a
<PAGE>
constant pressure of fourteen and sixty-five hundredths (14.65) pounds per
square inch absolute.
(d) "MMBtu" means one million (1,000,000) Btu.
(e) "Gross Heating Value" means the number of Btu liberated by the
complete combustion, at constant pressure, of one (1) cubic foot of gas, at a
base temperature of sixty degrees (60 degrees) Fahrenheit and a referenced
pressure base as set forth by the Measuring Party, with air of the same
temperature and pressure of the gas, after the products of combustion are cooled
to the initial temperature of the gas, and after the water resulting from
combustion is condensed to the liquid stab. The Gross Heating Value of the gas
is to be corrected for the water vapor content of the gas being delivered;
provided, that if the water vapor content of the gas is seven (7) pounds or less
per one million (1,000,000) cubic feet, the gas will be assumed to be dry and no
correction will be made.
(f) "Referenced pressure base" for measurement and determination of gas
volume and Gross Heating Value will be established by the Measuring Party;
however, the referenced pressure base is always to be the same for gas volume
and Gross Heating Value.
14. "Operating Agreement" means the agreement between Westar Transmission
Company and Energas Company, dated December 1, 1996, covering measurement
equipment and testing, measurement specifications, pressures, quality,
maintenance of facilities, and other operational matters.
SECTION II
CUSTOMER ORDER
1. Customer Order. The parties may enter into one or more agreements for
firm transportation service hereunder from time to time, and each such agreement
will be reflected in a Customer Order executed by both parties which will
constitute a supplement to and form a part of this Agreement, so that each
transaction involving this Agreement and a Customer Order constitutes a single,
entire agreement between Customer and Company. Each Customer Order will contain
provisions regarding price, Receipt Point(s), Delivery Point(s), quantity, term
and any other obligations of Customer and Company.
2. Conflict. If a conflict exists between a Customer Order and this
Agreement, the terms of the Customer Order will govern the applicable
transaction. If a conflict exists between two or more Customer Orders under this
Agreement, the Customer Order with the latest effective date will govern the
applicable transaction period.
<PAGE>
SECTION III
REPRESENTATIONS. WARRANTIES. TITLE AND INDEMNITIES
1. Company. Company represents that it has, or will have, all contracts
in place necessary to provide the services described in each Customer Order,
subject to Paragraph 3 of the RECITALS and Paragraph 10. Operating Conditions
and Agreements. of Section Xl MISCELLANEOUS .
2. Customer. Customer warrants that it has good title to or good right to
the gas delivered to Company under each applicable Customer Order, and that the
gas is free and clear of all liens, encumbrances, or adverse claims of any kind.
Customer indemnifies, saves and holds harmless, Company from all claims, losses,
causes of action, damages and expenses (including, but not limited to attomey's
fees and court costs) due to any adverse claims against the Company for the gas
delivered to Company by Customer. Customer warrants that all gas delivered to
Company for transportation hereunder is eligible for transportation under any
governmental authority having jurisdiction.
3. Control and Possession. Customer is in control and possession of the
gas and is responsible for and indemnifies Company against any injury or any
damage caused thereby until the gas is delivered to Company or its designee at
the Receipt Point(s), except for any injury or damage caused by Company.
Responsibility for the gas passes to Company at the Receipt Point(s), and then
Company is in control and possession of the gas and is responsible for, and
indemnifies Customer against injury or damage caused thereby, except for injury
or damage caused by Customer. Likewise, responsibility for the gas passes to
Customer at the Delivery Point(s), and then Customer is in control and
possession of the gas.
4. Damages. Notwithstanding anything in this Agreement to the contrary,
neither party will be responsible to the other party for any incidental,
consequential, lost profit, punitive or exemplary damages for a breach of this
Agreement.
SECTION IV
FORCE MAJEURE
1. Force Majeure. In the event that either Company or Customer is
rendered unable, wholly or in part, by reason of an event of force majeure, to
perform its obligations under this Agreement, other than to make payment due
hereunder, and such party has given notice and full particulars of such force
majeure in writing to the other party as soon as possible after the occurrence
of the cause relied on, then the obligations of the parties, insofar as they are
affected by such force majeure, shall be suspended during the continuance of
such inability, but
<PAGE>
for no longer period, and such cause shall, insofar as possible, be remedied
with all reasonable dispatch.
The term "force majeure" in this Agreement means, without limitation,
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, arrests and restraints
of the government, either federal or state, civil or military, civil
disturbances, explosions, breakage, breakdown or accident to machinery,
equipment or lines of pipe, the necessity of repairing, altering, maintaining,
inspecting, replacing, changing the size of, substituting or removing machinery,
equipment, pipelines, storage or plant facilities, and any other causes, whether
of the kind herein enumerated or otherwise, not reasonably within the control of
the party claiming suspension. Such term likewise includes (i) in those
instances where Customer or Transporter is required to obtain servitudes, right-
of-way grants, permits, exceptions or licenses to enable such party to fulfill
its obligations, the inability of such party to acquire, or the delays on the
part of such party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such servitudes, rights-of-way grants, permits, exceptions
or licenses, and (ii) in those instances where Customer or Transporter is
required to furnish materials and supplies for the purpose of constructing or
maintaining facilities or is required to secure permits or permission from any
governmental agency (federal, state or municipal, civil or military) to enable
such party to fulfill its obligations hereunder, the inability of such party to
acquire or the delays on the part of such party in acquiring, at reasonable cost
and after the exercise of reasonable diligence, such material 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 or a
Transporter 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 the opposing
party when such course is inadvisable in the discretion of the party having the
difficulty.
SECTION V
NOMINATIONS AND SCHEDULING
1. Nomination. For all quantities of gas that are to be scheduled
beginning on the first day of any month, Customer will provide written notice,
in a form to be provided by Company, either via the Company's electronic
bulletin board or via telefacsimile, no later than eleven (11:00) am CT three
(3) business days prior to the month of delivery. For all quantities that are to
be scheduled or changed any day after the first day of any month, Customer will
provide either via the Company's electronic bulletin board or via telefacsimile,
notice by eleven
<PAGE>
(11:00) am CT on the day prior to the day of the proposed change. Company may
waive any part of the notice requirement upon request if, in Company's sole
judgment, operating conditions permit such waiver. In addition to the
information required on the nomination form, Customer will specify whether the
gas scheduled is current month deliveries or imbalance payback quantities.
2. Confirmation Notice. Company shall provide Customer notice, by
Company's electronic bulletin board or by telefacsimile, of all quantities of
gas requested by Customer that Company has "confirmed" with Customer's
suppliers, designees, and/or other transporters for flow. Such notice shall be
provided not later than 4:00 p.m. CT on the day prior to the day of flow.
Company shall also provide Customer notice, by Company's electronic bulletin
board or by telefacsimile, of all quantities of gas received by Company for
Customer's account. Such notice shall be provided not later than 4:00 p.m. CT on
the day after the day of flow for only gas received at those Receipt Points that
are electronically monitored by Company.
3. Monthly Balancing Requirements. The balancing provisions herein have
been established and are provided to Customer by Company in recognition that the
gas being transported by Customer will be delivered to markets that typically
have a uniform consumption of gas. In any given month, any quantities of gas
received by Company from Customer (or its designee) at the Receipt Point(s) or
delivered to Customer by Company at the Delivery Point(s) that is not equal to
the "confirmed" quantities at the respective Receipt Point(s) and Delivery
Point(s) is an "Imbalance Quantity". Company shall provide a monthly statement
to Custom showing the previous month's volume activity "confirmed" at both the
Receipt Point(s) and the Delivery Point(s) and the resulting Imbalance Quantity.
Customer will then have forty five (45) days following such statement (Payback
Period) to schedule with Company the quantities of gas necessary to reduce the
Imbalance Quantity to zero. Any imbalance remaining after the Payback Period,
will be cashed out as follows:
For such remaining monthly Imbalance Quantity where receipts of gas at the
Receipt Point(s) are less than deliveries taken by Customer at the Delivery
Point(s), Company will invoice Customer and Customer shall pay for the
extra gas delivered to Customer one hundred and ten percent (110%) of the
"Index Basket", for the respective month of delivery, on a per MMBtu basis.
For such remaining monthly Imbalance Quantity where deliveries of gas at
the Delivery Point(s) are less than receipts of gas at the Receipt
Point(s), Company will pay Customer for the extra gas delivered by Customer
to Company ninety percent (90%) of the "Index Basket" for the month of
delivery, on a per MMBtu basis.
<PAGE>
The "Index Basket" referred to in above shall be equal to the sum of the
"prices" stated in dollars per MMBtu of: (i) fifty percent (50%) of the
arithmetic average of the index prices listed in each edition of Natural Gas
Week published during the applicable calendar month by Oil Daily Company in the
table titled "Gas Price Report", under the column labeled "Delivered to
Pipeline", "This Week" for Texas West Spot, and (ii) twenty-five percent (25%)
of the first publication in the applicable month of Inside F.E.R.C.'s Gas Market
Report. published by McGraw-Hill, Inc. for Panhandle Eastern Pipeline Co.,
Texas, Oklahoma (Mainline) under the heading "Prices of Spot Gas Delivered to
Pipeline" under the category labeled "Index", and (iii) twenty-five percent
(25%) of the index price published in the first edition of the month in Natural
Gas Intelligence Gas Price Index for the applicable calendar month, identified
in the table entitled "SPOT GAS PRICES" under the column entitled "Contract
Index", the "Intrastate Avg." for the "West Texas/Permian" gas.
4. Rate of Flow. The gas to be received by Company hereunder shall be
delivered by Customer at uniform daily rates of flow as nearly as practicable,
but it is recognized that due to operating conditions the quantities of gas
received and delivered may not be in balance on any one particular day. On days
when the quoted price from Enron Capital and Trade, Texas Intrastate desk, for
gas delivered to Company's system the same day in the Waha supply area exceeds
the price of the of the index price published in the first edition of the month
in Natural Gas Intelligence Gas Price Index for the applicable calendar month,
identified in the table entitled "SPOT GAS PRICES" under the column entitled
"Contract Index", the "Intrastate Avg." for the "West Texas/Permian'" by more
than $0.50 per MMBtu, and there is a difference in the quantity of MMBtu between
the nominated and confirmed Receipt Point(s) daily quantities and the actual
quantities being delivered by Customer or its designee at the Receipt Point(s),
Company shall notify Customer by telephone and telefacsimile of such difference,
and Company shall have the right to request Customer to correct the difference
within twenty four (24) hours of notification. Customer may correct such
situation by adjusting its nominations to match actual Receipt Point(s) daily
quantities. If Customer fails to correct the situation within twenty four (24)
hours of such notification, then Company shall have the right to charge Customer
up to $0.50 per MMBtu on any remaining and continuing difference in the quantity
of MMBtu between the nominated and confirmed Receipt Points) daily quantities
and the actual quantities being delivered by Customer or its designee at the
Receipt Point(s), until such time that the difference is corrected.
5. Imbalance Exchanges. In the event Company establishes an imbalance
exchange service program in conjunction with the transportation services
provided under this Agreement, Customer
<PAGE>
will be eligible to participate in the program under the terms thereof.
6. Upstream and Downstream Transporters. Customer shall make, or cause to
be made, all necessary arrangements with other pipelines or parties upstream of
the Receipt Point(s) or downstream of the Delivery Point(s) in order to
effectuate Company's receipt or delivery of Customer's gas. Company's
obligations are subject to Customer making such necessary arrangements set forth
in the immediately preceding sentence, and such arrangements must be coordinated
with Company.
7. Third Party lmbalance Penalties. If on any day Customer or Company's
Transporter receives or delivers, or causes to be received or delivered, a
quantity or Btu content of gas that is greater or less than that nominated and
scheduled for receipt or delivery at the Receipt or Delivery Point(s), and such
deliveries cause Customer or Company to incur a penalty(ies), cashout cost(s),
fee(s), forfeiture(s) or charge(s) as levied by any transporter or
Transporter(s), upstream or downstream d the respective receipt and Delivery
Point(s), the responsible party agrees to bear and pay such penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s). Customer and Company agree
to provide one another all information necessary to determine what event, or
which party caused the imbalances resulting in the imposition of penalty(ies),
cashout cost(s), fee(s), forfeiture(s) or charge(s) by a transporter or
Transporter(s) at the Receipt or Delivery Point(s).
SECTION VI
QUALITY OF GAS
1. Specification. All natural gas delivered by Customer to Company(s)
Transporter at the Receipt Point(s) shall conform to the quality specifications
imposed from time to time by the most restrictive of the Transporter(s). All
natural gas redelivered by Company to Customer at the Delivery Point(s) shall be
governed by the Operating Agreement.
2. Failure to Conform. If the gas tendered for receipt by Company from
Customer fails at any time to conform to the quality specifications set forth in
the Section titled Specifications, then Company may refuse to accept the receipt
of the gas and will notify Customer. Customer shall make a diligent effort to
correct such failure within twenty-four (24) hours following any such notice,
and if Customer is not successful then Company in its sole discretion may (i)
request its Transporter to accept delivery of any non-conforming gas, or (ii)
continue to refuse to accept the non conforming gas and Company's obligations
regarding such gas will be suspended. Non-conforming gas tendered by Company to
Customer at the Delivery Point(s) shall governed by the Operating Agreement.
<PAGE>
3. Odorization. Odorization shall be governed by the Operating Agreement.
SECTION VII
TERM
This Agreement is in effect on the effective date and will continue through
December 31, 2001; provided, that this Agreement and any Customer Order will
continue in effect until the later of (i) the expiration of any outstanding
Customer Order, or (ii) for so long as it takes to change any nominations to any
transporter or Transporter(s) reflecting the cessation of the receipt and
delivery of gas under any Customer Order.
SECTION VIII
REMEDIES UPON MATERIAL DEFAULT
1. If either patty hereto shall fail to perform any material covenant or
obligation imposed upon it under this Agreement, than in such event the non-
defaulting party may, at its option, terminate this Agreement upon acting in
accordance with the procedures hereafter set forth in this Section. The non-
defaulting party shall cause a written notice to be served on the defaulting
party, which notice shall state specifically the cause of terminating this
Agreement and shall declare it to be the intention of the non-defaulting party
to terminate this Agreement if the default is not cured. The defaulting party
shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and if
within such ten-day period, the defaulting party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no further force or
effect from and after the expiration of such ten-day period.
2. Any termination of this Agreement pursuant to the provisions of this
Article shall be (i) without prejudice to the rights of Company to collect any
amounts then due Company for gas delivered prior to the time of termination (ii)
without prejudice to the rights of Customer to receive any gas for which it has
paid but not received prior to the time of termination, and (iii) without waiver
of any other remedy to which the non-defaulting party may be entitled.
<PAGE>
SECTION IX
MEASUREMENT AND PRESSURE
1. Measurement. Unless specified in a Customer Order to the contrary, the
measurement of gas and testing of measurement facilities will be governed by the
applicable measurement and testing provisions and procedures of the Measuring
Party. The parties agree to rely on correct information provided by the
Measuring Party as to the quantity of gas measured at the Receipt and Delivery
Point(s).
2. Pressure. The gas delivered by Customer at the Receipt Point(s) shall
be delivered at a pressure sufficient to overcome the operating pressure
existing in Company's or its Transporter's facility from time to time; however,
in no event shall such delivery pressure exceed the maximum operating pressure
of the system receiving the gas. The gas delivered at the Delivery Point(s)
shall be delivered by Company's Transporter at the pressure existing from time-
to-time in Company's or Transporter's pipeline. Company's Transporter shall not
be obligated to install or operate compression facilities in order to effect
receipt or delivery of gas. Customer (or Customer's designee), any transporter
and Company's Transporter s completely and solely responsible for the
installation and maintenance of overpressure protection equipment on their own
pipeline(s), valve(s) and any other interconnection equipment.
SECTION X
BILLINGS, PAYMENTS AND AUDIT
1. On or before the fifteenth (15th) day of each Month, Company shall
render a statement to Customer giving the total quantity of gas, expressed in
Mcf and in MMBtu's, received and delivered by Company's Transporter hereunder
during the preceding Month and the monies due therefor. Such statements are to
be rendered in accordance with this Agreement, and shall include any amounts due
for tax reimbursement under the provisions of this Agreement. In the event the
total amount due Company cannot be determined on or before the fifteenth (15th)
day of the Month, Company shall nevertheless invoice Customer for the amounts
that are known and/or are nominated by Customer, and when the information is
available Company shall invoice for actual amounts (or refund any payment as
necessary) as soon as practicable after such amount is determined.
2. Ten (10) days after the statement is received by Customer, Customer
shall make payment to Company by wire transfer per the instructions set forth in
the Article titled COMMUNICATIONS. If Customer disputes the amount of any
statement for any reason, Customer shall notify Company of such dispute and
shall be obligated to pay only the undisputed portion of such statement on the
due date. Customer shall pay the disputed
<PAGE>
portion of the statement which is determined to be owing to Company within
fifteen (15) days after the date the dispute is resolved, together with interest
on such amount at the rate set forth in Paragraph 4 below, commencing on the
original due date of the statement and continuing until paid. If the statement
shall have been paid in full and it shall be determined that such disputed
portion of the statement was paid in error, Company shall refund such amount to
Customer, together with interest at the rate hereinafter set forth below over
the period that Company had possession of the money, within fifteen (15) days
after resolution of the dispute.
3. All statements, bills, computations and payments shall be subject to
correction of any errors contained therein until two (2) years after date of
payment, and after such period any errors found will be deemed to be waived by
the affected party.
4. Any amounts due for gas delivered hereunder remaining unpaid after the
due date for such payment shall bear interest at the lesser of the highest
lawful interest rate or 0 prime rate charged by Norwest Bank of Denver plus two
percent (2%) until paid.
5. Each party shall have access to and the right to audit during regular
business days and business hours, upon reasonable notice, ail measurement,
billing, computation and payment records maintained by the other party which
relate to gas received under this Agreement. All records will be maintained for
two (2) years after payment has been made for the month to which the records
pertain.
SECTION XI
COMMUNICATIONS
1. Notices and Addresses. Unless otherwise provided in this Agreement,
any notice (other than a Customer Order which may be sent by telefacsimile or
other electronic means), statement, demand, or payment called for is to be in
writing and shall be considered delivered when deposited in the U.S. Mail,
postage prepaid, telecopied/telefacsimilied or hand delivered to either party at
the address designated. Unless changed in writing, the addresses are:
Company:
Payments:
Wire Transfer WESTAR TRANSMISSION COMPANY
Norwest Banks Colorado, N.A.
Denver, CO
ABA# 102 00 076
Acct: # 101 091S554
Notices and Correspondence: WESTAR TRANSMISSION COMPANY
333 Clay Street, Suite 2000
<PAGE>
Houston, TX 77002-9817
Attn: Contract Administration
Telecopier No. (713) 739 6695
Telephone No. (713) 739 2900
Customer:
Notices and Correspondence: ENERMART TRUST
PO Box 650205
Dallas, TX 75265-0205
ATTN: Intrastate Gas Supply
Statements: ENERMART TRUST
PO Box 650205
Dallas, TX 7528-0205
ATTN: Intrastate Gas Supply
Telecopier No. (214)788 3773
Telephone No. (214)788 3746
2. Operating Communications. Operating communications by telefacsimile
will be considered as duly delivered the day after transmittal.
3. Telefacsimile/Telecopy Transmission. All communications, including
Customer Orders, may be sent by telefacsimile/telecopy, and signatures appearing
on the telefacsimile/telecopy are binding on the signatory party.
SECTION XII
MISCELLANEOUS
1. Waiver of Default. No waiver by Company or Customer of any default of
the other under this Agreement or a Customer Order shall operate as a waiver of
any future default, whether of a like or different character. Company shall not
be required to perform any service on behalf of Customer, if Customer fails to
comply with all of the terms of this Agreement.
2. Assignment. This Agreement may not be assigned by either party without
consent of the other party, which consent shall not be unreasonably withheld,
unless assigned to an affiliate or subsidiary of a party. Such assignment shall
not relieve the assigning party of any of its obligations under this Agreement.
3. Joint Preparation. This Agreement is deemed to be drafted and prepared
equally and jointly, regardless of which party prepared or submitted the
document to the other, and shall not be construed against one party or the other
as a result of the preparation, submittal or execution.
4. No Third-Party Beneficiary. Except for the parties, their successors
and assigns, no person, including without limitation, any joint operating
agreement party, any owner of a
<PAGE>
royalty interest, overriding royalty interest or production right, any
Transporter or Storer, shall have any rights as a third-party beneficiary or
otherwise under this Agreement or any Customer Order.
5. Severability. If any part of this Agreement or a Customer Order is
held to be void or unenforceable by any court or under any law, that part shall
be deemed stricken and all remaining provisions shall continue to be valid and
binding upon the parties.
6. Laws. Rules and Regulations. This Agreement and all Customer Orders
are subject to all valid applicable federal, state and local laws, rules and
regulations of any governmental body or official having jurisdiction. The
parties are entitled to treat all laws, orders, rules and regulations issued by
any federal or state regulatory body as valid and may act in accordance
therewith until such time the same may be invalidated by final judgment in a
court of competent jurisdiction.
7. Modification. Any modification of terms or amendment of provisions of
this Agreement or a Customer Order will become effective only by written
agreement between the parties.
8. Release of Dedication. Each of Customer's markets shall be released
from any requirement or dedication to transport gas on Company's system as
defined in the Amendment dated January 1, 1996 to the Gas Sales Agreement dated
January 1, 1992 between K N Marketing L. P. and Enermart Trust ninety (90) days
prior to the expiration date of that market's Gas Sales Order as defined in
Exhibit A of the Amendment. Such release shall only apply to those expiration
dates which occur after January 1,1997.
9. Minimal Creditworthiness. Company or Customer shall not be required to
perform, or continue to perform, any service under this Agreement or a Customer
Order in the event either party (i) applies or has applied for bankruptcy, or
(ii) one party fails, in the good faith opinion of the other party, to
demonstrate minimal creditworthiness.
10. Taxes and Fees. To the extent permitted by law, Customer shall
reimburse Company for,
(a) any natural gas gathering, occupation, production, inventory,
severance or sales taxes, first use tax, gross receipt tax, or taxes similar in
nature or equivalent in effect which are now or hereafter imposed or assessed
against Company or any transporting entities by any lawful authority as a result
of the transportation of natural gas under this Agreement or the production or
gathering of such natural gas.
<PAGE>
(b) any fees or charges by any Governmental agency which Company incurs
that are related to any service rendered to Customer under this Agreement.
11. Operating Conditions and Agreements. The services provided by Company
to Customer under this Agreement are subject to the various tariffs, statements
of compliance, statements of operating conditions, general terms and conditions,
transportation agreements, exchange agreement and general operating conditions
of the various Entities at and between the Receipt Point(s) and the Delivery
Point(s).
12. Choice of Law and Venue. THIS AGREEMENT WILL BE INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
RECOURSE TO THE RULES OF CONFLICT OF LAWS.
13. Confidentiality. The terms of this Agreement, including but not
limited to, price, rates or fees, the identified transporting pipelines,
Transporter(s), and cost of transportation, the quantities of gas, and all other
material terms shall be kept confidential by the parties, except to the extent
that any information must be disclosed to a third party as required by federal,
state or local law, regulation or governmental process, or for the purpose of
effectuating transportation of the gas hereunder or for obtaining regulatory
orders pertaining to the delivery or utilization of gas sold hereunder or for
regulatory filings or reports, or except to the extent that any information is
in the public domain, or which, through no breach by either party of its
obligations hereunder, ceases to be confidential.
COMPANY CUSTOMER
WESTAR TRANSMISSION COMPANY ENERMART TRUST
By: By:
- ---------------------------------- ----------------------------------------
Name: Name:
- ---------------------------------- ----------------------------------------
Title: Title:
- ---------------------------------- ----------------------------------------
Date: Date:
- ---------------------------------- ----------------------------------------
<PAGE>
CUSTOMER ORDER
COMPANY SHALL CAUSE THE TRANSPORTATION OF GAS AS FOLLOWS:
(ENERMART-LARGE VOLUME INDUSTRIALS)
This Customer Order entered into on January 1, 1996 between WESTAR TRANSMISSION
COMPANY (Company), and ENERMART TRUST (Customer) is subject to, made a part of
and is incorporated by reference into the Gas Service Agreement dated January 1,
1996, between Company and Customer.
Term: January 1, 1999
through December 31, 2001
Type of Service: Firm transportation service as required under the Gas
Sales Agreement dated January 1, 1992 but effective
August 1, 1991 between K N Marketing, L.P.(formerly
Anthem Energy Company L.P.) and ENERMART TRUST
Receipt Point(s): Interconnection facilities with Westar Transmission
Company, "Westar" and other mutually agreed to points
on Red River Pipeline, L.P., and AOG Gas Transmission
Company, L.P., subject to the operating limitations of
these receipt facilities.
Delivery Point(s): All Points of Interconnection between Westar
Transmission Company and Customer where Customer
receives gas for resale through certain of its
facilities
Maximum Daily
Quantity: Requirements to supply Customer's industrial sales
needs. Not to exceed 15,000 MMBtu per day
Maximum Contract
Quantity: Requirements to supply Customer's industrial sales
needs as set forth in the Gas Sales Agreement dated
January 1, 1942 but effective August 1, 1991 between K
N Marketing, L.P. (formerly Anthem Energy Company L.P.)
and ENERMART TRUST
Rate (as delivered): $0.2858 per Mcf
Special Provisions: In the event that the approved rate for firm
transportation on the Westar system (as that system is
described in
<PAGE>
the Operating Agreement) changes, then the S0.2858 per
Mcf rate for transportation will be replaced with the
new rate which has been approved by the Railroad
Commission of Texas, which notwithstanding the
structure of such approved rate shall be the cost of
service rate expressed on a per unit of actual
throughput basis for the capacity used to provide the
firm transportation service.
COMPANY CUSTOMER
WESTAR TRANSMISSION COMPANY ENERMART TRUST
By: By:
- ----------------------------- -----------------------------------
Name: Name:
- ----------------------------- -----------------------------------
Title: Title:
- ----------------------------- ------------------------------------
Date: Date:
- ----------------------------- ------------------------------------
<PAGE>
EXIBIT 10.16
OPERATING AGREEMENT
This Agreement made and entered into the 13th day of November, 1996, to be
effective the 1st day of December 1996 (the "Effective Date"), by and between
Westar Transmission Company (hereinafter called "Operator"), and Energas
Company, a division of Atmos Energy Corporation ("Customer");
WITNESSETH
WHEREAS, Operator currently owns and operates approximately 500 Metering
Facilities which will be subject to this Agreement; and
WHEREAS, Customer will by way of a separate agreement convey approximately
1,735 Metering Facilities to Operator as set forth on Exhibit A, which will
become subject to this Agreement; and
WHEREAS, Operator and Customer mutually desire to enter into an Operating
Agreement covering those certain metering and delivery facilities defined in
Article I as "Metering Facility(ies)"; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1. "Party" or "Parties" means Customer and/or Operator
hereunder, acting by and through duly authorized representatives.
Section 2. "Metering Facility(ies)" means the equipment and facilities
located in the West Texas area (including but not limited to all pipe, valves,
fittings, meters and regulators) which are presently connected (or connected in
the future under Article II) directly to Operator's pipeline system(s), and are
described on Exhibit A as follows:
a) Orifice Meters;
b) Large Capacity Positive Displacement Meters ("Large Meters"), being
Class IV or larger positive displacement, turbine, and rotary meters
which includes those meters with a capacity equal to or greater than
1800 cubic feet per hour at 8 ounces of pressure;
c) Other Positive Displacement Meters ("Other
<PAGE>
Meters"), being those Class I through III meters which includes those
meters with a capacity less than 1800 cubic feet per hour at 8 ounces of
pressure.
Customer shall retain ownership of and continue maintaining and operating any
and all metering facilities regardless of type and size which are currently
connected to pipeline systems not owned by Operator. Additionally, all yard
lines and service lines downstream of the Metering Facility(ies) shall remain
the property of Customer, and Customer retains all liabilities and obligations
associated with such yard and service lines. Operator shall own, operate and
maintain all taps, valves and regulators upstream of the Metering Facilities.
Section 3. "Day" means the period of twenty-four consecutive hours
commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00
a.m. (CT) on the following calendar day. The reference date for any day should
be the calendar date upon which such twenty-four (24) hour period began.
Section 4. "Month" means the period commencing at 7:00 a.m. CT on the
first day of a calendar month and ending at 7:00 a.m. CT on the first day of the
following month.
Section 5. "MCF" means the quantity of gas occupying a volume of one
thousand (1000) cubic feet at a temperature of sixty (60) degrees Fahrenheit and
an absolute pressure of fourteen and sixty-five hundredths pounds per square
inch absolute (14.65 psia).
Section 6. "BTU" means the amount of heat required to raise the
temperature of one avoirdupois pound of pure water from fifty-eight and five
tenths (58.5) degrees Fahrenheit to fifty-nine and five tenths (59.5) degrees
Fahrenheit at a constant pressure of fourteen and sixty-five hundredths (14.65)
pounds per square inch absolute.
Section 7. "MMBTU" means one million (1,000,000) BTU.
Section 8. "PSIG" means pounds per square inch gauge.
Section 9. "PSIA" means pounds per square inch absolute.
Section 10. "Gross Heating Value" means the number of Btu's liberated
by the complete combustion at a constant pressure, of one (1) cubic foot of gas,
at a base temperature of sixty (60) degrees Fahrenheit and a referenced pressure
base of fourteen and sixty-five hundredths (14.65) psia, with air of the same
temperature and pressure of the gas, after products of combustion are cooled to
the initial temperature of the gas, and after the water of the combustion is
condensed to the liquid
<PAGE>
state. The Gross Heating Value of the gas shall be corrected for the actual
water vapor content of the gas being delivered, provided, if the actual water
vapor content is seven (7) pounds or less per one million (1,000,000) cubic
feet, the gas will be assumed to be dry and no correction will be made.
ARTICLE II
MEASUREMENT EQUIPMENT AND TESTING
Section 1. Unless otherwise mutually agreed upon in writing,
Operator will be the "Operating Party" for all Orifice Meters and Large Capacity
Positive Displacement Meters and Customer will be the "Operating Party" for
Other Positive Displacement Meters; provided, that for any Orifice Meters and
Large Meters which are downgraded to a classification as Other Meters after the
Effective Date, Operator shall continue to be the Operating Party.
Section 2.
A. In the event Customer determines that a new Orifice Meter or
Large Meter ("New Metering Facility") is required to provide service to Customer
under this Agreement, or if Customer and Operator agree that a New Metering
Facility is required, Operator shall install, own, and operate, or cause to be
installed and operated such New Metering Facility. Customer shall pay to
Operator or Operator's designee the actual cost of such installations (including
taxes on income, if any, for aid in construction reimbursements) plus an
overhead charge of fifteen percent of such actual cost (example provided on the
attached Exhibit A). Customer shall pay such costs within thirty (30) days of
receipt of invoice. Customer at its cost, shall provide location sites
acceptable to Operator for all such New Metering Facilities. Operator shall
designate the type of New Metering Facilities that shall be utilized; provided,
if Operator, after the installation of New Metering Facilities pursuant to
Operator's initial designation for any point hereunder, designates a different
type of New Metering Facilities, the cost of such different New Metering
Facilities shall be borne by Operator. Operator will install or cause to be
installed a New Metering Facility only upon receipt of a completed "New
Facilities Request" form from Customer (example provided in attached Exhibit B).
B. Customer shall not be responsible for costs associated with the
replacement, rebuilding or repair of any Metering Facilities owned by Operator
already in place and being used to provide service under this Agreement.
C. For all Other Positive Displacement Meters, unless otherwise
agreed, Customer shall install, own and operate or
<PAGE>
cause to be installed and operated all equipment determined by Customer to be
necessary for the measurement of gas to be delivered under this Agreement.
D. All equipment installed by either Party will be based upon industry
standard designs and operated in accordance with this Agreement. Either Party
may install, maintain, and operate, at its sole cost and expense, check metering
facilities or other related equipment including, but not limited to, separate
Metering Facilities, and equipment which will give either party the right to
share pressure/differential sensing lines and positive displacement meter pulse
output; provided, however, that such equipment shall be installed in a manner
that will not interfere with the operation of the other Party's Metering
Facilities and/or telemetry equipment.
Section 3. Orifice meters installed in such Metering Facilities shall be
constructed and operated in accordance with ANSI/API 2530 (AGA Report No. 3),
Orifice Metering of Natural Gas and Other Related Hydrocarbon Fluids, Second
Edition, dated September 1985, and any subsequent modification and amendment
thereof, as mutually agreed upon, and shall include the use of flange
connections and, where necessary, straightening vanes and pulsation dampening
equipment.
Section 4. Positive displacement or turbine meters installed in such
Metering Facilities shall be constructed and operated in accordance with the
provisions of AGA Measurement Committee Report No. 6 (AGA Report No. 6) dated
January 1971, when positive meters are employed, and AGA Measurement Committee
Report No. 7 (AGA Report No. 7), First Revision, dated November 1984, when
turbine meters are used, with any subsequent amendments or revisions of either
report, as mutually agreed upon.
Section 5. When electronic transducers and flow computers, solar and
otherwise, are used, the gas shall have its volume, mass, and/or energy content
computed in accordance with the applicable AGA standards including, but not
limited to, AGA Report Nos. 3,5,6, and 7 and any subsequent modification and
amendments thereof as mutually agreed upon. The Parties specifically agree to
accept the use of these electronic devices in lieu of mechanical devices with
charts.
Section 6. The Operating Party shall give thirty (30) days minimum
notice to the other Party in order that the other Party may have representatives
present to observe any changing, inspecting, testing, calibrating, or adjusting
of the Metering Facilities. The official charts, recordings, and readings from
such Metering Facilities shall remain the property of the Operator or Customer,
as appropriate, but upon request, the Operator or Customer will submit its
records and charts, together
<PAGE>
with calculations therefrom, to the other Party for inspection and verification,
subject to return within sixty (60) days after receipt thereof.
Section 7.
A. The Operator or Customer (as appropriate) shall, in the
presence of the other Party's representative, if such other Party requested to
be present, verify the accuracy and adjust or calibrate all transmitting or
recording devices used in the Metering Facilities within the time frames
specified below:
a) Orifice Meters - monthly or quarterly, as determined by
Operator,
b) Large Capacity Positive Displacement Meter - one (1) to
three (3) years, as determined by Operator, (Operator shall
have three (3) years from date of conveyance described in the
second Recital to test the meters which it receives in the
conveyance and make any subsequent adjustments to bring them
into compliance with the Agreement);
c) Other Positive Displacement Meter - from the earlier of the
last test date or the date of manufacture - up to twelve (12)
years for Class II and Class III meters and up to twenty (20)
years for Class I meters, as determined by Customer.
B. If during any test of the Metering Facilities, an adjustment
or calibration error is found which results in an incremental adjustment to the
calculated hourly flow rate through each meter in excess of two percent (2%) of
the correct flow rate (whether positive or negative and using the adjusted flow
rate as the percent error equation denominator), then any previous recording of
such equipment shall be corrected to zero (0) error (i) for any and all months
in which the error existed (and which is either known definitely or agreed to by
both Parties), and (ii) the total monthly adjustment per meter is greater than
50 MMBTUs. The total flow for the period will be redetermined in accordance with
the provisions of Section 9. below. If the period of error condition cannot be
determined or agreed upon between the Parties, such correction shall be made
over a period extending over the last one-half (1/2) of the time elapsed since
the date of the latest test, provided that such correction period will not
exceed six (6) months. For a known calculation error for which the time period
can be determined and agreed upon by both Parties, the correction period shall
be the agreed upon time period with no limits on the correction period.
C. If, during any test of the Metering Facilities, an
<PAGE>
adjustment or calibration error is found which results in an incremental
adjustment to the calculated hourly flow rate which does not exceed two percent
(2%) of the adjusted flow rate (as described in part B. of this Section), all
prior recordings shall be considered to be accurate.
D. During all tests, the Metering Facilities will be adjusted or
calibrated to as near as zero (0) error as possible by the Operator or Customer
as appropriate.
Section 8. In the event a special test is requested by a Party of the other
Party's Metering Facilities, (a test not scheduled under the provisions of
Section 7. above),the requesting Party shall give seventy-two (72) hours advance
notice and both Parties shall cooperate to secure a prompt test of the accuracy
of such equipment. If the Metering Facility tested is found to be within two
percent (2%) of the correct flow rate, or if an inspection of the Metering
Facility indicates no problems, the Party performing the test shall have the
right to bill the requesting Party for the cost of such special test, including
any labor and transportation costs pertaining to such special test and the
requesting Party shall pay such costs within thirty (30) days of its receipt of
the invoice.
Section 9. If, for any reason the Metering Facility is (i) out of adjustment,
(ii) out of service, or (iii) in need of repair and the total calculated hourly
flow rate through the Metering Facility is found to be in error by an amount of
more than two percent (2%) of the correct flow rate, the total quantity of gas
delivered shall be redetermined in accordance with the first of the following
methods which both Parties mutually agree is feasible:
(a) by correcting the error by re-reading the official charts, or by
straightforward application of a correcting factor to the quantities
recorded for the period (if the net percentage of error is
ascertainable by calibration, tests or mathematical calculation);
(b) by using the registration of any mutually agreeable check metering
facility or telemetry equipment, if installed and accurately
registering (subject to testing as described in Section 7 above);
(c) by using upstream and downstream measurement;
(d) by estimating the quantity, based upon deliveries made during
periods of similar conditions when the meter was registering
accurately;
<PAGE>
(e) where parallel multiple meter runs exist, by calculation using the
registration of such parallel meter runs; provided that they are
measuring gas from upstream and downstream headers in common with the
faulty metering equipment, are not controlled by separate regulators,
and are accurately registering,
Section 10. Each Party shall retain and preserve for a period of at least two
(2)years all test data, charts, and other similar records.
Section 11. Each Party shall have the right to remove at its cost all
Metering Facilities, excluding the tap, owned by it within a reasonable period
of time following the expiration or termination of this Agreement.
Section 12. Customer has current end users connected to Metering Facilities
which are currently customers of Customer, and the intent of this Operating
Agreement and any separate meter conveyance agreement is to convey Metering
Facilities only.
ARTICLE III
MEASUREMENT SPECIFICATIONS
The measurements of the quantity and quality of all gas delivered at the
Metering Facilities shall be conducted in accordance with the following:
Section 1. Unit of Volume: The unit of volume for measurement shall be one
(1) cubic foot of gas at a temperature base of sixty (60) degrees Fahrenheit and
at a pressure base of fourteen and sixty-five hundredths (14.65) psia. Such
measured volumes, converted to MCF, shall be multiplied by their BTU per cubic
foot and divided by 1,000 to determine MMBTUs received and delivered hereunder.
Section 2. Volume Computations: Computations of gas volumes from measurement
data shall be made in accordance with the following depending upon the type of
measurement being utilized by Operating Party:
(a) Orifice Meters - ANSI/API 2530 (AGA Report No. 3), Orifice
Metering of Natural Gas and Other Related Hydrocarbon Fluids, Second
Edition, dated September 1985, and any subsequent amendments or
revisions as mutually agreed upon;
(b) Positive and turbine meters - For positive meters AGA Measurement
Committee Report No. 6 (AGA Report No. 6), dated January 1971, and any
subsequent amendments or revisions. For turbine
<PAGE>
meters, AGA Measurement Committee Report No. 7 (AGA Report No. 7),
First Revision, dated November, 1984, and any subsequent amendments or
revisions as mutually agreed upon.
(c) Electronic transducers and flow computers - AGA Report Nos. 3,5,6,
& 7 and any subsequent amendments or revisions as mutually agreed
upon.
Section 3. Temperature Measurement: The temperature of the gas shall be
determined by a recording thermometer so installed that it may record the
temperature of the gas flowing through the meters. The average temperature to
the nearest one (1) degree Fahrenheit, obtained while the gas is being
delivered, shall be the applicable flowing gas temperature for the period under
consideration for volume calculation. In lieu of recording thermometers either
Party may elect to install temperature compensating devices on its positive
displacement meters. For existing meters that currently do not have a recording
thermometer or a temperature compensating device, then the temperature used for
volume calculation shall be sixty (60) degrees Fahrenheit. All new Large Meter
installations and all meter replacements shall have either a recording
thermometer or a temperature compensating device.
Section 4. Specific Gravity Measurement: The specific gravity of the gas
shall be determined by calculating the specific gravity from an on-line
chromatographic device installed and located at a suitable point to record
representative average specific gravity of the gas being metered or by other
mutually agreeable methods. The gravity, to the nearest one-thousandth (0.001),
obtained while gas is being delivered shall be the specific gravity of the gas
used for the recording period. If on-line chromatographic devices are not
currently installed and available for use, the Party's are not obligated to
install equipment and, spot sampling or continuous sampling using standard type
specific gravity sampling methods may be used in lieu of an on-line
chromatograph. If the spot sampling or continuous sampling method is used, the
specific gravity of the gas delivered hereunder shall be determined on at least
a quarterly basis from a gas analysis. The result shall be obtained to the
nearest one-thousandth (0.001) and should be applied during the applicable
quarter or time period for the determination of gas volumes delivered.
Section 5. Adjustment for Supercompressibility: Adjustments to measured gas
volumes for the effects of supercompressibility shall be made in accordance with
accepted AGA standards. Operator shall obtain representative carbon dioxide and
nitrogen mole fraction values for the gas delivered as may be required to
compute such adjustments in accordance with
<PAGE>
standard testing procedures. At each Party's option (as applied to that Party's
Metering Facilities only), equations for the calculation of supercompressibility
may be taken from either (i) the AGA Manual for the Determination of
Supercompressibility Factors for Natural Gas, dated December, 1962 (also known
as the "NX-l9 Manual"), or (ii) the AGA Report No. 8, dated December, 1985,
Compressibility and Supercompressibility for Natural Gas and Other Hydrocarbon
Gases, or at operating Party's option, any subsequent revision to AGA Report No.
8.
Section 6. Atmospheric Pressure: The Atmospheric Pressure shall be the actual
atmospheric pressure at different elevations per the attached Exhibit A. Exhibit
A shall be updated by the Operating Parties from time to time to reflect
additions or deletions of Metering Facilities covered by this Agreement.
Section 7. Determination of Gross Heating Value: The gross heating value of
the gas delivered hereunder shall be determined by calculating the BTU from an
on-line chromatograph or a gas analysis of a spot or continuous gas sample. Spot
samples shall be taken at least quarterly, and a continuous sample shall be
taken monthly. Such sample shall be taken at a suitable point on the facilities
to be representative of the gas being metered.
Section 8. Other Tests: Other tests to determine water content, hydrogen
sulfide, sulfur and other impurities in the gas shall be conducted by Operator
annually, at four mutually agreeable locations at Operator's expense and shall
be conducted in accordance with standard industry testing procedures. If
additional tests of the same type are requested by Customer, Customer shall bear
the costs of such tests. For all other tests, each Party shall bear the cost of
testing the Metering Facilities for which it is responsible only in the event
the gas tested is determined not to be within the applicable specification(s),
otherwise the requesting Party shall bear the cost of such test(s).
Section 9. New Test Methods: If at any time during the term hereof a new
method or technique is developed with respect to gas measurement, such new
method or technique may be substituted for the method set forth in this Article
when such methods or techniques are in accordance with the currently accepted
standards of the American Gas Association, and if mutually agreed upon by the
Parties.
ARTICLE IV
QUALITY
Section 1. Gas delivered by Operator hereunder at the Metering Facilities
shall conform to the following
<PAGE>
specifications:
(a) Liquids - the gas shall be commercially free of
water and hydrocarbons in liquid form.
(b) Hydrogen Sulfide - the gas shall not contain more than one (1)
grain of hydrogen sulfide per one hundred (100) cubic feet.
(c) Organic Sulfur - the gas shall not contain more than ten (10)
grains of organic sulfur per one hundred (100) cubic feet.
(d) Carbon Dioxide - the gas shall not contain more than two percent
(2%) carbon dioxide by volume.
(e) Dust, Gums, etc. - the gas shall be commercially free of dust,
gums and other solid matter.
(f) Water Vapor - the gas shall not contain more than seven pounds (7
lbs.) of water in the vapor phase per million cubic feet.
(g) BTU Content - the gas shall have a BTU of not less than nine
hundred fifty (950) BTUs (dry) per cubic foot or more than eleven
hundred (1100) BTUs (dry) per cubic foot at standard temperature and
pressure.
(h) Temperature - the temperature of the gas shall not be more than
one hundred twenty (120) degrees Fahrenheit.
(i) Oxygen - the gas shall not contain more than one percent (1%)
oxygen by volume.
ARTICLE V
DELIVERY PRESSURE
Section 1. Operator shall make all reasonable efforts to maintain one hundred
fifty (150) psig at the inlet to all Town Border Stations (TBSs), all other
deliveries shall be made at the pressure existing from time to time in
Operator's facilities. Notwithstanding the one hundred fifty (150) psig
requirement at the TBSs, neither Party shall be required to install compression
facilities in order to effect deliveries hereunder at the Metering Facilities.
ARTICLE VI
OUTAGES
<PAGE>
Section 1. For all outages outside Force Majeure which (i) occur as a result
of any negligent act or omission of Operator, or (ii) are caused by or involve
third parties (Third Party Outage), Operator shall be obligated to reimburse
Customer for all direct costs and expenses incurred, including but not limited
to, reasonable direct costs of restoring service and relighting furnaces
(Restoration Expenses); however, Operator shall not be responsible for any other
charges or claims including, but not limited to, incidental, consequential, or
punitive damages. Notwithstanding the immediately preceding sentence, Operator
is only obligated to reimburse Customer for Restoration Expenses for a Third
Party Outage when and only to the extent that Operator is successful in finally
recovering damages (less Operator's attorneys' fees, court costs and collection
expenses) from such third party. When there is joint or concurrent conduct as
described in (i) and (ii) above leading to an outage, Operator shall only be
responsible for paying to Customer Restoration Expenses to the degree that
Operator is jointly or concurrently liable, and Operator shall subsequently
reimburse Customer for the third party's share of Restoration Expenses after
Operator's recovery, if any, of Restoration Expenses as set forth in the
immediately preceding sentence.
ARTICLE VII
MAINTENANCE OF FACILITIES
Section 1. Each Party shall maintain its Metering Facilities including
chromatographs and odorizers owned by it and used in its performance hereof in
good, safe, and efficient operating condition and repair. In addition each Party
shall maintain and replace from time to time its Metering Facilities in a
reasonable manner according to industry standards with the intent to obtain
accurate measurement.
Section 2. Each Party shall have the right at the time the other Party is
testing a Metering Facility to inspect that Metering Facility which is the
subject of the test. If the inspecting Party establishes that the Metering
Facilities are not operating in accordance with the terms of this Agreement,
then upon receipt of notice, the testing Party shall be obligated to correct
such condition within seventy two (72) hours, or as soon thereafter as is
reasonably practical with the exercise of due diligence.
ARTICLE VIII
ODORIZATION
Section 1. Operator shall be responsible for odorization of the natural gas
delivered to Customer only from Metering Facilities directly connected to
pipeline systems which Operator owns as of the Effective Date in accordance with
<PAGE>
applicable laws or safety regulations and shall construct, maintain and operate
any facilities required for the performance of this obligation. Customer shall
be responsible for odorization of the natural gas received by Customer from
pipelines that are not owned by Operator. Customer shall be responsible for
monitoring and performing all odorant checks within its delivery systems and
will notify Operator immediately of any low readings. Customer shall also be
responsible for any regulatory requirements associated with monitoring and
performing odorant checks on its delivery systems. The consideration for the
costs of odorization service provided hereunder is included in the
transportation service fee relating to any gas transported by Operator which is
ultimately delivered to, or on behalf of Customer, or its affiliated entities.
ARTICLE IX
SHARING OF SCADA INFORMATION
Section 1. Operator and Customer will make reasonable efforts, to share SCADA
data. The Party requesting access to SCADA data which is in the possession of
the other Party shall bear all costs associated with obtaining such data from
the other Party.
ARTICLE X
ANNUAL OPERATING MEETING
Section 1. Customer's and Operator's operating personnel agree to make
reasonable efforts to meet on an annual basis to discuss the Operating Agreement
in order to identify and resolve any outstanding operating issues.
ARTICLE XI
TERM
Section 1. This Agreement, regardless of when executed, is effective as of
the Effective Date, continuing through December 31, 2001 (Primary Term), and
shall continue thereafter month-to-month unless terminated by either Party with
at least thirty (30) days written notice prior to the end of the Primary Term,
or any subsequent month thereafter.
ARTICLE XII
AUDIT
Section 1. During the term hereof and for two (2) years thereafter, each
Party and its duly authorized representative shall have access to and the right
to inspect and audit during regular business hours all meters and measurement
records maintained and operated by the other Party. Any matters not challenged
within a period of two (2) years of their occurrence,
<PAGE>
are deemed waived by the Parties.
ARTICLE XIII
JOINT USE
Section 1. Each Party grants to the other Party, without cost, ingress and
egress to facilities and sites where the Parties will jointly use such sites to
operate their respective facilities.
ARTICLE XIV
INDEMNIFICATION
Section 1. Each Party assumes full responsibility for its own acts performed
under this Agreement, and shall indemnify and save harmless the other Party from
all liability, loss, claims, costs and damages (including but not limited to
attorney's fees and court costs) on actions, including injury to or death of
persons and environmental impacts, arising from any act or accident in
connection with the acts or omissions hereunder or any breach hereunder of the
indemnifying Party, except to the extent of any negligence or willful misconduct
of the other Party.
ARTICLE XV
ASSIGNMENT
Section 1. This Agreement may not be assigned by either Party (except to an
affiliate of such Party) without the prior written consent of the other, such
consent not to be unreasonably withheld.
ARTICLE XVI
NOTICES
Section 1. Any notice required to be given under this Agreement or any notice
which either Party hereto may desire to give the other Party shall be in writing
and shall be considered duly delivered when hand-delivered or when deposited in
the United States mail, postage prepaid, registered or certified, and addressed
as follows:
If to Customer: ENERGAS COMPANY
5430 LBJ Freeway, Suite 1800
Dallas, Texas 75240
P.O. Box 650205
Dallas, Texas 75265-0205
Attention: Intrastate Gas Supply
Department
<PAGE>
Phone: (972) 788-3746
ENERGAS COMPANY
5110 80th Street
Lubbock, Texas 79424
P.O. Box 1121
Lubbock, Texas 79408-1121
Attention: Technical Services Department
24 Hour Phone: (806) 744-1294
If to Operator: WESTAR TRANSMISSION COMPANY
333 Clay Street, Suite 2000
Houston, Texas 77002
Attention: Director of Pipeline
Operations
24 Hour Phone: (713) 739-2900 (Houston,
Texas)
24 Hour Phone: (800) 562-5879 (Amarillo,
Texas)
or such other address as Operator, Customer, or their respective successors or
permitted assigns shall designate by written notice given in the manner
described above. Routine communications may be mailed by ordinary mail and are
deemed delivered when hand-delivered or when deposited in the United States
mail, postage prepaid, and addressed to the above-designated name and address.
ARTICLE XVII
FORCE MAJEURE
Section 1. In the event that either Operator or Customer is rendered
unable, wholly or in part, by reason of an event of force majeure, to perform
its obligations under this Agreement, other than to make payment due hereunder,
and such Party has given notice and full particulars of such force majeure in
writing to the other party as soon as possible after the occurrence of the cause
relied on, then the obligations of the Parties, insofar as they are affected by
such force majeure, shall be suspended during the continuance of such inability,
but for no longer period, and such cause shall insofar as possible, be remedied
with all reasonable dispatch; provided, however, that the settlement of strikes
or lock-outs shall be entirely within the discretion of the Party having such
difficulty, and the above requirement that any force majeure be remedied with
all reasonable dispatch shall not require the settlement of strikes or lock-outs
by acceding to the demands of the opposing Party when such course is inadvisable
in the discretion of the Party
<PAGE>
having the difficulty.
Section 2. The term "force majeure" as used in this Agreement shall
mean any cause not reasonable within the control of the Party claiming
suspension and includes, but is not limited to, acts of God; strikes; lock-outs;
wars; riots; orders or decrees of any lawfully constituted federal, state, or
local body; fires; storms; floods; wash-outs; explosions; breakage or accident
to machinery or lines of pipe; inability to obtain or delay in obtaining rights-
of-way, material, supplies, or labor permits; repair, maintenance, or
replacement of facilities used in the performance of the obligations contained
in this Agreement; or any other cause whether of the kind herein enumerated or
otherwise.
ARTICLE XVIII
REMEDIES UPON MATERIAL DEFAULT
Section 1. If either Party hereto shall fail to perform any material
covenant or obligation imposed upon it under this Agreement, then in such event
the non-defaulting Party may, at its option, terminate this Agreement upon
acting in accordance with the procedures hereafter set forth in this Section.
The non-defaulting Party shall cause a written notice to be served on the
defaulting Party, which notice shall state specifically the cause of terminating
this Agreement and shall declare it to be the intention of the non-defaulting
Party to terminate this Agreement if the default is not cured. The defaulting
Party shall have ten (10) days after receipt of the aforesaid notice in which to
remedy or remove the cause or causes stated in the termination notice, and, if
within such ten-day period, the defaulting Party does so remedy or remove said
cause or causes and fully indemnifies the non-defaulting Party for any and all
consequences of such breach, then such termination notice shall be withdrawn and
this Agreement shall continue in full force and effect. In the event that the
defaulting Party fails to remedy or remove the cause or causes or to indemnify
the non-defaulting Party for any and all consequences of such breach within such
ten-day period, this Agreement shall be terminated and of no further force or
effect from and after the expiration of such ten-day period.
ARTICLE XIX
MISCELLANEOUS
Section 1. Notwithstanding anything contained in this Agreement to
the contrary, the Parties hereby specifically reserve any rights each Party may
have under any other Agreements between the Parties to collect any refunds due a
Party as a result of any measurement test, calibration or adjustment which
reflects an error exceeding the parameters allowed in such other Agreements.
<PAGE>
Section 2. On or about the anniversary date of this Agreement, and
each anniversary thereafter, the Parties will conference to discuss operating
matters in general, and specifically to negotiate the addition or deletion of
Metering Facilities by way of a mutually agreeable amendment to this Agreement;
provided, neither Party is obligated to add or delete any such Metering
Facilities to this Agreement.
Section 3. It is the intent of the Parties under this Agreement to
have Operator operate all Metering Facilities classified as Large Meters and
Orifice Meters which are directly attached to Operator's pipeline system and
which are in turn connected to Customer's systems or its customers (Additional
Meters). If after the conveyance of the 1,735 meters as set forth in the second
Recital in this Agreement, it is discovered that there are Additional Meters,
then Customer will immediately convey such meters to Operator by way of a
CONVEYANCE in the same form used to convey the aforementioned 1,735 Meters.
Section 4. Operator will notify Customer in a reasonable time of any
changes made to the 1,735 meters which would affect measurement readings,
including but not limited to, changes of indexes, pressure changes, meter
changes, or other type changes to the measurement facility affecting the
Customer's ability to read and acquire accurate measurement readings from any of
the 1,735 meters. Operator recognizes that the Customer needs to read and
determine volumes on the 1,735 meters for its business and operational needs,
and billing purposes to its customers.
Section 5. The Parties understand and agree that Customer's 1,735
Metering Facilities that are being conveyed to Operator are subject to mutually
agreeable adjustments to Exhibit "A" which may result from the completion of a
current audit of such facilities, and the Parties agree to execute the
appropriate documents reflecting such adjustments.
Section 6. The intent of the Parties is to convey any real property
rights related to the 1,735 Metering Facilities (as may be later adjusted as set
forth above) from Customer to Operator; however, as of the Effective Date, some
of those properties have not been specifically identified; therefore, the
parties agree to identify those properties within three months of the Effective
Date and, to the extent necessary, execute a conveyance of such properties to
Operator.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed.
"CUSTOMER" "OPERATOR"
ENERGAS COMPANY, a division WESTAR TRANSMISSION COMPANY
<PAGE>
of Atmos Energy Corporation
By: By:
------------------------- --------------------------
Name: Name:
----------------------- ------------------------
Title: Title:
---------------------- -----------------------
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
================================================================================
FACILITY DATA DATA DEFINITION REMARKS
- --------------------------------------------------------------------------------
<S> <C> <C>
FACILITY NAME
- --------------------------------------------------------------------------------
METER TYPE
- --------------------------------------------------------------------------------
OPERATOR
- --------------------------------------------------------------------------------
3RD PARTY
- --------------------------------------------------------------------------------
CAPACITY
- --------------------------------------------------------------------------------
STATE
- --------------------------------------------------------------------------------
COUNTY
- --------------------------------------------------------------------------------
TOWNSHIP/BLOCK
- --------------------------------------------------------------------------------
RANGE/SURVEY
- --------------------------------------------------------------------------------
SYSTEM NUMBER
- --------------------------------------------------------------------------------
I.D. DATE
- --------------------------------------------------------------------------------
ASSOCIATED
CONTRACT
- --------------------------------------------------------------------------------
COMMENTS
================================================================================
</TABLE>
<PAGE>
EXHIBIT 15
----------
Board of Directors
Atmos Energy Corporation
We are aware of the incorporation by reference in the Registra tion Statements
(Form S-3 No. 33-58220, Form S-3 No. 33-56915, Form S-3 No. 333-03339, Form S-4
No. 333-13429, Form S-8 No. 33-57687, Form S-8 No. 33-68852, and Form S-8 No.
33-57695) of Atmos Energy Corporation of our report dated February 5, 1997,
relating to the unaudited condensed consolidated interim financial statements of
Atmos Energy Corporation which are included in its Form 10-Q for the quarter
ended December 31, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
February 12, 1997
Dallas, Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE QUARTER
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 422,191
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 118,094
<TOTAL-DEFERRED-CHARGES> 37,849
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 578,134
<COMMON> 80
<CAPITAL-SURPLUS-PAID-IN> 113,493
<RETAINED-EARNINGS> 65,892
<TOTAL-COMMON-STOCKHOLDERS-EQ> 179,465
0
0
<LONG-TERM-DEBT-NET> 157,303
<SHORT-TERM-NOTES> 52,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,465
<LEASES-CURRENT> 273
<OTHER-ITEMS-CAPITAL-AND-LIAB> 178,328
<TOT-CAPITALIZATION-AND-LIAB> 578,134
<GROSS-OPERATING-REVENUE> 157,653
<INCOME-TAX-EXPENSE> 5,225
<OTHER-OPERATING-EXPENSES> 139,409
<TOTAL-OPERATING-EXPENSES> 144,634
<OPERATING-INCOME-LOSS> 13,019
<OTHER-INCOME-NET> 89
<INCOME-BEFORE-INTEREST-EXPEN> 13,108
<TOTAL-INTEREST-EXPENSE> 4,216
<NET-INCOME> 8,892
0
<EARNINGS-AVAILABLE-FOR-COMM> 8,892
<COMMON-STOCK-DIVIDENDS> 4,012
<TOTAL-INTEREST-ON-BONDS> 405
<CASH-FLOW-OPERATIONS> (3,992)
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
